Unions go corporate, beat business at its own game

That Sally McManus sits atop a corporate structure mimicking the big end of town seems to contradict everything she promotes.

‘A union is effectively caught between its own financial interests and carrying out its duty to negotiate in the best interests of workers’- John Slater, Menzies Research Centre. Secretary of the ACTU Sally McManus. Picture: Glenn Hunt

The idea that Sally McManus sits at the top of a corporate structure mimicking the big end of town — the chair of a board awash with cash and driven by self-interest — would seem to contradict everything she promotes.

Leading Australia’s union movement, McManus rails against profits and power concentrated in the hands of few. She speaks the language of an activist-style ACTU secretary, saying she wants to change the rules with laws that would swing the balance back to workers and the unions that represent them. Her brand is to be hero of the low-paid and an enemy of greedy, unscrupulous bosses. She even has advocated “breaking” laws judged bad ones.

But here lies the contradiction, or a fundamental disconnect with the working people McManus and the union movement claim to represent, according to John Slater of the Menzies Research Centre.

At the time their membership has fallen to dire levels in the past two decades, suggesting an existential problem for unions, their wealth has surged to record levels.

Unions now represent barely one in 10 workers of the private sector workforce. Overall, they represent about 14 per cent because of higher membership levels in the public sector (40 per cent).

Yet, paradoxically, the revenue stream and asset base of the union movement is now so healthy that the richest unions in the nation rival some of the largest corporations and have returns better than those on the Australian Securities Exchange.

The combined annual income of Australia’s 15 largest unions exceeds that of companies such as the LJ Hooker and Ray White real estate groups. The income of one union, the Construction Forestry Maritime Mining and Energy Union, is considerably more than Fuji Xerox or Greyhound Australia, and is on a par with the Dyson Group.

In a policy brief for Liberal Party think tank the Menzies Research Centre, Slater has collated data from annual reporting to the Registered Organisations Commission that confirms unions no longer rely on the dues of their members to survive.

 

He concludes the link between a union’s membership levels and its financial performance is “weak, at best” because unions now derive their income from other “sundry” sources: dividends, profits from insurance schemes, training course fees, superannuation and other board seat fees, grants, commissions, rents and investments.

As Slater puts it, “No members? No worries!” The workplace relations system, in allowing unions to derive income from negotiated enterprise bargaining deals and superannuation funds that put offi­cials on their boards, has provided those unions with long-term revenue sources independent of the people they represent.

Unions have “fireproofed” their business model against further membership decline, as Slater says in his report, Unions Inc: From Industrial Strength to Financial ­Muscle.

The model was set years ago by smart, strategically placed unions such as the Electrical Trades Union and the National Union of Workers, looking for ways to survive and prosper. As part of the institutionalised workplace system, they realised they could compel employers, during negotiations for enterprise agreements, to contribute to income protection or training funds from which they benefited financially.

Menzies Research Centre executive director Nick Cater says the entrepreneurial instincts of modern unions are “admirable” in one sense.

Prime Minister Scott Morrison delivers an address to the Menzies Research Centre at the Mirambeena Community Centre in Albury, NSW, on Thursday. Picture: AAP

Yet the serious side to the reality that unions may no longer need to rely on union dues is that their focus has shifted entirely to a business model based on ­financial performance. At worst, Slater says, it resembles the corporations they like to criticise. Meanwhile, unions continue to operate as protected benevolent organisations, competing with the private sector while offering financial and other services yet paying no tax.

Slater writes: “The practice of trade unions negotiating collective agreements from which unions also financially benefit poses a clear conflict of interest.

“It means that in performing its role as a bargaining agent, a union is effectively caught between its own financial interests and carrying out its duty to negotiate in the best interests of workers. These arrangements are also an affront to the freedom of association of the workers covered by these enterprise agreements, having regard to the union movement’s sizeable donations to the Labor Party.”

Slater challenges the core ACTU-McManus claim that unions look after the low-paid and those with insecure jobs, arguing the collapse in the traditional blue-collar industry base has left union membership predominantly the domain for wealthier, better educated, professional or managerial workers.

The result, he says, is that unions have become a “minority special interest group” increasingly irrelevant to the wider workforce.

Slater, the Menzies group’s research director, says ACTU proposals to increase union influence over collective bargaining under a Labor government deserve scrutiny because the result will be to enable unions to “monetise” their privileged role still further.

Who would benefit? It would not seem to be the shrinking union membership, at least not directly.

Slater’s research plays directly into the political dynamic as Scott Morrison takes a much more ­aggressive stance than his predecessor in taking the fight up to Labor Party leader Bill Shorten as allegedly beholden to an unrepresentative union movement, doing its bidding in return for large donations and political support.

Morrison already has picked up one of Slater’s themes that a primary beneficiary of the union movement’s main cashflow transfers is the Labor Party, and to a lesser extent minor parties such as the Greens, at election time.

CFMEU State Secretary John Setka. Picture: Stuart McEvoy

The union donations come with a quid pro quo, an expectation that Labor will honour its prom­ises to re-regulate the labour market and abolish the building industry’s union watchdog, but without regard for what the majority viewpoint of the workforce might be.

“He’s union-bred, union-fed and union-led,” the Prime Minister said last week when the Opposition Leader declined to rebuke publicly CFMEU Victorian branch boss John Setka for using his children in an expletive-laden attack on the Australian Building and Construction Commission.

“He’s completely owned by militant unions in this country, and that’s how he proposed to run the country,’’ Morrison said. “He said he was going run the country like a union, so have a look at John Setka’s union and you can see the future of Australia under a Bill Shorten-led government.”

A troubling associated development of the union business model, according to Slater’s report, is the growing resort to “lawfare” as a means to achieve industrial goals.

Or as Cater puts it in the report’s introduction: “It is particularly apparent in the construction sector, where law breaking has become an established part of the union modus operandi.

“Union leaders openly flout the law, becoming multi-offenders, racking up multi-millions of dollars in fines and legal costs, covered in full by their employers.”

Morrison appears ready to take up the fight against militants such as Setka. While his government may not be ready to tackle the thorny issues of the unions’ tax-free status or end other aspects of their protected position, Morrison has signalled a willingness to eradicate “lawfare”.

In the past former Labor prime ministers Bob Hawke and Kevin Rudd have called for the CFMEU’s deregistration as a way of punishing its disregard for the law and industrial norms in the workplace. When Hawke was prime minister, he deregistered the Builders Labourers Federation, but conditions existed then that do not now. Hawke had onside the ACTU, the then main construction union, the Building Workers Industrial Union, and the Labor governments of NSW and Victoria.

Morrison lacks this co-operative environment and faces an ACTU leadership that has taken a determined shift to the left. He also is weighed down by advice that to deregister the CFMEU outright could penalise some by denying representation rights to workers who do not subscribe to Setka’s brand of militancy and have no part of illegal behaviour.

Morrison is likely to target Shorten’s political reliance on Setka between now and the election. But his legislative strategy is likely to be tightly focused on seeking amendments to industrial laws that would disqualify individual union officials from remaining in their positions if they are found guilty of at least two civil breaches.

McManus declined to comment on Slater’s conclusions about unions’ corporate formula.

She says Australia’s workplace system fosters inequality because the weakening of centralised arbitration for pay rises and the lack of any requirement that employers bargain with unions “gives big business too much power”.

McManus stands by this position even though the Fair Work Act she attacks as inequitable was introduced by Julia Gillard as prime minister and was overseen without amendment by Shorten when he was Gillard’s workplace relations minister. Neither Tony Abbott nor Malcolm Turnbull as Coalition prime ministers have made any substantive changes.

Slater says the ACTU’s Change the Rules campaign’s success in setting Labor’s workplace relations policy agenda suggests its influence will be formative, at a minimum, if a Shorten government is in office after the election.

“Even based on the Labor Party’s existing policy commitments, the differences on workplace relations policy between the two major parties at the next election will be the sharpest since 2007,” Slater writes. “The legal privileges and degree of institutionalised influence afforded to trade unions has emerged as a key flashpoint.”

The membership base of the union movement may continue dwindling but it seems the profits are guaranteed.