In this months ACTU Super Newsletter: Superannuation contributions; Choice of fund; Transition to retirement; Car workers & Super; ACTU Fund Managers Seminar; James Hardie; Activist pension funds; Teamsters Central States pension fund; Workers representatives — German companies; TUC — Compulsory employer & worker pension contributions; Stock-option awards; ATO — Warning to Workers
ACTU Superannuation Trustees Network Newsletter No.27
December 2004/January 2005
Editor: Linda Rubinstein
Fax: 03 96634051
Email: lindaru@actu.asn.au
Falling On Deaf Ears
The ACTU has been making submissions on a number of superannuation subjects,
with no sign, to date, that anyone much is listening.
Contribution reporting
Employers will no longer have to tell their employees how much super they
contribute on their behalf and the fund to which contributions are paid.
The Tax Laws Amendment (Superannuation Reporting) Bill 2004, which removes
the requirement for employers to give this information quarterly, passed after
Labor dropped its support of two Senate amendments rejected by the Government:
one by the Democrats would have maintained the reporting requirement but allowed
the information to be provided by various means; the other, by Labor, would
have required the ATO to report in more detail on the extent of unpaid
contributions and action taken in response.
The Bill passed the Senate by a large majority, with only the Democrats, the
Greens and Senator Lees voting against.
The ACTU had strongly opposed the passage of the Bill, arguing in a
submission to the Senate Economics Committee that it would mean employees might
not know for many months whether or not their employers were making their
contributions or if these were made to the right fund (particularly important
given the commencement of choice of fund on 1 July 2005).
With funds required to report only once a year, and many employers not
required to include this information on payslips, an important opportunity to
improve compliance has been lost.
Choice of fund
The ACTU has argued strongly in a submission to Treasury against any
exemption from the prohibition on employers accepting benefits in return for
employees joining a particular fund.
Treasury’s consultation paper on the regulations for choice of fund
gave provision of clearing house services as an example where an exemption might
be warranted.
The ACTU submitted that if this service was provided free to employers, the
cost would end up being borne by fund members.
The ACTU response to the consultation paper also said:
implement;
left to the fund to determine whether taking up the cover is mandatory for all
members;
employees to make an informed choice, including details of the default fund and
a comprehensive list of issues for consideration by employees.
Transition to retirement
The ACTU has told Treasury that it supports assistance to employees who
voluntarily seek to reduce their working hours as part of a transition to
retirement, although unions continue their strong opposition to any change in
pension or preservation age, or any other measure designed to make employees
“work until they drop”.
The ACTU supports allowing employees who have reached preservation age and
reduced their working hours to take part of their super as an income stream.
The ACTU argued that this option should be available to all employees,
whether members of defined benefit or accumulation funds.
Car Workers Win Super
Holden workers are considering acceptance of a new certified agreement which
includes two 0.5% increases in the employer’s super contribution in the
next two years, lifting minimum contributions to 10%.
Funds Managers Hear All Kinds Of Things
From a sober exposition of future inflationary expectations from Bernie
Fraser to a fiery condemnation of PPPs, and a prediction that capitalism could
be doomed from the AMWU’s Doug Cameron – these were among the varied
contributions by speakers at the ACTU fund managers seminar held last month in
Sydney.
Even the venue raised some eyebrows. Arrivals at the American Club were
greeted by large pictures of recently elected President Bush and Prime Minister
Howard, while those looking out at the spectacular view of Sydney Harbour
couldn’t avoid the Stars and Stripes gently moving in the sunlight. Was
the choice ironic, or is the ACTU coming to terms with a new reality?
Greg Combet laid out the ACTU agenda for increasing super contributions
through enterprise bargaining, and spoke about the need for fund consolidation,
starting with ARF and STA, as well the opportunities for investment in
infrastructure and nation building.
Beth Mohle, from the ANF and a HESTA trustee, spoke about the recent CMSF
study tour to the US and, in particular, how well Australian networks like CMSF,
AIST, IFF and ACSI function compared to the US, where funds seem to operate in
greater isolation from each other.
Nixon Apple, now at the ACTU and a STA trustee, who also participated
in the CMSF tour, predicted that as funds here become larger, investment would
be managed internally to a greater extent.
John Nolan was able to give managers some valuable insights into the way
boards work, including the interaction between trustees and staff, from his
persecutive as a former asset consultant, and in his current role as chair of
REST’s investment committee.
Other speakers challenged the audience to think more profoundly about
corporate governance, and to understand growing trade union activism around
corporate behaviour and about the future for super and the industry funds.
Pressure On James Hardie
At time of writing negotiations between the ACTU, victims groups and James
Hardie were proceeding reasonably well, given the complexities involved.
A deal to compensate all present and future sufferers of asbestos-related
disease over at least another half century is not easy to work out.
There is no doubt that public revulsion at the company’s conduct,
reflected in media anger, community boycotts, demands from state and federal
governments, a falling share price and representations from some shareholders
and fund managers has all contributed to the company realising that,
irrespective of the legal position, it cannot get away with its strategy to
avoid its responsibilities to victims..
Separate from any settlement, it has been reported that the US Securities
& Exchange Commission has been in touch with ASIC, which is currently
investigating the conduct of James Hardie and its officers and directors.
That investigation will continue irrespective of agreement being reached
about future compensation.
It is also possible that class actions could be commenced in the US by
shareholders, including pension funds, seeking compensation for losses suffered
as a result of any fraudulent conduct by the company.
Calpers Activist Ousted
The Republican fight back against the activist pension funds in Democrat
states may be on in earnest.
Sean Harrigan, an official of the United Food and Commercial Workers Union
has been removed from his position as president of the US$78 billion pension
fund for California’s public sector workers (Calpers) by a state personnel
committee.
Defenders of Calpers activism blame the Republican Governor, Arnold
Schwarzenegger and corporate allies angry at the fund’s high profile
efforts to force better behaviour by companies, including suing those who are
accused of defrauding shareholders.
However, Harrigan has been replaced by another union official.
A particularly controversial issue was Calper’s vote against
re-election of Safeway’s chairman, following a bitter dispute with its
supermarket workers.
The events at Calpers are particularly interesting in light of the growing
move by public pension funds in those ”blue” states carried by John
Kerry in the recent presidential election to carry the fight against Republican
control of the national political agenda.
As Bush plans a second term, funds in California, New York, Illinois and
Connecticut have begin to forge alternate agendas on clean energy, the
environment, executive pay – even gay marriage.
from NY Times
1/12/04 & Forbes 5/12/04
Making Money With The Mob
Heavy losses by the Teamsters Central States pension fund highlight an
extraordinary irony.
In the 1960s and 70s, when the Teamsters Union was controlled by a corrupt
leadership led by the late Jimmy Hoffa, 80% of its funds were invested in real
estate, much of it hotels, casinos and resorts.
The loan approval process involved kickbacks, threats and at least one
kidnapping, although Hoffa saw to it that loans were repaid.
With a growing and younger transport workforce, and generally profitable
investments, the fund was in good shape when Hoffa disappeared in 1975.
From 1982, as part of the clean up of the union, the fund was removed from
the union’s direct control and managed by Morgan Stanley, which invested
heavily in equities, including overseas shares and other riskier assets.
With a shrinking and aging workforce and poor performance caused by the
collapse of many of its stocks in the technology and energy sectors, the fund
has been forced to reduce benefits.
Not surprisingly, some members are missing the good old days when the mob ran
the pension fund.
from NY Times 15/11/04
German Workers Get The Boot
The principle of shareholder rights is being used to justify a move to reduce
the influence of workers representatives on the supervisory boards of German
companies.
Under legislation for “co-determination”, companies with 500-2000
employees must give workers’ representatives one third of board seats,
with this rising to half for those with more than 2000 employees.
Even where workers hold half the seats, the chair’s casting vote gives
shareholders a majority, although major issues require a two thirds
majority.
Advocates for change allege that CEOs are too ready to agree to union demands
to preserve jobs, for example, in order to win board support for their own
positions.
The “Last Chance Saloon”
The TUC continues to argue for compulsory employer and worker pension
contributions, although an Employer Task Force report has recommended continuing
to rely on encouraging voluntary payments.
The report acknowledges that unless the employer-led pension decline is
reversed, the government will be forced to look at compulsion.
The task force found that minimum contributions should be 10-15%, with
employers contributing two thirds and employees one third.
The report warns that it is the “last chance saloon” for a
voluntary solution to the £57b pension shortfall.
Pick Up The Nickels
Up to US$2 billion of class-action settlements against corporations on behalf
of pension funds may have been unclaimed in the last three years.
Some American funds do not claim the money because they believe it’s
not always worth the effort of filling in complex forms.
That’s good news for funds which do claim; fewer claimants means more
for them
In Australia, a number of super funds receive information from Lerach,
Coughlin, a prominent US law firm involved in many of these actions, which
enables them to claim if they have held the company’s shares at the relevant
time.
Stock Options Fade Away
Faced with mounting shareholder pressure and expected changes in accounting
rules, many companies are sharply reducing their stock-option awards. The value
of stock options awarded to executives and employees fell more than 50% from
2001 to 2003, according to a survey by Watson Wyatt Worldwide. Awards to chief
executive officers fell 41%, while employees who weren’t among the top five
executives saw the value of their awards drop 53%.
from Wall Street
Journal 14/12/04
Warning To Workers
The ATO has asked the ACTU to warn unions about the dangers of members using
schemes promoting illegal early release of benefits.
Use of these schemes involves very heavy fees as well as the risk of tax
penalties if discovered.
More information
www.fido.asic.gov.au/fido/fido.nsf
Editorial Change At ACTU Super
After 11 years I am leaving the ACTU. The job of producing this newsletter
will be taken over by Nixon Apple, with help from Cath Bowtell and David
Whiteley.
Nixon can be contacted at napple@actu.asn.au
