Why Miliband is right

Ed Miliband is right. MPs should be banned from having paid directorships and consultancies.  However, I don't say this for the conventional reasons.

It's not because such jobs distract MPs from their duties to voters and the country. The way to stop an MP doing a lousy job isn't to stop him doing other jobs but to ensure that he gets either deselected or voted out. In this context, stronger powers of recall would be better than a ban on outside work.

Nor is it because such directorships will lead to MPs' votes being swayed by specific commercial interests. As Simon says, the solution to this is to have tougher rules preventing such interests from influencing votes.

Instead, I'm thinking of the mere exposure effect: people tend to like things simply because they are familiar with them. Some experiments (pdf) by James Andreoni and Justin Rao illustrate an important variant of this.

They got people to play a simple dictator game, in which people were asked to split $10 between themselves and a partner. They found that when the dictator and the partner were not allowed to communicate with each other, dictators handed over an average of $1.53. However, when subjects were allowed to ask the dictator for a donation, the dictator gave an average of $2.40. This tells us that communication increases sympathy, even if it leaves incentives unchanged.

Herein lies the danger with allowing MPs to take directorships and consultancies. In causing MPs to associate with rich businessmen, they will bias MPs' sympathies towards the rich. This violates the democratic ethos, which says that political influence should be equalized.

Two things exacerbate this danger. One is that the converse of the communication effect is also true. Experiments by Agne Kajackaite have shown that people are more likely to behave badly if they are ignorant of the victims of their behaviour. If MPs don't associate sufficiently with the worst off, they might therefore become less sympathetic to them.  

The other is that MPs tend to be personable types: you couldn't cope with all that gladhanding unless you were. But this means they are especially vulnerable to the mere exposure effect; the problem with agreeable folk is that they can agree with the wrong people.

In this sense, directorships and consultancies are very different from other types of work. Writing newspaper articles, for example, is a solitary job which doesn't expose you to the influence of the rich*.

You might reply here that this form of exposure is only one of countless ways in which the rich gain undue political influence.You'd be right. But this is another reason to welcome Miliband's proposal. It invites the questions: in what other ways do the rich have excessive power and how might we combat this? In this sense, he is both putting a good issue on the agenda, and perhaps introducing a building block policy - an apparently modest policy which creates the potential for more radical ones later. For this reason, I applaud him.

* The counterargument to this is that some directorships don't do so either - for example, in small family firms. But legislation should take account of this.

Comments

[gastro george]

As was pointed out, I think in the Guardian Letters section, if some MPs have so much time then maybe they should volunteer at their local Citizens Advice Bureau rather than taking up a directorship.

On the other hand, you have people like Frank Field who have spent so much time working with poverty that it seems that he's come to hate them all.

[Dave Timoney]

Miliband has actually been quite deft in translating an issue of lobbying (i.e. influence bought on a time & materials basis) into one of paid directorships and therefore corporate governance.

The root of the problem goes back to the Cadbury Report of 1992 (following Polly Peck, BCCI and Robert Maxwell), which sought to improve governance standards without statute, preferring "comply or explain", aka brazen it out. This recommended increasing the number of non-executive directors, which created a gravy-train for the usual City suspects.

Many companies split their management between an executive board, that handled all operational decisions, and a main board (with majority NEDs) that handled public and investor relations. The result has been the "not me, guv" excuses of the directors when malfeasance comes to light (HSBC are just the latest of many).

Over time, MPs started to be attracted to NED roles, largely because having one on board was regarded in the Russian idiom as "krysha", i.e protection. The rationale was that an MP would want to avoid reputational damage, so s/he would keep the business on the straight and narrow, governance-wise. Because the market recognised this, an MP as a NED boosted "soundness". Their technical input was irrelevant and their usefulness for lobbying was merely a bonus.

The ethical issue isn't MPs having paid directorships in small family firms, or even NED roles where they can genuinely bring industry expertise to bear, but the venality of those who tart themselves out to FTSE-listed firms as a form of PR. This encourages the mindset of "what's good for business is good for UK Plc".

[An Alien Visitor]

"They got people to play a simple dictator game.."

Oh so that explains why politicians and the rich and powerful are so cosy! Do me an effing favour.

[rogerh]

Seems to me the problem is endemic with government. Governments seem to lie on a continuum from tribal chief through warlord, emperor and president/prime minister - but one constant factor is the close support network of family, fighters, courtiers, barons, knights and party members. If you want influence go talk to them and take gifts of goats, slaves, gold, directorships, consulting fees whatever.

As you say, a shorter leash is the answer, but who holds the leash - and do they like goats or old or consulting fees...

[formula57]

I am much more virtuous than I had supposed for I permit my local MP no exposure to me whatsoever, thereby not compromising his impartiality. If only all of us followed such an approach, those inside the Westminster bubble would be freed (as I now see) to act solely in our collective best interests.