Secret report reveals super fund’s cosy culture with CFMEU

A decade-old secret review examining a governance scandal at industry superannuation giant Cbus recommended appointing more independent directors to its board to curb the powerful influence of the CFMEU and improve the fund’s culture.

Former competition tsar Graeme Samuel, who led the 2015 review, found the composition of the Cbus board at the time – made up of employer and union representatives – created a culture of “proprietorship” that at times turned a blind eye to members’ personal information being leaked to the construction union.

The review, released on Monday, was commissioned by Cbus’ then chair, Steve Bracks, a former Victorian Labor premier, to examine governance failures at the fund after two employees were found to have leaked information about fund members to the CFMEU, which was campaigning against Lis-Con Concrete Constructions over the company’s alleged late payments of superannuation.

A decade-old secret review by former ACCC chairman Graeme Samuel into Cbus was released on Monday. Credit: Alex Ellinghausen

Samuel found that Cbus, which has assets of more than $100 billion, relied too heavily on the CFMEU to act as a bulwark against employers breaking the law by not paying their staff their superannuation entitlements on time, and the fund would benefit from more independent directors.

“This [joint venture on the board] creates a culture of proprietorship of the organisation by the sponsor members, and that proprietorship culture permeates through to impact in varying ways on those dealing with the organisation and in particular its employees,” Samuel said in the review.

He added that while Cbus’ culture was driven to deliver the best outcomes for members, it also left the super fund exposed to the risk of being too reliant on the CFMEU and seemingly working in the union’s interest.

“On the one hand, this culture produces strong commitment to the interests of Cbus members. On the other hand, this culture, if misdirected, can lead to attitudes on the part of employees that gives rise to an acceptance of the propriety of practices such as those that are the subject of this review.”

Samuel said the culture and governance of Cbus would improve if there were more independent directors with relevant experience on the board. At the time, there was only one independent director, former Labor treasurer John Dawkins.

The two independent directors currently on the board are Wayne Swan, who is a former Labor treasurer and current Labor president, and John Edwards, a former Reserve Bank of Australia board member. The Australian Council of Trade Unions no longer has a say on the appointment of the chair, who is currently Swan, following Samuel’s recommendations.

The remaining 11 positions on the board are split between employer organisation Master Builders Australia, and unions the Australian Manufacturing Workers’ Union, the Communications, Electrical and Plumbing Union, and the CFMEU.

“The reviewers are not of the opinion Cbus would necessarily benefit from a majority of independent directors and would not be making that recommendation,” the review noted.

“However, the appointment of additional independent directors with the expertise and ability to properly present independent views to the board is seen to be of advantage in the future governance of Cbus both internally and in its dealings with external parties in relation to its ongoing business strategy.”

A Cbus spokeswoman said the fund had modernised its processes since the review was conducted, and had collected more than $600 million in unpaid super for 600,000 members.

“Cbus acted on the Samuel review and our fund is stronger for it, which along with other changes helped us to deliver top five returns for members over the last decade,” the spokeswoman said.

The Senate released the secret review on Monday following a push by Liberal MP Andrew Bragg last year to force the financial regulator to produce the report. The Australian Prudential Regulation Authority (APRA) baulked at the time, citing secrecy clauses.

“The [Samuel] report makes clear the governance standards at Cbus were as broken then as they are now,” Bragg said.

Cbus has come under fire for its relationship with the CFMEU, which was placed into administration after this masthead revealed corruption and criminal infiltration in the union.

It was forced by APRA to engage an independent expert to examine its corporate governance, which found the fund had failed to sufficiently demonstrate that its controversial relationship with the disgraced union improved member outcomes.

While industry funds, which have union and employer representatives on their boards, make better returns and have lower fees compared with retail funds, the Liberal Party has been increasingly worried the sector will use its financial power against the Coalition.

Critics of the industry funds’ equal representation model have also raised concerns about the unions and employer organisations picking directors regardless of their investment, governance or risk experience.

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