What now for CFMEU’s affiliated super fund Cbus?

The Construction, Forestry and Maritime Employees Union (CFMEU) is in the process of excommunication from the Labor Party. This follows the uncovering of new crimes that are now publicly unmanageable for Labor.

Is anyone really surprised that the CFMEU is rife with thuggery, corruption and criminal behaviour?

Labor looks weak because it has acted only because it is publicly embarrassed. Labor looks like a government for vested interests rather than a government for Australians.

Excommunication could have been achieved a long time ago by Labor separating financial and policy engagement with the CFMEU.

But what about the CFMEU’s affiliated super fund, Cbus? They are conjoined twins.

Labor can show leadership here, as can the fund itself.

There are two things that should happen immediately.

Firstly, the Government should ban Cbus from any involvement with the Housing Australia Future Fund (HAFF).

As it currently stands, Cbus will play a major role in Labor’s HAFF.

The HAFF is a $10 billion fund, designed to distort the notion of individual home ownership in Australia. Labor is passing the buck to ‘institutional investors’ - codename for big super funds and foreign fund managers to construct and rent homes to Australians.

The dual hatted Wayne Swan, who is both Chair of Cbus and Federal President of Labor, locked Cbus into the HAFF, even before it passed the Parliament.

In November 2022, Mr Swan committed $500 million of Cbus member funds to Labor’s HAFF. This is despite Cbus telling the Treasury that the design of the HAFF in the exposure draft of the Bill would ‘jeopardise our ability as institutional investors to get involved.’

As revealed via a heavily redacted FOI, Cbus was in contact with the Treasurer’s office the day before this funding announcement. The Treasurer has refused to reveal what supposedly commercial-in-confidence information was transmitted to his office from Cbus.

Given the close connection and control between Cbus and the CFMEU, allowing Cbus to participate in the HAFF risks its integrity.

Cbus has an obligation to spend members' funds in the best financial interests of their members' retirement. However, super funds, including Cbus, make payments to unions masked as ‘contracts’ or ‘sponsorship agreements’.

During the 2022-23 Financial Year, Cbus paid the CFMEU $1.25 million. This included $233,000 paid to the Construction and General Division (Victorian Branch) of the CFMEU for a ‘sponsorship agreement’.

These payments are clearly inconsistent with the best financial interest duty that applies to super fund trustees.

These payments are currently the subject of a never ending investigation by the Australian Prudential Regulation Authority (APRA).

If the Government is serious about taking action against the CFMEU, they would encourage APRA to throw the book at Cbus rather than staying silent. Labor’s silence makes the government an accomplice.

Secondly, Cbus should act on the recommendations of Graeme Samuel’s 2016 review of the fund’s governance.

The Heydon Royal Commission uncovered the leaking of Cbus members’ private contact details to CFMEU officials. Two Cbus officials were convicted and given suspended custodial services after mixing Cbus/CFMEU/Labor business.

As reported at the time, the Cbus official Ms Lisa Zanatta “admitted to the Commission she was a member of the CFMEU and had attempted to become a Labor candidate in the state seat of Altona.”

The CFMEU has people throughout the super fund - but the super fund officials must only act in the best interest of the members of the fund. The clear conflict is the officials have a job at the fund because of the union.

The directors have shown contempt for their legislative obligations to work in the best financial interests of their members.

The key to managing these conflicts of interest was identified by the exact review undertaken by Cbus after the excoriating findings of the Royal Commission.

Graeme Samuel, appointed by former Cbus chair Steve Bracks said the two-thirds representation of CFMEU officials was an unacceptable conflict. Samuel recommended Cbus appoint more independent directors.

Cbus today appears to have 14 directors and three from the CFMEU. Only two could be considered to be independent, one of which is Wayne Swan. He would not pass an independence test in corporate Australia.

The fund should move to a majority of independent directors as recommended by the Financial System Inquiry of 2014 or at least take their own report seriously.

The Cbus/CFMEU scandal again demonstrates that union dominated boards cannot be consistent with good corporate governance.

The Labor Government and APRA should be pushing Cbus to cut ties with the CFMEU.

This means kicking the three CFMEU directors off the board and stopping the endless flow of workers' money to the CFMEU.

Ultimately, this mess could have been avoided. The Government should not have allowed a vested interest like CFMEU into its policymaking and campaigning apparatus.

There is still time for Labor to act in the public interest and kick Cbus out of the HAFF and encourage APRA to do its job.

APRA should also demonstrate that it knows how to enforce the best financial interest test.

Labor never talks about this, but they might need to because the public is now more alert to the Government being beholden to vested interests.

Ultimately the Government can’t solve the major economic challenges like housing and inflation while they are so focused on fellow travellers. Too many of which are becoming ugly problems.

Senator Andrew Bragg is Shadow Assistant Minister for Home Ownership