Friday, June 26, 2015

Gov't on collision course with unions over governance crackdown on industry superannuation funds

Superannuation funds face a major shakeup in their corporate governance under controversial reforms announced by the federal government today. 

Under draft legislation to be released, superannuation funds will be required to have an independent chairman and independent directors will need to comprise at least a third of a fund’s board.

While the government’s key target is known to be union-backed industry superannuation funds, the proposed changes will also apply to retail, corporate and public sector funds now worth $2 trillion in retirement nest eggs.

Funds will also be required to detail in their annual reports whether they have a majority of independent directors on an “if not, why not” basis under similar rules that apply to ASX-listed companies.

The government’s pursuit of industry superannuation funds in particular comes amid concerns about a lack of transparency and links between the union movement and the boards controlling the industry superannuation sector.

The draft legislation is also timely for the government as the Royal Commission into Trade Union Governance and Corruption highlights incidents of alleged misconduct and conflicts of interest between trade unions and employers.

Unveiling the proposed changes, the Assistant Treasurer Josh Frydenberg said the federal government was delivering on a commitment to improve the governance of superannuation funds.

“Not only does superannuation represent the hard-earned retirement savings of Australians, it is already the second largest asset held by Australian households,” Mr Frydenberg said.

“Given the size of the superannuation system, and its importance in funding the retirement of Australians, good governance is absolutely critical.

“Independent directors bring additional experience and expertise to boards making a valuable contribution to their decision making.”

The proposed governance shakeup has been cautiously welcomed by Industry Super Australia which represents union backed not-profit superannuation funds.

But ISA’s deputy chief executive Robbie Campo said successful industry funds were being targeted despite current scandals in the wealth management industry.

The superannuation system now comprises more than 120 percent of Australia’s gross domestic product (GDP) and is anticipated to grow to from $2 trillion to $9 trillion by 2040.

The number of Australians over 65 and seeking to access their retirement savings is expected to double by 2054-2055.

The proposed reforms will apply to all superannuation funds regulated by the Australian Prudential Regulation Authority (APRA) with the exception of self managed funds.

The government’s proposal for majority independent directors and an independent chairman mirrors the Labor government Cooper Review commissioned in 2010.

The legislation if passed allows for a three year transition period to allow funds to reconstitute their boards under the new governance rules.

Australia Post in major job cuts as snail mail creates "tipping point" on delivery business

Australia Post has announced major job cuts as the decline in its traditional letter delivery service continues to accelerate.

The ABC reported earlier today that 1,900 voluntary redundancies will be offered over the next three years from metropolitan centres.

The redundancies come as Australia Post confirmed losses in its mail delivery business is approaching $500 million this financial year.

With the volume of ordinary mail expected to plunge by more than ten percent, Australia Post has warned it will report its first company wide financial loss in more than 30 years.

The disruption created by the Internet and other online messaging services has taken losses at Australia Post to more than $1.5 billion over the past five years.

Australia Post managing director Ahmed Fahour admits the decline in the mail delivery service is now critical.

"We have reached the tipping point that we have been warning about where, without reform, the business becomes unsustainable," Mr Fahour said this morning.

"We welcomed the federal government's decision to support reform so we can manage the mail service losses, meet the changing needs of our customers and continue to invest in growing parts of our business such as parcels and trusted services."

In announcing the voluntary redundancies, Mr Fahour confirmed there would be no change to postal deliveries five days a week.

However, earlier this year Mr Fahour flagged the possibility of a two-speed postage service for its loss making letter deliveries business so it can focus on the lucrative opportunities in freight and parcel deliveries.

Mr Fahour said there would be no forced redundancies caused by the overhaul of the letters business and the focus would be on retraining and deployment.

"While reforming our business we have made a number of commitments to protect our employees, our Post Offices and the community," Mr Fahour said.

Under the proposals, Mr Fahour said he would protest Australia Post's national network of more than four thousand post offices.

He said there would be financial support for licensed post offices and community postal agencies which make up 80 percent of the business.

Australia Post says since October 2013, more than four thousand staff have been transitioned into different roles with an emphasis on its fast growing parcels delivery business.