The ‘Folau Clause’ relates to the case of Mr Israel Folau, whose comments on his private social media account led to the termination of his contract with Rugby Australia. Under the ‘Folau Clause’, additional requirements will be imposed upon businesses with annual revenue of at least $50 million when it comes to standards of dress, appearance or behaviour that limit religious expression. The Bill states that such restrictions must be shown to be necessary to “avoid unjustifiable financial hardship on the business”. The process of calculating potential financial hardship will fall on financial professionals, particularly management accountants.
Professor Janek Ratnatunga says, “The application of the ‘Folau Clause’ means organisations will have to prove that their social media rules relating to religious expression, and subsequent actions taken, are in place to protect their brand. However, as the impact of individual social media activity on brand reputation is impossible to quantify, the draft bill instead defines the impact on the brand in financial terms, i.e. as causing “unjustifiable financial hardship on the business”.
In the case of Rugby Australia, its primary revenue is derived from ticket sales, broadcast rights, government grants and sponsorships. Professor Ratnatunga says, “The revenue source that has garnered the most attention for potentially unjustifiable financial impact is corporate sponsorship, which accounts for 22 per cent of Rugby Australia’s total income. Rugby Australia’s major sponsor, Qantas, clearly has to distance itself from the Folau case, as it may be considered an accessory to any breach and become a target for legal action if Rugby Australia is found guilty of wrongful dismissal.”
Professor Ratnatunga believes this poses a conundrum for sponsors like Qantas. “For example, if the Folau case arose after the Bill was passed in its current form, Rugby Australia would have to prove that Qantas was going to discontinue sponsorship, thereby demonstrating “financial hardship”. At the same time, Qantas would have to reject any such claim, or face the consequences of Mr Folau winning his case and citing them as an accessory to any breach,” he says.
If the Bill passes, corporates will need to be extremely careful of sponsorship agreements. This is also true of organisations such as universities, which have been the subject of much debate regarding external sponsors and their influence on free speech.
Professor Ratnatunga provides a hypothetical example of a University of Melbourne academic posting a private social media comment that is “very supportive of the Dalai Lama returning to Tibet and rejuvenating Buddhism there”. If this led to the possibility of losing sponsorship from the Confucius Institute, would Melbourne University be justified in terminating that academic’s contract under the ‘Folau Clause’?
Again, what if an academic in a university that is sponsored by the Ramsay Centre for Western Civilisation posted the following comment on social media: “The only thing Western civilisation has done is spread Christianity with the gun!”? Would the university be justified in terminating that academic’s contract under the ‘Folau Clause’?
Professor Ratnatunga poses a final question: “Should corporates offer their views on social issues unrelated to their core businesses? Corporates are justified in ending sponsorship deals with individuals and other organisations for bad behaviour, sexual discrimination and the like, both publicly and privately, but threatening to end sponsorship agreements as a result of religious comments posted on private social media accounts by employees or other contractors on religious issues that have little or no relation to their core business is another matter,” he says.
Professor Janek Ratnatunga is the CEO of the Institute of Certified Management Accountants, Australia. He has held senior appointments at the University of South Australia, Monash University, University of Melbourne, and the Australian National University in Australia; and the Universities of Washington, Richmond and Rhode Island in the USA. Prior to his academic career he worked as a chartered accountant with KPMG. He has also been a consultant to many large Australian and international companies and to the World Bank.
Prof. Janek Ratnatunga
CEO, Institute of Certified Management Accountants, Australia