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Issues of risk and governance
Issues raised before the Royal Commission into Trade Union governance ought to give APRA food for thought.
It is an old maxim in politics that you never ask a question to which you do not already know the answer and it follows that many of the questions being asked at the Royal Commission into Trade Union Governance and Corruption have elicited answers consistent with their original objective.
That some of those questions have traversed the relationship between trade unions and industry superannuation funds is also not surprising given the long-standing habit of conservative politicians to reference “union super funds” in the same context as industry superannuation funds.
And it is a measure of the questions which have been asked and the answers which have been provided that seemingly innocuous practices have been made to look sinister - the existence of “union liaison officers”, for example.
The degree to which the existence of these “liaison officers” has become an issue was evidenced during a sitting of the House of Representatives Economics Committee in mid-July during which members interrogated senior officers of the Australian Prudential Regulation Authority.
During that committee hearing, Queensland Liberal MP, Scott Buccholz reference media reports that major building industry fund Cbus had made available member information to the Construction Forestry Mining and Energy Union - the major union in the sector and one which nominates trustee directors to the Cbus board.
Buccholz asked APRA’s Helen Rowell whether APRA [would] “have questions or concerns around the governance of, say, breaches of the obligation to treat members’ information as confidential and the apparent release of such data to union officials?”
Rowell replied, any control breakdown, and particularly a breakdown in respect of privacy obligations, is of concern and something we would follow through on.
The Queensland parliamentarian then went on to ask Rowell whether “clients’ confidential data [should] be shared with union liaison personnel on the payroll for the benefit of the particular union?”
Rowell replied she believed such instances were very limited and isolated.
Two things are evident from the questioning of people such as Buccholz - (1) that the Royal Commission initiated by the Abbott Government has succeeded in identifying an issue which should be of concern to the superannuation industry. (2) That the APRA appeared unaware of the breach in confidentiality or the particular use of “liaison officers” before the issue was raised in the Royal Commission.
All of which adds weight to the arguments of those seeking to prosecute the notion that superannuation funds should be subject to same governance arrangements as publicly-listed companies which independent directors and shift away from the traditional superannuation trustee model.
In truth, given the nature of the Australian building and construction industry, the existence of union liaison officers should not be counted as all that sinister. Anyone who has encountered the industry would understand the transient nature of many of its workers and the all too frequent occasions on which small contractor/employers might fail to deliver on their superannuation guarantee obligations.
It is entirely arguable that the existence of a union liaison officer capable of dealing with superannuation guarantee issues makes good sense. What does not make good sense is a superannuation fund providing confidential member data to a union via the auspices of such a liaison officer.
The senior executives and trustee board members of Cbus can hardly have been surprised by the level of attention directed towards the fund by the Royal Commission. Not only is it the major superannuation fund in a highly industrially-active industry, it has also been a major investor in the development of the building and construction work that is the lifeblood of that industry.
The revelation that confidential member information was inappropriately disclosed will undoubtedly have consequences for Cbus when the Royal Commission hands down its findings but it may also have implications for APRA.
Quite simply, while the prudential regulator may be able to argue that it could not have known about the breach of confidentiality, it ought to have been aware of the governance risks that gave rise to that breach.
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