Nottinghamshire director of cricket Mick Newell is also an England selector and Botham feels that could have played a part in Coughlin's decision to swap sides.
"They need to introduce a transfer or similar system of compensation, (and) to remove the potential for conflict of interest by preventing serving directors of cricket acting as selectors," Botham said in a statement on Durham's website.
"The ECB is currently reviewing its partnership agreement with the counties and Durham will be making strong representations to properly reward those that invest in the development of local talent."
News that makes sense
Your trusted source for staying up-to-date with the world around you. Get free daily news updates and analysis, straight to your inbox.
English soccer uses transfer tribunals to decide the values of players under the age of 24 who switch clubs after running down their contracts.
The fee decided by tribunal in these cases is non-negotiable, with the intention of protecting clubs that invest in talent development.
"It concerns me that the current arrangements within cricket do not reward counties that invest in academies and produce exciting young English players," Botham added.
(Reporting by Shrivathsa Sridhar in Bengaluru; Editing by Christian Radnedge)
