Stopping the revolving door for top public servants

The expression refers to a process whereby legislators or regulators seek employment in the same field where he or she had influenced the regulatory framework

19 August 2016, 8:00am
As Europe grapples with the transparency and accountability issues raised by the Panama Papers scandal, previous concerns with the concept of ‘revolving doors’ have suddenly become more relevant.

The expression refers to a process whereby legislators or regulators – anything from a European Commissioner, to a Cabinet Minister, to a member of an authority board – seek employment in the same field where he or she had influenced the regulatory framework.

An example would be an energy minister who, after his or her term as minister, gets a job as a consultant with an energy firm. Technically it is not illegal; but the practice is nonetheless bound to raise eyebrows for a number of self-evident reasons. Accepting such a position, under those circumstances, would automatically raise suspicions that the minister or public official may have availed of his or her legislative or regulatory powers to benefit the firm he or she would later work for… possibly even to secure the job in the first place.

As with the graft issue, suspicion alone – whether substantiated or not – is highly damaging. Permitting revolving door arrangements undermines public trust in institutions. It lends weight to widespread perceptions that the relationship that exists between governments and big business interests is altogether too cosy.

This revolving door process has worked well for many politicians and high ranking government officials in Malta and abroad. The most recent example was former EU commission president Jose Manuel Barroso, who joined US bank Goldman Sachs in early July to advise the bank to mitigate the effects of Brexit: prompting an anonymous group of EU employees to launch a petition in which they described the move as “irresponsible”, “damaging” and “morally reprehensible.”

Described as a ‘gold-plated revolving door’, Barroso’s move was particularly controversial because Goldman Sachs was the same financial institution that confirmed Greece’s readiness to join the Eurozone, despite massive evidence of accountancy fraud. 

“This decision to go and work for one of the banks most implicated in the subprime crisis that led to the financial crisis of 2007-2008 – the worst since the Great Depression – as well as one of the banks most involved in the Greek debt crisis, having helped Greece dissimulate its deficit before speculating in 2009-2010 against it in full knowledge of the unsustainability of its debt, is a further example of the irresponsible revolving-door practices, which are highly damaging to the EU institutions and, even if not illegal, morally reprehensible,” the petition reads.

But Barroso’s case was not the first of its kind. After stepping down as Commissioner for Firsheries and Maritime Affairs, Joe Borg attracted similar controversy by taking up a position with Fipra: a public relations consultancy firm that lobbies the Commission on maritime issues.

Even closer to home, we have seen former minister Tonio Fenech and former FIAU chief Manfred Galdes take lucrative jobs in the private sector. 

Fenech in particular drifted straight into the world of private investment funds, joining former Bank of Valletta executives, within months of losing his hat as finance minister in 2013. He even became the chairman of an advisory firm whose registered owner is a British Virgin Islands company, despite the fact that the party he militates within has made capital out of the Panama Papers case.

As with the revolving door concept as a whole, there is nothing illegal about this arrangement… nor that of Galdes, which also raises questions about the relations between the FIAU and the financial institutions it supposedly regulates.

But such moves remain unwise for all the reasons mentioned earlier: they can only add to a perception, which is now overwhelming in Malta, that politicians and corporate interests are engaged in a permanent backscratching exercise. At worse, we could have embarrassing situations where Prime Ministers, Ministers, MPs and top civil servants end up joining the very same companies they were dealing with while in office. Imagine Joseph Muscat joining Henley and Partners, or Konrad Mizzi working for Shanghai Electric.

The EU already has rules on revolving doors, with commissioners banned from lobbying on the same topics covered by their EU portfolio for 18 months upon leaving office. But critics and civil society organisations argue that this is not enough, and Barroso’s example - transiting from Commissioner, to an employee of a firm lobbying the Commission – has intensified calls for a more practical and effective deterrent.  

This has particular significance for Malta. If the EU’s rules on revolving doors are insufficient, what can be said about Malta’s situation… where no such regulations exist at all? Currently, Maltese law does not give ministers transitional allowances to act as a disincentive for the so-called revolving doors mechanism. Politicians and officials can cosy up and lobby for well-paid jobs, while in a position where they can possibly appease future employers. 

Having full time MPs could possibly prevent this, but stricter rules need to be in place. Now that Malta is committed, as an EU member state, to upgrade its transparency and accountability mechanisms in the wake of Panamagate, the time has come to also introduce laws which prohibit revolving door practices, and ban politicians and civil servants from joining companies they have dealt with closely while in office.