Crack the regulatory whip where it's most needed

Lobbecke

ONE good thing has emerged from the minority government we have in Canberra. Had the allegations of corruption not concerned Craig Thomson, a Labor member of parliament whose vote is so critical in Julia Gillard's minority Labor government, we may never have heard about the scandalous behaviour of those who run the Health Services Union East. Union bosses at the HSU East would still be using union funds to pay prostitutes, maxing out union credit cards and creating dubious, but well-paid, union jobs for family members.

Last week the latest investigation carried out by Ian Temby QC and accountant Dennis Robertson revealed further rorting of some $20 million during the reign of HSU East boss Michael Williamson and his union cronies. Never forget we are talking about funds paid in good faith to the HSU by some of the lowest-paid workers in Australia. Yet, even with the lid long blown off systemic corruption within HSU, unions seem to have escaped the vice-like grip of regulation that the Gillard government has imposed on other areas.

It is a most curious lapse because one thing you cannot say about the Gillard government is that it is shy when it comes to regulation. The Prime Minister and her ministers like to tell us at any opportunity about the growing number of laws they have passed, minority government notwithstanding.

Indeed, between them, the Rudd and Gillard Labor governments have been quick to crack the regulatory whip in a multitude of areas - from the workplace to the superannuation industry, from financial services to the mining industry, from carbon emissions to cigarettes.

Under the Labor governments, tight-fisted regulation has reached into every nook and cranny of the country. Save one. Unions.

Consider the regulatory zeal of the Gillard government when it comes to those who run companies. We have the Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Act 2011, which imposes new obligations on boards in relation to executive remuneration packages and gives more power to shareholders about the re-election of directors when the company's remuneration reports receive a "no" vote from 25 per cent or more shareholders at two consecutive annual general meetings.

Financial advisers have also caught the sharp eye of the Gillard government. New provisions in the Corporations Amendment (Future of Financial Advice) Act 2012 ensure financial advisers provide their clients with sufficient information and boost the powers of regulators over financial advisers.

And don't forget the Corporations Amendment (Further Future of Financial Advice Measures) Act 2012 which introduces a best interests duty so that financial advisers must place the clients' interests ahead of their own. Good idea. Why not apply the same standard to unions?

Then came the Gillard government's announcement in April that it will crack down on conflicts of interests within the superannuation industry.

In all sorts of way, across all sorts of industries, Gillard has been flexing the fist of government. From imposing plain packaging on the cigarette industry to protect consumers to slapping a mining tax on resources companies to share the wealth, the government has been busy, as Gillard tells it, looking out for us. Which makes her limp-wristed approach to the regulation of unions all the more stark. Note her weak response to revelations last week of more rampant abuse of union funds within the HSU East by Williamson.

"It's clear there have been real problems at the HSU," she said. Where is the moral outrage, PM?

To be sure, the Gillard government has made a few amendments to the Registered Organisations Act relating to disclosure of information, increasing penalties and enhancing the investigative powers of Fair Work Australia.

But more needs to be done. Much more. If you draw up a ledger, listing on one side the duties of, and obligations on, directors and executives who run companies and then, on the other side, the obligations on those who run unions under the Registered Organisations Act and the Fair Work Act, there is a gaping governance hole on the union side of that ledger.

Take the question of penalties. Under the personal liability for corporate fault reform bill, introduced earlier this year, the government intends to impose a penalty of one year in prison on a company director if he or she fails to lodge an annual return. By contrast, a union boss faces a fine and nothing more.

Look also at the ever-growing list of directors' duties. Under Labor, the liability of directors has increased to the point where many directors are asking if the potential risks are now too great to justify being on a company board. By contrast, the regulation of unions is so lax, you won't find a single union boss in Australia raising even an eyebrow about his or her potential liabilities in the job.

In fact, lawyers will tell you that much of the scandalous conduct within the HSU East may not breach any laws at all. They will tell you that if, for example, union rules allow for the expenditure of union funds on "union business" then taking a few associates to a brothel to enjoy the services of prostitutes may be permissible under the broad banner of union business. Similarly, Williamson's suspect expenditure of union funds on himself, his company and his family may be allowed under slack union rules.

And therein lies the problem. Had a company director done what is alleged of Thomson and Williamson, the director would have contravened myriad provisions of the Corporations Law attracting serious punishment. There is no sound reason why the same laws should not apply to those who run unions, which is why Tony Abbott has proposed precisely such reforms.

Alas, the Gillard government won't plug this regulatory gap any time soon. After all, regulating union bosses would attract howls of opposition from those who fund the ALP and its election campaigns to the tune of millions of dollars each year.

With an election around the corner, no wonder the Prime Minister is trying to fob off the question of union regulation.

Gillard's intransigence raises other questions of honesty and integrity. Williamson was federal president of the ALP when he was also running HSU East. If this kind of unbridled rorting by union bosses can occur under the noses of the union-connected Gillard, not to mention other Labor ministers and MPs, then how can we seriously believe the government's assertions that this is not a widespread problem.

Given the absence of sufficient regulation of unions in this country, shouldn't we wonder whether similar shameful behaviour is occurring at other unions not drawn into the political web of a precarious minority government?