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Monday, 4 December 2017
Page: 9449


Senator BROCKMAN (Western Australia) (11:52): If you had listened to the last two contributions, you would have heard that we have the union movement, unicorns and rainbows, and big banks are terrible. To quote Senator Whish-Wilson: 'there's nothing to see here' when we're talking about industry super funds. I think there is something to see. The reason there is something to see is that, for the exact same reason that many people have been arguing for a closer look at the banks, people have been arguing against the idea of strong vertical integration and banking institutions having links through the financial services sector from top to bottom. And yet when we look at the structure of the industry super funds and the entities that have been created to provide services to those industry superannuation funds, we start to see a very strong web of the same people providing services to the industry super fund network in a way that looks highly vertically integrated to me. I think that is something that does need a much closer look.

Industry Super Holdings describes itself as providing 'services to Australian based superannuation funds and fund members and managing a range of equity and debt portfolios'. ISH has been bankrolled by $830 million of retirement savings from 28 superannuation funds. Senator Whish-Wilson's contribution described how industry super funds were looking after members' money. Yes, they are. When they're looking after members' money, you've got to ask: where is that money going? The major shareholders of ISH are organisations like AustralianSuper, Cbus and HESTA. AustralianSuper recently sold down its stake and reduced its shareholdings. Perhaps it just wanted to reduce its shareholdings, but that has allowed others to buy in. We've now got Cbus, CareSuper, Energy Super, Hostplus, Maritime Super, HESTA, Media Super, MTAA and Vision Super. All are contributors to this Industry Super Holdings, which is, as I said, a large holding company. It has never paid a dividend to shareholders. It has $71 billion of assets under management—$71 billion of Australians' retirement savings. This is a significant entity.

Obviously, we've got Industry Super Australia. It used to be the Industry Super Network, which obviously is the lobbying and advertising vehicle for the industry super funds. We've seen recently in the media a very large campaign for them. I've seen it at least tens of times myself. I'm sure everyone's very aware of it, because it's quite striking. The imagery is the fox in the henhouse. It has very ominous music. The fox is, of course, the banks. 'We don't want the banks having anything to do with superannuation; we've got to protect the industry super funds' patch.' You could rewrite and reproduce that ad; instead of the fox being the banks, you could make the fox the union movement and you would have a very similar message in my opinion. So we've got Industry Super Australia. Obviously, they're a very effective lobbying outfit. We also have Industry Fund Services, with 23 of the 28 Industry Super Holdings shareholders using Industry Fund Services as a service provider. Then we've got links to Industry Funds Investments Limited. Again, very similar people are involved. We have Super Members Investments Limited, the IRIS fund, the AUSfund, IFS Insurance Solutions, IFM Investors—investment and fund managers for 24 of the 28 industry funds. We've got Industry Fund's financial service. We've got the Industry Funds Management (Nominees 2).

So we've got a huge interconnected network of service providers to the industry super funds with a significant lack of transparency and—this is the concerning piece—similar people involved across those organisations. For example, Mr Garry Weaven, who is chair of Industry Super Holdings, is also a senior member of Industry Super Australia. He is also intimately involved with The New Daily, which is an online industry super news website. He has also been involved with ME Bank, which, obviously, has links to the industry super funds as well. There are people like Linda Rubinstein. She has a significant number of roles across this network of interconnected companies. Again, we've got a large, vertically integrated set of arrangements with very little oversight as to what is going on within that with Australian retirees' savings. So at least one of these figures—Garry Weaven, Michael Migro and Linda Rubinstein—is on the board of every entity in the ISH group. Garry Weaven, in addition to being chair of ISH, is chair of The New Daily and IMF Investors. He is also a director of Industry Super Australia. Michael Migro, in addition to being an ISH director, is director of IFM Investors and Industry Super Fund Services and all of its related entities, including AUSfund and IRIS fund. Linda Rubinstein, in addition to being the ISH director, is chair of IFS and all of its related industries, including AUSfund and IRIS fund, and she is a director of IFM. So we have a situation where we've got a significant amount of money—$71 billion in Australians' hard-earned savings—encapsulated in this network of interactions with a significant lack of transparency.

We heard some very strong words from our previous two contributors in this debate about what this bill was going to do. The bill was going to 'dismantle'; it was going to 'abolish'; it was going to 'break apart'. What is the core thing that people seem to be railing against that is going to have this outcome? Having one-third independent directors. Think about that for a moment—that having one-third independent directors, not Liberal Party appointees, is going to dismantle, abolish or break apart. Who are those opposite really trying to convince? Who are they talking to? I don't think they're talking to the people saving for their retirement; they're talking to the unions. No-one in their right mind, quite frankly, could say that having one-third independent directors, which was recommended by the Cooper review—a review set up by the Labor Party—could in any way dismantle, abolish or break apart the industry super funds. What it will do is add a modicum of independent directorial skill to those boards.

Whilst a variety of directors with a range of skills is important, independent directors are vital, particularly in sectors like this where the risks from the kind of vertical integration that I described earlier are apparent. We need to be able to look transparently. We need to ensure that the only thing that the directors care about when they're making decisions on behalf of their industry super funds is the retirement savings of their members. That is the only thing they should be talking about. The idea that having one-third independent directors dismantles anything, abolishes anything or breaks apart anything is just a nonsense.

The Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017 and the cognate bill represent an important reform that strengthens Australia's compulsory superannuation system, in particular for default MySuper products. The package was developed with the clear objective to improve outcomes for consumers. It should never be forgotten that the superannuation sector has grown to over $2 trillion. This is the result of the government forcing people to save part of their own money. In that environment, where the government has compelled people to put part of their money aside for their retirement, it's not enough to merely say, 'Oh, there's nothing to see here.' We have to have the structures and systems in place to ensure that decisions are made solely for the benefit of superannuants. This is Australians' own money. Australians have the right to expect that the industry is held to the highest standards of transparency and accountability—no more closed shops or cosy deals. That's what Australians want. They deserve nothing less than the maximum level of transparency and the highest quality of oversight for their retirement savings.

The change is also designed to make superannuation more consumer friendly and to make superannuation providers more accountable for how they use their members' money. These bills enact more robust prudential standards, improved enforcement and greater transparency. This will boost confidence that super savings are being managed in the best interests of members. Many of these measures have been on the policy agenda for several years and have been recommended by past reviews into superannuation. As I said, some of these things were recommended under reviews of the system undertaken by past Labor governments, but ignored.

Who could possibly argue against independent directors? In normal circumstances, the closed shop of big business and big unions with the lack of transparency would be ringing alarm bells in the opposition and the Australian Greens. Yet, in this case, what do we hear? We hear, 'Nothing to see here.' Surely, everyone in the space would appreciate that the lack of independent board members leads to a potential perception, and a potential reality, of actions that are not in the best interests of Australian superannuants. There can be no argument that members of superannuation funds, the hardworking people of Australia, deserve the best and brightest minds sitting around the board tables of Australian superannuation funds, and this includes industry superannuation funds. That is why the government is committed to legislating consistent and appropriate standards of governance, including minimum levels of independence, across the entire superannuation sector.

The superannuation sector has evolved considerably since the introduction of compulsory superannuation in 1992. Not only has it evolved; it has grown. It is now a significant part of our financial sector. As such, it has a lot of power and influence over other parts of the financial sector, and on that basis it needs to face similar governance rules. Governance arrangements simply have not kept up. Superannuation is larger and more complex, with a more diverse membership. Funds themselves have evolved. They have opened up to competition so that they can appeal to a wider variety of members. They are competing actively for market share beyond their traditional industry based membership. These things need to be taken into account.

An industry super fund that represents a particular industry no longer just has members from that industry. As such, the governance arrangements, particularly in terms of having more independent directors, are vital. Some trustee boards do not have governance arrangements that reflect the important role they play in ensuring that the retirement savings of their members are invested to maximise returns. These standards would not meet the expectations of the Australian people. Endeavouring to lift the independence of the superannuation sector should not just be a priority of ours; it should actually be a priority of the industry itself. The risks are all on the downside. Strengthening trustee board structures, through increased independence, is in everyone's best interests. The government makes no apologies for putting the interests of superannuation members ahead of any self-interest of the industry. In particular, the statutory minimum requirement for one-third independent directors, including an independent chair, is a very significant reform and, to me, it should be something that could be supported by everyone in this chamber. I personally think that there is an argument for having 100 per cent independent directors, selected solely on their ability to oversee the money of Australian retirees, who—I once again remind all in this place—are forced to save their money. They are forced to put their money into super. It is not a choice.

There have been numerous inquiries that have recommended a majority of independent directors, including the Financial System Inquiry and an inquiry by the Financial Services Council at one point. The one-third benchmark, as I have said, matches the proposal put forward in the Cooper review. The Cooper review was commissioned by the then Labor government, and that is a good start. It is also a very modest start. It does not dismantle; it does not destroy; it does not do any of the things that the other side are arguing it does. Without a minimum standard, fund members may be exposed to detrimental outcomes that can arise through poor decision-making or failure to deal with conflicts of interests appropriately.

We've clearly got what should be a fairly non-contentious change, and yet those opposite are doing all they can to undermine and frustrate one-third independent directors—not appointees of the Liberal Party and not appointees of any particular part of business, but independent directors who are there solely to look after the members' interests, Yet that can't be supported in this place. I find that staggering.