Financial Services Minister Kelly O’Dwyer has signalled the federal government will reintroduce a bill that would lessen the number of union and employer-aligned directors at industry super funds.
Ms O’Dwyer made the announcement during a speech at the Industry Super Australia conference in Canberra on Tuesday, where she accused the industry funds of “cosy deals and lower governance standards”.
“My question for you all today is: are you serious about lifting governance standards in this sector or do you want to cling to outdated practices which do not reflect the size, the scale, nor the enormous importance of this industry?” she asked delegates.
The Liberal-National government tried to push a bill through Parliament last year to require at least one-third of all industry super fund directors, including the chair, to be independent. It gave up the attempt in the face of a hostile Senate.
Industry Super Australia, which represents 15 of the industry funds, and the Australian Institute of Superannuation Trustees, which represents the entire non-profit sector, convinced several crossbench senators to pledge to vote it down by promising a review of fund governance.
The promised review, headed by former Reserve Bank governor Bernie Fraser, was to report in April, but was deferred because of the federal election. Its findings have not been made public.
Ms O’Dwyer told the conference the report seemed to have “disappeared into a black hole”.
Industry Super Australia chair Peter Collins contested this. He told The Guardian his organisation had tried unsuccessfully on numerous occasions to give Ms O’Dwyer the report.
Many industry funds currently have a model of equal representation, whereby boards are comprised of union-aligned and employer-aligned directors in equal numbers.
‘A hidden motive’
IFM Investors chair Garry Weaven, a veteran of the industry super sector, told the conference the government’s true intention was to rebalance the super system in favour of the banks.
“They [the government] are now on about giving the banks a bigger slice of the default system. Why? Simply because they believe the industry funds should have less.”
The ‘one-third rule’ was supported by the Association of Super Funds of Australia (ASFA), the peak body for both profit and non-profit funds.
The Financial Services Council, which represents retail super funds, wants the government to go further and legislate that a majority (not just one-third) of industry fund directors be independent, as is required of retail funds.
If reintroduced, the bill would be one of many before Parliament seemingly aimed at weakening the power of unions, union-aligned funds and the Labor Party.
These include a proposal to alter the rules of default super. Currently, employers select their company’s default fund from a pre-approved list, many of which are offered by industry funds.
The Turnbull government wants to copy the Chilean government, which every two years conducts a national auction and awards the prize of managing the nation’s single default fund to the lowest-fee bidder.
Industry Super Australia CEO David Whiteley has criticised the government for trying to follow the example of Chile, ranked eighth in the world for superannuation, when Australia’s industry fund sector already closely resembles that of Denmark (ranked first) and the Netherlands (ranked second).
“The best systems, just like Australia’s best-performing funds, involve employers and employee representatives working together to deliver income security for retirees. They are not about generating profits for banks and financial institutions,” Mr Whiteley said in early November.
“The approach to superannuation in Denmark and the Netherlands, along with the part of Australia’s system built and maintained by unions and employers, is internationally lauded.
“The key difference is that these systems and institutions put member interests above those of others, including shareholders.
“Super is different to banking and industry super funds are deliberately different to bank super funds.”
The Turnbull government is also pushing for two new union regulators: the Australian Building and Construction Commission (ABCC) and the Registered Organisations Commission.
*The New Daily is owned by a group of industry superannuation funds