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From the Desk of the Executive Director

Ken Phillips is co-founder and Executive Director of Independent Contractors of Australia. He is a published authority on independent contractor issues and directs research on related commercial and trade practices issues. Through his numerous articles in newspapers and think-tank and academic journals, Ken is known for approaching issues from outside normal perspectives and is frequently sought out for media comment.

Union corruption shows why we need transparency in super

Tuesday, December 08, 2015

Around 20 years ago, when I was writing for another news outlet, I received out of the blue a large cardboard box in the post. It contained the true financial records, including source documents, of a high-profile union. My suspicion was that it had come from a senior union official who’d just been kicked out of the union. When I checked the real records with the union’s officially declared financial returns, nothing matched. The official returns were a fabrication.  

On Monday the Victorian boss of the construction the CFMEU, John Setka, and his deputy, Shaun Reardon, were arrested and charged with blackmail. The blackmail charges relate to the CFMEU putting pressure on concrete company Boral to stop supplying the CFMEUs hated construction firm Grocon.

Ah, what a complicated web of intrigue! I’ve covered the dispute before but in essence it related to the CFMEU wanting to force Grocon to employee some CFMEU heavies to act as ‘safety officers’ in 2014.  Grocon said ‘no’, Boral kept supplying Grocon, so the CFMEU black-banned Boral. You get the drift…

Also on Monday, Opposition Leader Bill Shorten announced that Labor would soon announce a new crackdown on union governance and transparency.

Unions, including Shorten’s own union, the AWU, have been caught up in allegations and revelations of scandal, missing funds, secret payments and accounts, bribery and more in the Royal Commission into Union Corruption. Again you get the drift. It’s pretty much a greatly expanded exposure of what I discovered in my mysterious box.

The Turbull government has fired back at Shorten, claiming his announcement of new union governance laws is a stunt. Further, that if Shorten and Labor were serious about union corruption they wouldn’t keep rejecting in the Senate the government’s attempts to pass new union governance laws.

The Labor Party and unions know they have an image problem. But the Royal Commission revelations of corruption and lots of dodgy dealings are nothing new, as my box demonstrated. Normally Labor and the unions ride this sort of thing out. The Commission will finish and usually the Coalition fails to put through new laws or put through ‘limp lettuce’ laws. (That’s a technical term for ‘useless’.)

Last week the government failed with a ‘limp lettuce’ law on superannuation governance. They wanted to require super funds to have independent directors -- something that on its own would do nothing to fix superannuation governance.

A sure sign that dodgy dealings and corruption are probably rampant in any organisation (union, business, government or even charity) is when financial records are essentially secret. Publicly listed companies have imposed on them extreme transparency laws as a first measure to prevent corruption. Unions don’t.

In late 2010 the then Labor government’s review into superannuation (the Cooper Review) recommended that industry and retail super funds have imposed on them significant transparency and disclosure requirements. Bill Shorten was the minister in charge at the time. He buried that recommendation.

Many large super funds in Australia essentially operate as secret financial organisations. No, or little, verifiable information is available on what they do with workers’ super money: where it is invested, what commissions are paid, legal or otherwise. They operate on the same basis as my mysterious box. The financial regulators overseeing the super funds do not audit them but instead just report blindly what the funds say.

The industry funds in many respects could allegedly be operating on the same basis as unions have operated for, well, almost ever!

If the Turnbull government were to drop its ‘limp lettuce’ approach to superannuation they would aggressively push the Cooper Review’s recommendations and force disclosure and transparency on the big super funds. This is about protecting ordinary Australians’ retirement money from fraud, theft and all the stuff that’s being exposed in the union Royal Commission.

What independent Senator is going to oppose full transparency and disclosure in super when the issue is properly explained to them?

Transparency in super would be a real first test for Shorten. If it’s not true, as some could allege, that some industry funds are potential milking machines flowing money into the broad Labor church coffers, Shorten would have no hesitation in supporting superannuation disclosure and transparency laws. If there’s nothing to hide, don’t hide anything!

Corruption, bribery, theft and so on are not union problems. They are human problems. Some people will be corrupt if opportunity exists or can be created. Transparency in a democracy and free market is the most important tool in preventing such behaviour.

[First published in Business Spectator, December 2015]

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