Industry funds want more control

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He spoke out in 2012, and now First State Super fund chairman Tom Parry is reiterating his call for changes to superannuation law.

Parry told The Australian Financial Review this morning that unions and employer groups will continue to hold too much sway over superannuation schemes unless the law is modified. He is sick of being unable to remove or appoint independent directors to the board.

“We can only declare a position vacant if a director is found guilty of doing something, or an appointing body [a union or employer group] removes the director,” Parry told the AFR.

“I think the SIS Act needs to address that. [The current system] relies too much on the appointing entities.”

First State Super felt the full brunt of this system when former director Michael Williamson faced a number of criminal charges. Parry and his board were unable to remove Williamson, who was appointed by the Health Services Union, despite perceived reputational damage to the fund.

Paul Fletcher MP, Federal Member for Bradfield, raised this issue in a speech to the HR Nicholls Society earlier this year. He said that there was risk of a superannuation fund being cross-infected by corruption at a union because officials of that union are appointed to the board of the fund.

“The HSU scandal is powerful evidence that at least one union had a serious culture of corruption. In my view, it raises obvious questions about whether there is a systemic risk in a system in which union officials are extensively appointed as directors of superannuation funds,” he said.

Similar to Parry, Fletcher also accused the current model for industry and public sector funds, of “advancing Union power and influence”.

Since the HSU 'scandal', First State Super has changed its constitution to allow the board to place a director on leave if there were allegations that “go to the reputation of the fund,” reported the AFR.

Although Parry is due to step down in March next year, he says, “As a general matter of principal, you need a sufficient number of independent directors so you can keep the board honest if required.”

He said that although the fund has done all it can, the SIS Act needs to change.

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  • Peter Vickers on 23/09/2013 10:00:49 AM

    So instead of control by members through their union and employers, this bloke was complete control for himself. This is not even controlled democracy of the Soviet type but out right dictatorship.
    What happened to members controlling their fund?

  • Peter Vickers on 23/09/2013 11:31:51 AM

    There is equal representation between members and employers. Are you saying employers are incompetant to run their industry funds?

  • Tony on 23/09/2013 12:10:19 PM

    I'm saying the unions have too much control compared to their members and employers - hence, the defeat of the act / bill by labor. The act would have given the members and employers equal footing with the unions in the industry super fund world. The great news for retail super is best interest duty "this is a now making advisers a "watch dog". Industry super "generalised comment" a very large majority of members dont receive individual advice - thats the real concern and problem here as they trust what the ISN's tell them. How many members actually understand that in some ISN's their tax/franking credits are dispursed to other members or retained by the fund. How many members are aware that insurance commissions / fees are retained without disclosure by they funds - yes there is a very big difference in disclosure and statutory requirements which will hopefully be corrected after July 2014 when the senate changes.

  • Mel on 23/09/2013 1:02:15 PM

    Finally, someone speaks some sense in this space....
    (And I am talking about Tom and Tony here)

  • Tony on 23/09/2013 11:15:23 AM

    Your missing the independent part, the current system was proven biased when labor stop the equalisation act FOR "members".

    This act was past through the house of reps - and was providing members and directors with equal voting and responsibility - but billy boy shorten made sure the senate squashed that. Couldnt have those political donations made by the ISN's placed into danger by giving members equal rights - who's protecting who!!!!

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