LargeJet, that is precisely why at the beginning of the flight it must be decided who is ultimately the "Captain" for the flight. In the example you quoted, the pilot who wasn't flying at the time was obviously sitting there not bothered about the fact that the handling pilot was flying too low. Therefore I would say he was guilty of the same offence.
If I was designated commander and the other pilot decided to do some low flying I would do what I could to stop it.
It doesn't really matter that the other person is flying it.
Generally it would make sense for the person with the most relevant experience to be allocated as commander for the trip.
So if you are a newly qualified Instrument pilot and you are doing one of your first flights in true IFR and you take with you another pilot who has the same basic qualifications as you but has loads of recent bad weather experience, it would make sense for that person to be allocated commander.
The key here is - sort it out on the ground.