Why are so many company directors diverting their energies into pushing publicly-owned corporations to take up controversial social and political issues (like diversity, climate change and same sex marriage), rather than concentrating on their duty to make a quid for their shareholders?
One reason may be emerging from last weekend’s dust-up between a trade union leader and a union-dominated industry superannuation fund that is not (yet) doing his bidding. When NSW electricity supplier Ausgrid sought to help put downward pressure on rising electricity prices by offshoring a third of its information system to India, the United Services Union banned the training of the Indian contractors until Ausgrid succeeded before the Fair Work Commission in having the ban lifted. So now the USU’s boss, Graeme Kelly, wants its related $10 billion Local Government Super fund to withdraw its $113 million from union-controlled industry funds manager IFM Investors. In partnership with fellow industry fund AustralianSuper, IFM has a $16 billion majority-controlling investment in Ausgrid. Kelly, who told the Australian he had the full support of the ACTU’s bosses Sally McManus and Scott Connolly, plans to ‘condemn IFM and AS for their support of Ausgrid’s appalling behaviour against workers’. LGS is to consider the USU request to pull its funds out as ‘environmental, social and governance considerations are a key to LGS investment decision making’.
Kelly and LGS super should take heed of the long-standing advice of ACTU icon Bill Kelty that industry superannuation funds should not become industrial or political playthings. In rebuking the CFMEU some years ago for its attempt to force its super fund, Cbus, to break a deal with builder Grocon, Kelty warned of a possible loss of confidence in industry super funds if it appeared they were subject to pressure over their investments for political or industrial reasons. ‘This is compulsory superannuation, therefore the level of trust and accountability must not be less than what corporations in Australia apply; it should be greater’.
There is nothing new about the potential for conflict of interest between the union bosses who control industry super-funds and the non-unionists who make up the great bulk of superannuees whose retirement savings, thanks to Labor governments, have by default ended up in industry funds; that’s why, as union membership dwindles to record lows, assets in their super funds hit record highs. So far, at least on the surface, union attempts to dictate to their super funds have failed. But the founder of the industry funds movement (and chair of the $75 billion IFM), Garry Weaven, has never been shy about its broader social objectives: ‘Holding controlling stakes in assets or very substantial stakes with strong partners, clearly confers strong benefits’ and at the ACTU NextGen conference, his IFM outlined the way industry fund investments created the ability to ‘effect positive social change’. This is in line with its three core beliefs: a healthy environment, an inclusive society and an obligation that its financial returns must ‘not be at expense of the community, the environment or market integrity’. To further its social agenda, Weaven’s IFM has a long-standing relationship with the Uniting Church’s activist Justice and International Mission. So IFM wants more women on corporate boards; it doesn’t like coal and funds renewable energy plants and pressured 72 Australian companies to reveal their greenhouse gas emissions; it has confronted corporations with its concerns about human rights and has exercised 700 votes on company resolutions – many on ‘excessive’ directors’ remuneration.
There is no evidence yet of industrial, political or social agendas affecting public confidence in these funds; the latest official statistics for Australia’s $2.3 trillion super business show industry funds assets ($545 billion) still growing at five times the rate and outperforming the retail funds ($587 billion) which continue to lose business to the Self Managed Superannuation Funds that have boomed under Costello’s tax lurk to $700 billion. Corporate boards seem to be increasingly responsive to this growing and organised power of industry funds – and their union-backed agendas.