Thursday, 24 February 2011

Conflict of interest for the Electoral Reform Society?

It has come to light that the main funder of the "Yes" campaign, the Electoral Reform Society, is also the main stakeholder in a company, the Electoral Reform Services Limited (ERSL).

The Spectator, a heavily Tory friendly magazine that has featured articles from the head of the No2AV campaign Matthew Elliott, claims that this is proof of a conflict of interest. I have to disagree.

Take a look at this quote, perfectly formed from Wikipedia: "A conflict of interest can only exist if a person or testimony is entrusted with some impartiality;"

So for a start it is pretty much impossible for the ERS to be in conflict of interest here. They're political, and they're wanting reform. There is no impartiality assumed upon their being (especially as members are actually key parts of the Yes campaign), and no impartiality is required to be a donor of the Yes campaign.

But even ignoring this I believe there are three different ways it can be described that it is not a conflict of interest for the Electoral Reform Society (ERS) to be donating to the Yes campaign any more than it is for the Tories (who today donated £500k to the No campaign) to donate to the No campaign.

1) The ERS is not the ERSL.

Sure, the ERS is a stakeholder (the main one in fact) in ERSL, perhaps even controlling in that fact...who knows how the inner machinations work? But it is the political body, the ERS, that is funding the campaign for a Yes vote. The ERS derives dividends from it's stakeholder position whether it supports the Yes campaign or not, what it does with that money to support it's own stated aims is up to the ERS.

Given the ERS is a political organisation rather than a business there is no benefit that they can gain other than to further their own aims. To claim this is a conflict of interest is to accept that ANYONE donating to EITHER campaign is a conflict of interest, as they ultimately want their respective side to win.

It might be a slightly different picture (but still not a conflict of interest) if it was the ERSL that was directly using it's own profits to fund the Yes campaign.

2) There is no immediate benefit to ERSL by the referendum taking place

There is no proof that additional services would be required by the ERSL. There is a claim that the referendum for AV will be administered by ERSL, however I am unable to find any proof of that (I welcome any confirmation either way), but even this involvement is not a conflict of interest. The fact that the ERSL could be administering the referendum doesn't mean that it benefits by ERS contributing to the Yes campaign.

A separate body, I would imagine the Electoral Commission, will be responsible for awarding contracts through their own process, so donations to the Yes campaign are not going to increase their chances of being picked by this separate independent body.

3) There is no guarantee of future benefit to ERSL conferred by the change to an AV voting system

There are two things that the ERSL cannot guarantee. 1) It cannot guarantee that it will be used for general elections in the future, the Electoral Commission no doubt decides this. My understanding is that it currently does not provide services for General Elections (corrections are welcome). 2) It cannot guarantee that if AV were to take place that it would generate a greater profit in the chance that it would be chosen to administer the General Election than if it were still under FPTP.

Essentially, for the ERSL to be in conflict of interest here it would have to be providing funding in such a way that it could improve it's chances of increased commercial use. Given that in the first case their chance remains the same for gaining any contracts regardless of whether their dividend money is going to the Yes campaign or not, and that the second chance is a decision that would need to be made by the same independent body without ERSL involvement on using different and more expensive administration methods, there is no reasonable claim to be made here that the ERSL are in a conflict of interest situation.


If we are to get ourselves in to a mock frenzy over this issue then we would have to severely look at all funding models for political campaigns in the future. Is it appropriate that the Tories, who will perhaps see that their chances of a not-to-distant majority in the House of Commons relies on the retention of the First Past the Post system should donate to the No campaign to help them secure that? Should individual donors be able to contribute to either side when they stand to be rewarded, based on their local area, with a result that is more likely to be in their favour?

It is not a conflict of interest for people to fund campaigns in to what they believe in, and it's certainly not a conflict of interest for money to be used that has been derived from an organisation in the same "field" or forum whereby decisions are being made. And even if it were the ERSL funding rather than the ERS (if we perhaps combine them as a single unit), the ERSL cannot guarantee by any of it's actions that by increasing the chances of a Yes victory through it's funding that it will benefit in any way from that choice.

A storm in a teacup, and so if you're reading this congratulations as I'm not going to be giving this link out, as I don't wish to give extra fuel to the flames of such a ridiculous argument.


  1. Interesting post. Here are my thoughts:

    First, to be absolutely clear from the start, I do not think believe that the ERS will have decided to support AV out of any financial motivation. I believe that they are working hard for a yes vote because they genuinely think that it will be a good first step towards getting PR. I tend to agree with this point of view, which is why I will probably vote Yes in May.

    That said, there is clearly a potential for there to be a conflict of interest here.

    If the full version of the article - sadly behind the paywall - is correct (and due to the nature of ERSL's work I feel that it would have at least been denied were it not true), ERSL approved the advancement of £1m with full knowledge that it would be used to fund the Yes campaign. This, in all intents and purposes, is a very large loan against the company and is very different from the normal dividend that a shareholder would receive. Their accounts are publicly available, and I've had a look at them, so I would like to clarify or add to a few things that you have said in the above post:

    1) ERS owns a 56% stake in ERSL, but it own 100% of the category A shareholding and as such, is the only shareholder able to draw a dividend from the profits of ERSL
    2) That shareholding is not sufficient for it to have been able to 'force' ERSL to release the funds without the agreement of the other shareholders. ERSL would have had to consciously agreed to the transfer of that money for those purposes.
    3) ERS recieves over 95% of it's funding from ERSL, so the better ERSL does, the more work ERS can do. A sharp fall in dividends would mean redundancies and would not leave the ERS unaffected.
    4) The executive and non-executive directors of ERSL get a healthy remuneration and so this is not a not for profit social enterprise by any means
    5) ERS have admitted themselves that there is a chance that ERSL could profit from a yes vote. This seems reasonable enough to me. Such a profit would not come from the mythical counting machines that NO2AV are so fond of, but from the contracts to print ballot papers and distribute postal ballots etc. ERSL are already one of the leading players in this sector and will be seen as a company with experience of administrating preferential systems, so they would be well placed to get the work as well as offering consultancy services.
    5) ERSL are involved in the administration of the Referendum ballots. This is not contracted centrally by the electoral commission as many people imagine, but the contracts are with each local authority individually. ERSL do have the contracts to print and distribute postal votes for this referendum on behalf of a number of local authorities. They also have been responsible for registering people to vote in the referendum in roughly half the council areas in the UK.

    As much as I feel that the motives of the ERS are all above board and that they are supporting a Yes vote out of a desire to get PR, I can't help but be unhappy with this. To be very clear again, I do not for one minute think that there is any suggestion that ERSL/ERS would seek to fix the ballot. I just happen to strongly feel that those who print and dispatch the ballot papers for the referendum should have no ties to any groups campaigning at it. It is important in a democracy that processes are not only above board, but are clearly seen to be above board and are beyond reproach. I would be similarly unhappy if the Labour party had a company called Labour Election Services and they were dispatching ballots and postal ballots at a general or local election. I believe that it is in the public interest that ERSL surrender or at the very least publicly declare those referendum administration contracts that they hold so that there can be no doubt about what is going on.

    This is a side issue anyway that should not influence anyone into voting yes or no. I look forward to the No campaign declaring their true donors so that they can be subject to this level of scrutiny.

  2. Cheers for the comment. As I say I believe it can't be a conflict of interest due to the fact that there is no onus placed on donors or organisers of political campaigns to be "impartial" to the issues, that very idea goes against political free speech. Secondly, as you say, they don't stand to directly benefit without a third party (or parties) giving them the opportunity to benefit, based on decisions that haven't been made nor will be influenced by the outcome of this result.

    That said it is arguable that the whole set up that the ERS have with ERSL means that the ERS cannot claim to be an impartial source of information on electoral reform, and that the aim of the ERS to provide information about reform is a conflict of interest given how they are deriving such funding. This is a separate and non-relevant issue to the two (as partners in one form or other in this) supporting the Yes campaign, or for ERSL to provide services for the referendum.

    Great comment though, very thought provoking :)


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