Jan 25, 2013

$600b in voting rights wasted, now unions rally on super funds

The local labour movement is becoming increasingly bullish about how its members' superannuation money is invested. What happens if more unions start putting their money where their mouths are?

Andrew Crook — Former <em>Crikey</em> Senior Journalist

Andrew Crook

Former Crikey Senior Journalist

When leading US pension fund CalPERS blew the whistle on the Walmart board last year for bribing Mexican officials to secure market access to booming markets south of the border, the decision made headlines. The collective assault on nine sitting board members of the world’s third-largest company may have been shot down at the annual shareholders meeting, but the record vote against successfully shined a spotlight on big box abuses in the fledgling narco-state.

It’s the sort of ballsy front-foot activism historically absent locally, where union-backed industry funds have cleaved to a strict interpretation of the Superannuation Industry Act‘s “sole purpose’ test” — that theoretically locks trustees and fund managers into maximising raw returns to the exclusion of anything else.

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10 thoughts on “$600b in voting rights wasted, now unions rally on super funds

  1. swingingvoter

    I’m all for ensuring super funds operate and invest responsible ethically and legally. And by all means the superannuated should hold them to account, and unions should be involved; however who holds the unions to account. The HSU saga and the CFMEU illegal strikes are evidence that the unions are a sacred cow. Every organization in Australia should be subjected equally to regulations that ensure responsible ethical practice, super finds public companies unions or otherwise.


    Unions need to rebuild their reputation to obtain trust & be responsible for members’ funds and respect employer’s right to be profitable. The cost pull inflationary measures the government has applied on industries and employers will erode the profitability and force them to go off shore. This does not mean that we should accept the Billions of shareholder value eroded by poor decisions made by heavy weights like BHP, RIO TINTO, QANTAS etc., over the last 5 years, which has nothing to do with sovereign risk or labour costs or GFC!!
    Good Luck to Mr Tim Lyons and his team. I am looking forward to the actions he takes and combine his efforts with that of Share Holders Association of Australia to make companies accountable and not bulldoze the AGM’s with a lot of Waffle and no care attitude towards shareholders. Punish those responsible for decisions taken which have resulted in erosion of shareholder value [majority of them are SMSF and large industry superfunds].

  3. Stephen Paul

    Industry Super funds should ask members and whether the remuneration reports for the executives and other matters should be approved or not. The memebers vote would be proportional to the amount they have in the fund and the Superannuation fund would allocate their voting in line with the results. This would bring some real democracy and accountability to shareholder meetings.

  4. PaulM

    After reading the first paragraph, all I could think was, “Doesn’t Crikey employ sub editors anymore, either.

    For future reference: a “boarder” is one who pays money for food and lodging.

  5. David Coles

    It is high time super funds exercised any muscle they have to ensure that the funds of their members are invested in companies that operate according to the rules they endorse. Financial muscle is there for everyone to use.

  6. Tom Jones

    Absolutely right David Coles. There are often choices which are about equivalent on profit but with one that will hinder the future while the other will help. Why wouldn’t responsible superannuation funds look to the long term.

  7. Mike Flanagan

    It is not just the super funds that should have their investment of funds under scrutiny with their subscriber’s long term interest in focus.
    I would suggest that all allocators of capital resources to the market should show a greater focus on the long term effects of their loans and investments.
    I applaud the Industry Super Funds attending to their ethical allocation of funds on behalf of their member’s lifetime interests.
    We only have to observe the current flood crisis affecting the coastal fringe of Queensland.
    Many of our reputable Oceanographers and Marine Biologists have been advising us of their confirming data that our east coast ocean currents have heated by up to 6 degrees Celsius because of global warming and climate change. To assert this temperature increase is not having an impact to increase these flooding events, to my mind, defies logic.
    These floods and other environmental disasters are having a major impact on the individual’s security and infrastructure. It makes no sense for superannuant’s to invest in companies that have no regard to the maintenance of their customer’s accumulated assets.
    Likewise it is hard to see the logic for any allocator of capital in our so called free market to assist in the destruction of their customer’s assets and wealth.
    The coal industry for instance, has been identified by all our climate scientists as producers of much of the destruction we are beginning to see from the warming of our biosphere through the discarding of CO2 into our common.
    The sources of their capital is from many sections of the capital allocation processes and industry ,and all of them should reflect on their continued dismissal of the ethics of their work in the destruction of some of the basic elements of our lifestyle and the impairment of, ultimately, their own client’s assets.
    So, congrats to Cbus and it is time for Banks, Corporate Bond players and others to reflect on their influence and ethics of much of their current allocation of capital in the market.

  8. Ian

    Very well put Mike but I would add that it should not all be about return on investments, short or long term, but also about equity (no pun intended). Inequality is on the rise as the 1% take for themselves a an ever increasing share of the total pie. Increases to board remuneration way in excess of the inflation rate or the rate of pay increases for the average person have now become the norm.

    Governments pretend to be powerless to stop this trend and individual workers or shareholders like myself do not have the power to change anything. It is time for our superfunds to act on our behalf and as a matter of course vote against these excessive pay increases.

  9. Matt Stevens

    It would be no bad thing if unions and their mates focused on people’s savings. At some point, if they haven’t already, employees are going to wake up to what happens when other people decide what happens to 10% of your pay packet.

  10. Dogs breakfast

    It’s a bit rich to try to exclude the industry super funds (yeah, the union run ones) from having input to the direction a company takes, particularly from a governance, remuneration, ethics and environmental/social viewpoint.

    For mine, this argument is about the ‘real’ value of the company rather than the current shareprice.

    Warren Buffett says that he bases his investments on well managed companies. I think it can be argued that remuneration and ‘well-managed’ do have a correlation, and generally it isn’t that the highest paid do the best job.

    Highly paid, stock incentives etc often bring perverse (but foreseeable) outcomes, such as short-termism, poor value acquisitions and dubious governance.

    The owners of those companies are the super. contributors, and the union boards are responsible to those owners.

    I agree with the first comment though, shed light on the union’s nominees to these boards as well, they should not be highly paid sinecures for ‘mates’, as no doubt some are.

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