The industry super funds are getting really desperate. The sharing of the booty of the equal representation model, underpinned by legislation, is under attack – well actually, some very modest changes to the governance of APRA-regulated super funds are being proposed.
Who will guaranteed those well-paid trustee positions (and assorted perks such as luxury travel and expenses to attend ‘important’ conferences) for completely unqualified union hacks and only slightly better qualified employer representatives?
The intrepid – intrepid in the sense of putting out consistently misleading material – lobby group, Industry Super Australia, which represents the industry super funds is at again in the form of its submission to the Senate Economic References Committee inquiry, in the hope this rent-seeking group can persuade the cross-bench senators to vote against legislation that will ensure that a third of trustees of all APRA regulated superannuation funds are independent.
And this is notwithstanding that it was the Labor-commissioned Cooper report that recommended this change.
Here are some of the myths/downright lies that are being peddled in the submission:
- It is only trustees who represent the members and the employers of these members that act only in the interests of the members.
- Actually, most of the industry super funds are open schemes and the occupational/industry based trade unions that are represented on the trustee boards do not represent all of the members. And bear in mind that only 17 per cent of workers are union members and the figure is even lower in the private sector at 13 per cent. Industry super funds also have retired persons as members. Note also that most of the industry representatives are not real employers but nominees of the employer associations which are just part of the rent-seeking racket.
- The government is not mandating an equal representation model for the two-thirds of trustees who are not independent.
- Nor should it; it is up to the boards of trustees to work out how best to meet the interests of the members. But if a board wants to divvy up the two-thirds on an equal representation basis that is up to the board itself and is allowed under the amended legislation.
- The superior returns of the industry super funds are the result of the equal representation model of governance.
- In fact, the evidence produced in the Murray report on the financial sector showed a clear advantage in having more independent directors in terms of superior returns and bear in mind, Murray recommended a majority of independent directors as the preferred model.
- The returns of the industry super funds are superior to the returns of retail funds.
- The reality is that there is a distribution of returns and some industry super funds have got into real trouble in the past – eg. MTAA Super and the meatworkers fund. But the real story here is that industry super funds don’t have to worry about managing liquidity because of their monopoly position in respect of default funds (this has to be changed) and the scope to invest in alternative investment products, including direct unlisted investments. (Note that there are real issues about the reliability of the valuations attached to these investments which may alter the real differences in the returns between the funds.) The notion that industry super funds are forever changing their asset allocation is probably damning (transactions costs of this strategy are high) rather than something about which ISA should be boasting.
- The new law will require new directors to be approved by APRA.
- This is an excellent change. After all, BA (incomplete) and a complete absence of knowledge of matters related to financial affairs and retirement policy should disqualify anyone taking up a role as trustee of a superannuation funds, let alone chair it!
- The third of the board who are independent directors plus an absence of mandated equal representation for the remaining trustees means that industry super funds will be demutualised and turned into for-profit funds.
- This is really scrapping the bottom of the barrel on the part of the ISA. The only way that a board of trustees would recommend this course of action – highly unlikely – is if the change were in the interest of the members.
With the Royal Commission on Trade Union Governance and Corruption revealing multiple instances of conflicts of interests, including in respect of the workings of industry super funds, you might think that the ISA would decide to accept this perfectly obvious and modest change in the governance of the APRA-regulated super funds. But I guess if you are desperate this is what happens, as the ISA attempts to get into the ear of any sympathetic journalists who will listen.