ACTU Super Newsletter - Oct / Nov 2004

In this months ACTU Super Newsletter: Federal election 2004; James Hardie victims; Qantas; CBA; Electrolux & super; Choice of funds; Super Power Conference Syd/Melb 2004; Protection of Super Insolvency; Blue Scope Steel -- AWU -- Corporate governance; UK pensions.

ACTU Superannuation Trustees Network Newsletter No.26 October / November 2004

Editor: Linda Rubinstein
Fax: 03 96634051
Email: lindaru@actu.asn.au

Election Result

What is there to say, except that the Government will be able to continue with its grand plan of delivering compulsory super to the banks and life companies, and “incentivising” the already well-off to contribute.

Hardie Bends But Doesn’t Break Under Pressure

Less than a week after fund managers received a letter from the ACTU asking them to consider voting against adoption of the company’s accounts at its AGM, Hardie announced that it was deferring the resolution.

The ACTU argued that funds should protest the failure of the accounts to make provision for compensation for asbestos victims.

The AGM was followed by the finding of the NSW Special Commission of Inquiry that Hardie had a moral obligation to make compensate victims, irrespective of any legal claims which could be made.

Although Hardie is now negotiating with the ACTU and victims, settlement has not been reached, and there is a need for pressure to continue. This includes pressure from investors and consumers.

A number of managers told the ACTU that they did not hold the stock, or had sold down because of the uncertainty surrounding the asbestos liabilities, while a couple said they were appalled at the company’s behaviour.

On the other hand, other have made it clear that the moral issues are of no interest in determining whether the shares are a good buy.

This is a shocking attitude. If good corporate governance does not include dealing honestly and fairly with all those affected by the company’s action it is stripped of any real meaning.

300+ At ACTU Super MTGs

More than 300 union and industry fund representatives attended the ACTU’s Super Power conferences in Sydney and Melbourne last month.
The main focus of the discussion was to kick off a bargaining campaign around claims for increased employer super payments and for agreements to provide for contributions to be made to industry funds.

Shareholders Face Workplace Issues

The current company AGM season has found shareholders forced to consider company behaviour towards workers and their unions.

BlueScope Steel

The BlueScope (formerly BHP) Steel AGM heard how the CEO refused to meet with the AWU about its concerns about corporate governance.

The AWU had moved resolutions seeking to cap executive and directors’ remuneration to 20 times that of an average worker (unless shareholders agree otherwise) and limit multiple directorships and terms of office.

The union is currently engaged in a difficult wage dispute which highlights the contradiction between workers’ employment conditions and excessive remuneration and jobs for life for directors and executives.

The AWU resolutions received around12% of the vote at the meeting.

Qantas

Similar issues concern unions at Qantas. The ASU has been campaigning against 66% increases in director remuneration compared to 3% for workers.

CBA

The FSU is asking the Commonwealth Bank AGM to support a resolution for an annual review of the impact of change on customers and staff, conducted by an independent expert.

Electrolux And Super

The ACTU believes that superannuation provisions in agreements are unaffected by the High Court’s Electrolux decision, which held that agreements containing provisions which do not pertain to the relationship between employers and employees cannot be certified.

In Financial Clinic the Court held that a union claim for a single superannuation fund, to the extent that it applied to non-members, was not a matter in which the union had a legitimate interest in the sense of being capable of giving rise to an industrial dispute unless there were “exceptional circumstances”.

This is a different issue from whether or not the claim pertains to the employment relationship as discussed in Electrolux and, in the ACTU’s opinion, the case does not affect the validity of agreements containing super fund specification provisions.

Choice Of Legal Advice

Unions, amongst others, have had reason to be confused by some conflicting legal advice about the application of the choice of fund legislation which commences on 1 July next year.

It is now clear that, in the federal jurisdiction, if an employee fails to make a choice, the award provision applies. If there is more than one fund specified in the award, it operates just as it does now. If no fund is specified, employers choose the fund, just as they do now.

A second issue is whether, in state jurisdictions, workers who do not have a fund specified in their award must be offered choice. One view is that because the Act exempts employers who make contributions under or in accordance with a state award, there is no requirement for fund specification so long as the award provides for super contributions. The same issue applies in relation to exemption from choice for employees under certified agreements.

While this position is arguable, the ACTU believes that the context of the legislation, together with the Explanatory Memorandum, make it more likely that the exemption requires specification of the fund in the state award or agreement.

In any event, to avoid problems, unions should, as a priority, ensure that agreements and awards, federal and state, specify the fund or funds into which contributions are to be made.

And Watch This Space

The Government’s unexpected Senate win means that it could revisit its move, previously blocked in the Senate, to remove superannuation from the allowable matters which can be included in federal awards, thus wiping out the award default provisions.

Given the commitment to another round of award stripping, this is a real possibility.

Senate Backs Protection Of Super In Insolvency

The Coalition-dominated Parliamentary Joint Committee on Corporations and Financial Services has unanimously recommended including super in GEERS, the government-funded scheme to pay employees’ entitlements when their employer goes broke, saying in its recent report on corporate insolvency laws:

“In the Committee’s view, GEERS is an important aspect of the overall arrangements for the protection of employee entitlements in Australia and should continue to be a feature of those arrangements. As to extending its coverage, the Committee believes that it should cover superannuation entitlements, particularly in light of steps that have been taken to ensure that employees’ superannuation contributions are being made.”

“Gray” Directors Linked To Fraud

A study by US academics has found that the presence of independent directors protects companies from fraud and corruption.

Published in the June issue of Financial Analysts Journal, the study found as the number of independent outside directors increased on a board or key committee, the likelihood of corporate wrong doing decreased.

For the sample, the researchers compared 133 companies accused of fraud from 1978-2001 to a sample of “no-fraud companies”, with a focus on non-management directors who had ties to the company under review. The issue of board members the paper terms “gray” harks back to Enron, where critics say ostensibly independent directors were tainted by other connections to the former energy giant.

The study found that “fraud companies” in the sample had a higher percentage of “gray” directors on the key audit, compensation and nominating committees.

UK Pensions Debate

An inadequate state pension and collapsing provision of employer benefit is forcing the UK to look at how future retirement needs are to be funded.

Acceptance of the aged living in poverty, increased taxes, individual savings or increased retirement age were the choices identified in the recent report of the Pensions Commission.

Assuming increased poverty is unacceptable, the Commission advocates a combination of the other options: some combination of higher taxes, higher savings and later retirement age.

A central element of the current debate is whether or not to introduce compulsory savings by employees and/or employers.

The Brutish unions support a compulsory scheme, while others, like the Fabian Society, argue that:

“More compulsion is not the answer. Compelling companies to contribute to their employees’ pensions does not, of course, produce free money. While the costs would initially fall on companies, they would soon adjust wages to compensate.

“Compelling companies is thus a way of forcing individuals to save. If individuals are compelled to save, and as a result lose entitlement to means tested benefits, they will be furious.” The Fabian Society then proposes that the state pension should be increased above poverty levels, and that incentives should be given to encourage private savings, including in relation to means-tested benefits.

A public opinion survey conducted by the Association of British Insurers found that over 70% of people support compulsion, generally as an employer/employee partnership.

However, only 25% of people favour compulsion that would affect them personally: most supporters of compulsion are already making mandatory or voluntary contributions.

Corporate Governance Google

Influential proxy voting adviser, Institutional Shareholder Services, has declared that Google, which made its stock market debut in August, has the worst corporate governance of any company in the S&P 500 index.

ISS identified 21 weaknesses in Google’s governance, including too few outside directors and a capital structure that gives effective control to insiders.

The Inside Story For Fund Managers

The ACTU is holding its 2^nd seminar for fund managers and other superannuation investment professionals in Sydney on Friday 26 November.

Speakers include Greg Combet, Doug Cameron, Mike Fitzpatrick, Heather Ridout, Bernie Fraser, Steve Gibbs, Justin Wood and John Nolan.

The seminar will give managers an inside look into unions’ views of fund managers, corporate governance and investment priorities, as well as some insights into how boards actually make decisions.

For more information or registration contact Debi Bruce on 03 9664 7379 or dbruce@actu.asn.au

Unions & Super: A Training Resource For Union Organisers And Delegates

A collection of materials has been developed by TUEF and the ACTU, in conjunction with STA, to help unions inform delegates and organisers about superannuation issues.

Training activities using these materials will assist participants to bargain to protect workers’ superannuation from erosion and to improve current superannuation arrangements. It explains the choice of fund legislation, the superannuation guarantee and addresses issues of adequacy and increasing contribution rates.

The materials include: session plans, background notes, exercises, handouts, overheads, newspaper clippings, case studies and uncomplicated explanations of superannuation issues.

This material is provided in hard copy and on disk to enable easy customisation at no extra cost.

Contact the ACTU Organising Centre on 9664 7360 or sross@actu.asn.au for an order form