AFR: Unions and the Super Conundrum

The Fair Work Australia report into the Health Services Union reveals a union culture in which normal standards of governance are largely ignored. But it is not just union members whoare affected. There is a direct link between unions and the superannuation savings of millions of Australians. The deeply flawed governance arrangements put in place by the Keating government allow union officials a privileged place in running super funds.

HSU boss Michael Williamson against whom serious allegations of corruption have been made was until recently a director of First State Super, a fund with more than $30 billion in assets. He was appointed to that position by Unions NSW. Last month the chairman of First State Super complained that he had no power to remove Williamson as a trustee. This is an example of a wider problem: if superannuation fund directors are appointed by a union, then how are they held accountable by members of the super fund?

The issue is not the personal integrity of individual directors; the issue is a design flaw in the system. With dozens of super funds having up to half of their directors appointed directly by a union, there is a real risk that a failure of governance in a union will be transmitted across to the super sector. Williamson reportedly earned a $330,000 annual salary, in addition to $150,000 from his various board positions such as First State Super. Bernie Riordan, the head of the Electrical Trades Union in NSW, last year reportedly earned nearly $400,000 from his union job plus three superannuation directorships (Energy Industry Super Scheme, Futureplus Financial Services and Chifley Financial Services) and one other company.

Helpfully for such officials, frequently the funds to which they are appointed do not disclose the fees they pay directors. Of the 16 self-branded "industry super" funds, less than half disclosed fees paid to individual directors in annual reports. The Cooper review recommended removing the legislative requirement of "equal representation" of employer and worker representatives on industry fund boards. This is the basis for appointing scores of union officials to superannuation fund boards. Workplace Relations Minister Bill Shorten, a former union official and director of an industry super fund, failed to act on this recommendation, although he has implemented many other Cooper directions. The HSU scandal shows what is at stake. It is time for Shorten to stop sitting on his hands.

Paul Fletcher is a Liberal MP.He serves on the Corporations and Financial Services Committee.