Cbus: A relic from the past

When it rains, it pours. The construction industry super fund has recently been in the news about its poor performance. Now there are revelations of corruption with secret deals involving lucrative contracts and links to criminals and bikie organisations.

Commentators are crying out for an overhaul of the governance systems in super. But how widespread is the problem really? And what action, if any, is required of members of industry super funds?

First, let’s start with the facts

The Superannuation Industry (Supervision) Act 1993, requires equal numbers of employer and member representatives to be on the boards of the super funds.

The member representatives typically come from the unions.  This is despite trade union membership declining since 1992. According to the Australian Bureau of Statistics, just one in eight of Australian employees is a member of a union.

The Construction and Building Unions Superannuation Fund, Cbus, has six employer representatives and six member representatives, three of whom are sponsored by the CFMEU.  There are also two independent directors, which include the Chair and previous Federal Treasurer, Wayne Swan.

Because it likes its members to work on the properties they own within their super, Cbus is overweight to the underperforming commercial property sector.   As a result, Cbus posted returns of just 8.4% last financial year, while the median super fund returned 8.8%.

Building bad
After a nine-month investigation, journalists from the Australian Financial Review, Sydney Morning Herald, and 60 minutes, have reported evidence of alleged corruption involving Cbus via its CFMEU links.  Allegations include CFMEU corruptly influencing the award of lucrative building contracts to businesses with links to gangland criminals and bikie gangs.

The government has now called on the Australian Federal Police to investigate.

Whatever the outcome of the AFP investigation is, questions must be raised about the manner in which investment decisions are made at Cbus.

Not a widespread issue

However, we believe these issues may be contained to Cbus.  Superannuation is now a $3.9 trillion industry, with world class investment professionals at the helm. Industry funds like Australian Super, Unisuper and Australian Retirement Trust also have world-class executives and governance systems in place.

Meanwhile, the government is pushing hard to legislate the purpose of super which will lead to greater clarity and accountability in super funds.

At Daniel Crump Financial Planning, we are independent advisers who hold your super fund to account on your behalf. If you’d like to know more, give us a call.  We would love to help.

This article is general and does not consider your personal circumstances so it may not be appropriate to you.  If you would like advice specific to you, please let us know at daniel@danielcrumpfp.com.au