Ms O’Neil, an alternate director on the board of AustralianSuper, said companies engaging in poor labour practices presented a double whammy of risk: lower investment returns and an erosion of wages now, leading to fewer retirement savings.
Transport Workers Union national secretary Michael Kaine, an alternate director on TWUSuper, told The Australian Financial Review on Monday that super funds should take an unapologetically robust approach to assessing risks to returns created by poor labour policies.
Asked if he agreed with Mr Kaine’s comments, Mr Shorten said: “He’s entitled to his opinion but I’ve given you mine. He’s not running for prime minister – I am.”
The prudential regulator is writing to all super funds to remind them of a focus on issues such as board capability, fiduciary culture and conflicts of interest.
Mr Shorten, who accused the Coalition government of waging war on the industry super sector, said he did not support the ACTU’s push.
“When I, as a trustee for 10 years on Australia’s biggest superannuation fund [AustralianSuper] … I always understood when you were in that boardroom, you’re handling people’s money and you invest it in the best interest of the members, not whatever particular cause or affiliation you have outside the room,” Mr Shorten said.
Ms O’Neil in February wrote to 30 industry super funds, including AustralianSuper, demanding they pressure BHP over an industrial dispute involving the maritime union.
“Companies take stands on workers’ rights all the time: sometimes seeking to improve them, often seeking to undermine them,” Ms O’Neil told the Conference of Major Super Funds last week. “These are overt risks to the capital of workers and should be part of our considerations when making investment decisions.”
That the ACTU would advance such a position is alarming to some because industry funds are part owned by unions. AustralianSuper has two shareholders: the ACTU and Australian Industry Group. Industry funds were largely cleared of misconduct by the Hayne royal commission. The Productivity Commission said industry funds on average performed better than retail funds.
The TWU is pressuring companies, such as Uber and Amazon, to extend permanent employment to workers and recognise the rights of employees to join unions.
Mr Kaine has called on funds to conduct detailed assessments of the employment practices of the companies in which they invest.
“Environmental, social and governance principles have been in place for some time but too often there is just lip service paid to them,” he said.
“All superannuation funds should urgently refocus their efforts to ensure that investments are being made on a socially responsible basis, especially as regards to labour standards, and if they are not adjustments must be made.”
Mr Shorten said the government was focused on its attack on industry funds and was ignoring retail funds and their poorer returns to members.
“If you want to put your money in a retail fund that’s fine by me. If you want to put your money in an SMSF, that’s fine by me. That’s your choice,” he said.
“But there’s no doubt that industry funds have significantly, by and large, outperformed other superannuation fund categories. But this government only ever wants to talk about industry funds, don’t they? I wonder why that is?”
Industry funds traditionally use an “equal representation” governance model, whereby half of the board is appointed by unions and the other half by employer groups.
Some funds have an independent chair and still others, such as Equip Super and Sun Super, have one-third independent directors.
Treasurer Josh Frydenberg wrote to the Australian Prudential Regulatory Authority on March 3 to express alarm over Ms O’Neil’s letter to industry funds in relation to BHP.
It was a “dangerous development”, the Treasurer wrote, because super was “not a plaything for union bosses nor a platform for pushing their industrial relations agenda”.
Responding, APRA chairman Wayne Byers said “any evidence of trustees potentially giving priority to anything other than members’ interests and the provision of retirement incomes would be of concern”.