• Home
  • Enterprise
  • Andrew Bragg: Unions keep super power to gild their own future

Andrew Bragg: Unions keep super power to gild their own future

Friday, 17 February 2017

Andrew Bragg: Unions keep super power to gild their own future
MRC Director of Policy and Research: Andrew Bragg


MRC Policy Director Andrew Bragg writes in The Daily Telegraph: 

Superannuation is compulsory in Australia, so you’d expect super funds to be held to the highest standards of governance, care and transparency.

Yet things are crook. Rampant governance failures exist in super funds where union power and kickbacks come before nest eggs. Payments to unions and squabbles over union board positions is enriching unions at the expense of workers, savers and retirees.

The industry superannuation movement has dedicated almost a decade to stop reforms to improve superannuation governance.

And the reform that industry funds are most desperate to stop is a requirement that all super funds have independent people on their boards: a check and balance for savers.

The duty of independent directors would be to ensure the owners of the fund (unions or financial services companies) aren’t feathering their own nests at the expense of savers.

In 2010, Kevin Rudd’s government’s review into the super industry by Jeremy Cooper ­recommended all funds must have one third of directors as independent. This recommendation was rejected by the then-Minister Bill Shorten.

Fast forward to 2014 and Joe Hockey’s review of the ­financial system by David Murray recommended super funds should have a majority of independent directors. This time, the government accepted the independent advice about independence and moved to legislate.

But in November 2015, Senators Xenophon, Lambie and Lazarus stopped the reform. They delayed the legislation by giving the green light to another review of superannuation governance — this time by former Reserve Bank governor Bernie Fraser. The review was run by the industry fund lobby group Industry Super Australia.

Yesterday, we saw the result of the 15-month review. In a classic case of the fox guarding the henhouse, independent directors are not recommended.

The hypocrisy is staggering. It flies in the face of the independent Cooper and Murray findings and that industry funds demand companies in which they invest have ­independent directors.

Why is this? There are two reasons.

The first is union money. Unions partly own and dominate the boards of industry funds. Industry funds donated $4.8 million of workers retirement savings to unions in 2015-16. For example, Hostplus gave $850,000 to United Voice, CBUS gave over $600,000 with the CFMEU the biggest recipient, and AustralianSuper gave the unions over $500,000. These payments to unions are clearly not in the interests of savers and would not be allowed if independent directors were on the boards. But as union membership declines, the money from superannuation funds clearly keep unions afloat.

The second reason is control and relevance. The unions like their board seats so much that they oppose merging small industry funds to create retirement schemes with more scale that are better for savers. More smaller funds mean more board seats for the boys.

A proposed merger between Energy Super and Equip Super collapsed late last year because the Electricity Trade Union wanted more seats on the board but this was unacceptable to Equip Super.

This happened after great expenses were incurred, including a KPMG review of the proposed merger.

The losers: workers.

Industry Super Australia’s report on itself is a farce and the Parliament should quickly enact David Murray’s recommendations for a majority of independent directors.

News Ltd.


Contact Information

(02) 6273 5608
From outside Australia: + 61 2 6273 5608
This email address is being protected from spambots. You need JavaScript enabled to view it.

RG Menzies House
Cnr Blackall & Macquarie Sts
Barton ACT 2600