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Tuesday, 29 May 2012
Page: 6126

Mr FLETCHER (Bradfield) (13:32): In speaking today on the Appropriation Bill (No.1) 2012-2013 and related bills, I would like to focus on the critical failure of governance associated with the influence of the union movement and union officials on Australia's $1.35 trillion superannuation sector. I want to make three points. Firstly, we have seen a governance scandal at the Health Services Union, and that has clearly spilled over into governance in the superannuation sector. Secondly, the problem is broader than just the Health Services Union. Thirdly, I want to note that the recent Cooper review into superannuation recommended substantial reforms to superannuation governance but the Minister for Financial Services and Superannuation, Bill Shorten, has done nothing about it.

Let me turn, firstly, to the governance scandal at the Health Services Union. The former national secretary of that union is the subject of an 1,100-page report by Fair Work Australia detailing multiple breaches of the union rules. Another senior Health Services union official, Michael Williamson, has been the subject of serious corruption allegations. The partner of the current Health Services Union National Secretary, Kathy Jackson, has written to police complaining about what is happening at the Health Services Union. The most obvious victims of the mismanagement and poor governance at the Health Services Union are the unfortunate members of that union.

Another group of Australians should be very concerned: those whose retirement savings are in the hands of Health Services Union officials appointed as directors of superannuation funds. Thanks to deeply flawed governance arrangements put in place by the Keating government, union officials have a privileged place in running superannuation funds. Health Services Union boss, Michael Williamson, was until recently a director of First State Super, a fund with $30 billion under management for some 70,000 current and former New South Wales public servants. He was appointed to that position by Unions New South Wales. Last month, the Chairman of First State Super complained that he had no power to remove Williamson as a trustee. Three other current Health Services Union officials are directors of superannuation funds. Peter Mylan, who is the assistant secretary of the New South Wales Health Services Union and a man recently described in the Australian as 'a long time Williamson loyalist', is also on the board of First State Super, appointed by Unions NSW. HESTA, which is a fund with $18.3 billion of superannuation savings for people working in the health industry, has two Health Services Union officials appointed by that union to the board of HESTA: Rosemary Kelly and Lloyd Williams.

Then we could look at former directors of superannuation funds appointed by the Health Services Union. Until recently there was another superannuation fund called Health Super and, before it recently merged into First State Super, Health Services Union official David Langmead served on its board. Until last year, Kathy Jackson, National Secretary of the Health Services Union, was a director of HESTA, and Craig Thomson, the former National Secretary of the Health Services Union and the current member for Dobell, is also a former director of HESTA.

Let us just remind ourselves of what the current member for Dobell had to say about Kathy Jackson's appointment as a director of HESTA. He said:

She sat on the board of HESTA, collecting board fees for many years, rarely attending meetings. But when the union decided the board fee should go to the union, she left the board.

I do not know whether or not that allegation is correct. But I do think it is instructive as an insight into the mindset of one former union official, the current member for Dobell, about the status of board appointments to superannuation funds.

It is deeply troubling that so many officials of a union whose affairs have become a byword for corruption, mismanagement and failure of governance are able to be appointed by that union to roles as directors of superannuation funds where they have the responsibility to oversee the retirement savings of tens of thousands of Australians, many of whom are not members of the Health Services Union or any other union. The Health Services Union scandal shows what happens when union officials are more interested in looking after themselves than in serving their members.

I want to come to the second proposition put before the House this afternoon: that this is a broader problem, which extends beyond the Health Services Union. There are dozens of superannuation funds that have up to half of their directors directly appointed by a union and hence there is the real risk that, if a union is infected by a 'look after your mates' culture, this in turn can infect governance in the superannuation sector.

One troubling indicator is the number of superannuation funds that do not disclose the fees they pay to their directors. Of the 16 funds which brand themselves as 'industry super', fewer than half of them disclose the fees paid to individual directors in their most recent annual reports. Another indicator that something is wrong here is the number of current or former union officials doing very nicely from serving on the boards of multiple superannuation funds. Michael Williamson of the Health Services Union, whom I mentioned before, was recently reported in the Sydney Morning Herald to earn a $330,000 a year salary, in addition to $150,000 from his various board positions, such as First State Super.

Mr Williamson is not the only follower of this particular career strategy. Consider, for example, Mr Bob Henricks, a former Queensland secretary of the Electrical Trades Union and CEO of Energy Super, a Queensland based fund with net assets of $3.8 billion. He was also Chairman of SPEC Super, until it recently merged into Energy Super, and he is also Chairperson of AUST(Q) Super. None of these funds in their annual reports disclose the fees paid to Mr Henricks as a director but, when you add up those fees across multiple funds, they are likely to be significant.

Another interesting case study is that of Mr Bernie Riordan, until recently the head of the Electrical Trades Union in New South Wales. Last year the Sunday Telegraphreported that he earns nearly $400,000 a year from a combination of his union job and directorships of three superannuation funds and businesses: Energy Industries Superannuation Scheme, FuturePlus Financial Services, and Chifley Financial Services, and one other company.

Let us look at another fund where there has been a profound governance problem. Vision Super in Victoria, formerly known as Local Government Super, was supposed to be merging with Equip Super, the fund which covers employees in the Victorian electricity and power sector. It has recently been announced that the merger is off. The difficulty seems to have been that it ran smack bang into the politics of the Australian Services Union, which dominates Vision Super. Equipsuper has elected member representatives, which is a good thing, but Vision Super has its four so-called member representatives directly appointed by the Australian Services Union. The merged entity was supposed to have elected member representatives, but it seems that ASU officials were very unhappy when a member of the Equipsuper fund—somebody who happened to be a senior manager at a power company, somebody who had formerly been an employer-appointed director of Equipsuper—chose to seek election as a board member of the merged super fund.

A letter was circulated to ASU members by ASU state secretary Brian Parkinson. Let me read from some of what he had to say. He said:

Voting has now commenced for the election of two member elected directors to serve on the Equipsuper board.

As expected, employers are seeking election to workers' positions. Indeed, one such individual, John Azaris (General Manager—Operations and Services at SP Ausnet), has exploited his senior management role to frustrate the election chances of ASU candidates.

To illustrate this point, I wish to bring this one incident to your attention. SP Ausnet management allowed Azaris, a current employer director at Equipsuper, to use it's email system to promote his candidacy as a member director. When an endorsed ASU candidate employed there (with almost 40 years of service to the company) sought to use the same service, he was refused on the most flimsy of pretexts. Management will pull out all the stops to see one of their own elected at the expense of workers.

These are the sort of unfair tricks we can expect from management. It is a disgrace. Workers such as yourself need to send a clear message to management to keep their hands off Equipsuper.

It seems that Mr Parkinson, who, as well as being ASU state secretary is also a director of Vision Super, was unhappy that the Australian Services Union was not going to have a guaranteed number of union appointed directors to the board of the merged entity. But his letter reveals that he has fundamentally misconceived his duties as a director of Vision Super. The selection of directors of a superannuation fund, to take on the vital task of stewarding the collective retirement wealth of members of the fund, has nothing to do with outdated class-war rhetoric about workers and bosses.

We could look at reported difficulties in the Meat Industry Employees Superannuation Fund. According to a recent report in the Australian this union invested some $30 million in a property company called Austcorp, before the company collapsed in May 2009 with almost all of the $30 million being lost. According to the Australian, Austcorp paid tens of thousands of dollars to a Mr Wally Curran, described as 'a legendary unionist, former long-time secretary of the Meatworkers Union and a long-serving trustee director of the Meat Industry Employees Superannuation Fund.' If you look at the most recent annual report of that fund, you will see that he was listed as a director. According to the article, Mr Curran is 80 years old and a former communist.

It is an obvious question: is Mr Curran a suitable person to be managing a superannuation fund which has $550 million of assets? Does he have the qualifications, skills and ability to separate what is in his personal interests from what is in the interests of members of the fund? But if this question can be asked about Mr Curran or Mr Parkinson—or Mr Williamson, of whom I have earlier spoken—how many other union officials on superannuation fund boards can it be asked of? If you take the 67 funds listed by the Australian Prudential Regulatory Authority as industry or public sector funds, there are 170 directors appointed directly by a union or a union peak body such as the ACTU. The majority of these people have as their day job that of being a union official. For example, the four union appointed directors on TWUSuper are the national secretary and the three state secretaries of the Transport Workers Union.

Let me turn to the third point I wish to make, which is that the Minister for Financial Services and Superannuation and the Gillard government have failed to implement the reforms recommended in the Cooper review to address the governance problems that I have spoken of. The minister, Bill Shorten, has done some window-dressing recently, announcing a package of measures that will, amongst other things, require funds to disclose the remuneration of directors. That is a good thing, but in both his reform package and in the legislation dealing with the obligations of directors of trustee companies of superannuation funds, which went through this House last week, the minister made no attempt to deal with key recommendations from the recent Cooper review dealing with the governance of superannuation funds.

Those recommendations include that disclosure of conflict of interest should be mandatory; that directors must properly disclose their remuneration in line with the provisions that apply to publicly listed companies; that the so-called equal representation model—which is code for the unions having a privileged role in the governance of superannuation funds—should no longer be mandatory; that where equal representation does apply there should be at least one third of the directors on the board who are independent; and that directors who want to sit on multiple boards must demonstrate to APRA that they do not have any foreseeable conflicts of interest.

As I have demonstrated, there is plenty of evidence that union officials regard being on the board of a superannuation fund as a nice little extra benefit that comes as part of the package of being an official. There is troubling evidence that some do not understand their fiduciary obligations to members of the superannuation fund—obligations which have nothing to do with their position as a union official and which are quite separate and which are legally binding. Unfortunately, Minister Shorten has done nothing to solve this problem. He is, I note, himself a former union official and a former director of an industry superannuation fund—one of the predecessors of AustralianSuper—as are two other Labor parliamentarians former directors of AustralianSuper, Greg Combet and Senator Doug Cameron, and as was Labor's failed candidate for Melbourne in the 2010 elections, Cath Bowtell.

The current arrangements suit the union movement and individual union officials very well. They are not, however, in the interests of the millions of Australians who are members of superannuation funds which have union officials appointed to the board, because those fund members get no say in that appointment and, in many cases, those fund members are not members of the union.

The evidence is very clear: there is a profound governance problem in superannuation. Last week the minister said that he was 'appalled' about the HSU scandal. I could not help being reminded of Captain Reynaud in Casablanca, who was 'shocked' to discover that there was gambling going on, and promised to 'round up the usual suspects'. It is time to end the window-dressing. It is time for Minister Shorten to deal with this serious problem. (Time expired)

Debate adjourned.

Sitting suspended from 13:47 to 16:01