Forget the grandstanding, just look after us shareholders

Treasurer Josh Frydenberg.

Treasurer Josh Frydenberg will deserve superhero status if he manages to protect shareholders from those trying to hijack Australian companies.

Big shareholders have their own super powers to protect them, which is part of the problem.

But the rest of us with modest shareholdings in compulsory superannuation funds need someone to make sure our interests are not swamped by those trying to commandeer corporate Australia for their own political purposes.

“Superannuation is not a plaything for union bosses nor a plaything for pushing their industrial relations agenda,” the Treasurer said on Sunday, taking aim at ­financial activism by those who manage industry super funds.

It’s about time. The urge to use other people’s money to enhance your negotiating leverage isn’t confined to CEOs in search of an AO or media canonisation.

The masters of this art are unionists using their captive industry super funds to fight industrial battles in what appears to be flagrant disregard of the interests of members of those super funds.

The CFMEU’s unholy alliance with industry super fund CBUS is well known.

Consider this union chutzpah. The ACTU-backed Maritime Union of Australia is pressuring 30 industry super funds to force BHP and BlueScope Steel to reverse commercial decisions not to renew contracts for two Australian-crewed vessels.

The unions are, in effect, saying to the boards of BHP and BlueScope: “If you don’t agree to take money out of your shareholders’ pockets and give it to our union members, we will cause the industry funds we control to vote against your re-election.”

It’s hard to work out the biggest villain if this works. The BHP board for using shareholder money to appease these latter-day Teamsters? Or the boards of the trustees of the industry super funds who agree to reduce the value of their members’ superannuation accounts to satisfy the outrageous demands of the unions that appoint them to their cushy and well-paid board seats?

Frydenberg has asked the prudential regulator if it needs more powers to stop the union-appointed super trustees hijacking corporate Australia.

But maybe APRA could use its existing powers first, to demonstrate some backbone.

After all, APRA copped a lashing from banking royal commissioner Kenneth Hayne for its insipid enforcement of the “sole purpose” test imposed on the trustees of super funds.

That legal test says trustees must administer the fund solely for the benefit of members.

Before it asks for new powers, APRA should use section 62 of the Superannuation Industry (Supervision) Act 1993 to vigorously test whether super fund trustees are exercising their votes at AGMs in the interests of super fund members, not the unions that appointed them. Watch that space.

Hayne recommended that directors of super fund trustee boards face civil penalties for breach of their duties.

If APRA and ASIC want some credibility as “tough cops on the beat” they should come down on political activism by trustees of super funds every bit as strongly as they intend to hammer errant directors of banks.

That might mean scrutinising the country’s biggest industry super fund, AustralianSuper, with its ties to the ACTU. Regulators might also want to check apparent conflicts within the Australian Council of Superannuation Investors — and other proxy advisers.

These groups are shrewd. They appoint as chairs the suave and the smooth. Acceptable faces such as Greg Combet at Industry Super Australia, Heather Ridout at AustralianSuper, Steve Bracks at CBUS. Behind the scenes their union backers use CFMEU-style tactics to bully companies.

Meanwhile, our superannuation nest eggs seem to be fast ­becoming a plaything for activists and hangers-on to indulge political and financial fantasies.

That said, let’s not imagine companies are without sin when it comes to using other people’s money to pursue pet political purposes. BHP boss Andrew Mackenzie and Rio Tinto boss Jean-Sebastien Jacques recently signalled their support for a First Nations voice, in line with the Uluru Statement. Mackenzie has committed $1 million from the BHP Foundation to educate Australians about a constitutionally enshrined voice in parliament ahead of a referendum.

BHP “cannot stand on the sidelines”, he said last month, while there is “unfinished business”.

Maybe he thinks it is an opportunity to smooth the way for land deals with indigenous communities in the future, with the added glow of goodness from signalling moral virtue.

Now for the hard stuff.

Virtue-signalling by BHP and Rio bosses, using company time and money, may be harmful to shareholders when you remember no one has a clue what the First Nations voice will look or sound like. The May 2017 Uluru Statement called for “substantive constitutional change and structural reform” to address the “torment of our powerlessness”.

That was later explained to mean a “representative body that gives Aboriginal and Torres Strait Islander peoples a voice to the commonwealth parliament”.

It is a series of platitudes. There is no political agreement on the path forward. Will the voice bring into parliament a body that ends up riddled with stories of corruption and nepotism, like ATSIC?

Remember that bold experiment in 1989 by the Hawke government to administer indigenous affairs and provide a voice for indigenous people? By early 2004 the Howard government promised to abolish the body, which had become irrelevant to the plight of ordinary indigenous Australians. The Labor opposition agreed and ATSIC was disbanded in 2005.

Maybe these two CEOs from overseas — Mackenzie is a Scot, Jacques a British citizen born in France — are not fully across local history. Once their terms as CEO end, maybe they will fly to other pastures, leaving behind a voice they supported before they understood its full ramifications.

Will BHP and Rio shareholders encounter a constitutionally enshrined indigenous voice that has a veto over land deals?

Once enshrined in the Constitution, which party, Liberal or Labor, will be brave enough to say we don’t agree with a position taken by the First Nations voice?

Neither Mackenzie nor Jacques has a crystal ball.

A treasurer can’t do much, but shareholders can mobilise against CEOs who sound good without really knowing whether they are doing good. Enter Will Morgan, portfolio manager at investment fund Intrinsic. At an investor briefing a few weeks ago, Morgan questioned BHP executives about supporting the voice, given the few settled details.

Morgan was fobbed off, told it was a matter for the board.

He told The Australian he is concerned by an apparent “progressive” arms race among CEOs and boards on everything from climate change to the voice: “They are trying to prove they are more morally virtuous than others by signing up to social causes, diminishing their focus on shareholder wealth creation.”

Morgan, who helps run a wholesale fund, A-rated according to UN principles of responsible investing, suggests a ginger group of investors could fight this arms race. Maybe a new kind of Vice fund. Not one that supports the likes of tobacco or alcohol but one that champions companies with a focus on that other vice — profit. That might nudge CEOs to put away their social justice hair shirts.

Industry super funds and big companies are increasingly run by people who ignore stakeholders to pursue political causes. If genuine about their political agendas, they should take the honourable route.

Enter politics.

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