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Thursday, 7 February 2013
Page: 540

Mr FLETCHER (Bradfield) (12:40): I rise to speak on the topic of superannuation and the importance of the superannuation system in funding the retirement incomes of Australians. The sole purpose test in section 62 of the Superannuation Industry (Supervision) Act requires that the trustee of a regulated superannuation fund must ensure that the fund is maintained solely for the benefit of each member of the fund. The reason for spelling this out in legislation is of course that the agglomeration of substantial economic resources—extremely substantial in the case of the $1.5 trillion superannuation sector—naturally presents temptations. This includes the temptation for those with influence and control over those economic resources to use them to advance interests which are different from the interests of members of the fund in maximising their retirement savings.

There is presently a troubling example of how this temptation can play out. The Victorian branch of the Construction and General Division of the CFMEU is pressuring the Building Industry Superannuation Fund, Cbus, in relation to property developments pursued by Cbus. This follows a major industrial dispute last year between the CFMEU and the construction company Grocon. According to media reports last month, the CFMEU's Victorian Secretary, John Setka, said its members were angry that Cbus had awarded Grocon a $430 million project in Sydney. He said, 'I reckon it is a slap in the face for the union, what Cbus has done.' It was reported that the CFMEU has sought expressions of interest from other superannuation funds to become its default fund. Presumably what it intends to do is to use the award process to have Cbus removed as the default fund for workers covered by the relevant awards, and this in turn would stop the flow of contributions from such workers into Cbus. This is an attempt by a union to use the economic resources of a large superannuation fund over which it has substantial influence, including the appointment of three directors, to secure industrial or political outcomes—in this case, to advance its industrial dispute with Grocon.

What would such action mean for the interests of the 655,000 members of Cbus? Presumably this property development venture is being pursued to generate economic returns to fund the retirement incomes of members of Cbus, members who, by operation of statute, have a proportion of their remuneration paid in the form of employer superannuation contributions. Grocon has presumably been chosen using normal commercial processes with a view to getting the development done as quickly and cost-effectively as possible. Yet the CFMEU is proposing to subjugate the interest of all of these Cbus members to the furtherance of the industrial agenda of the CFMEU in Victoria. How could it be compliant with the sole purpose test for Cbus to agree to the CFMEU's request? This situation raises a very clear question as to the approach that the three CFMEU appointed directors on the Cbus board intend to take.

Cbus is not unique in facing these sorts of conflict. Consider TWUSUPER, a fund with $2.6 billion under management and four directors appointed by the Transport Workers Union. In 2011 the Transport Workers Union vigorously attacked changes proposed by the management of Qantas to the operation of the company, changes that management said would improve the company's financial performance. Members of TWUSUPER have a right to expect that the sole consideration exercising the minds of directors is how to maximise the financial returns generated by the fund. But an obvious question arises: how do the directors of TWUSUPER who are also union officials think about equity investments in Qantas or other companies in the transport sector?

The recent Cooper review recommended major changes to the existing so-called 'equal representation' system of unions and employer organisations appointing directors to the boards of superannuation funds. The Rudd-Gillard Labor government has done nothing about these recommendations but they will not be ignored by the coalition should we come to power.