The industry super fund sector has undoubtedly emerged as one of the big winners out of the financial services royal commission.
After bank-linked retail funds copped a lashing during the hearings for multiple instances of customer mistreatment and fee gouging, billions of dollars shifted into the not-for-profit industry funds out of retail, according to regulator APRA.
However as industry funds overtook retail funds last year to dominate Australia’s trillion dollar super sector, new questions have been raised about the influence that these powerful funds (many of which are tied to trade unions) could wield over Australia’s economy.
Speaking to TICKY, Ian Silk, CEO of the country’s largest fund AustralianSuper, was asked how – given the influx of new members and money – his industry fund movement can avoid some of the problems that its rivals in the big four banks have faced.
“We’ve seen what almost absolute power did in the banking sector,” host Ticky Fullerton told Silk, before going on to ask whether the shifting dynamics in the super sector might empower controversial union bosses like the CFMEU’s John Setka.
But Silk – who presides over $145 billion in funds under management – said his organisation, and those of his fellow industry fund peers, are sound.
“The governance structures that have facilitated the achievements of those investment performance are the governance structures that we’re looking to maintain,” he said.
“And I do think that culture and this laser like focus on members does start at board level there’s no prospect that the board structures at industry funds are going to be wholly turned on their head.”
The reasoning that powerful super funds could influence corporate decisions, such as wage growth and other environmental and social governance (ESG) issues has sparked a fierce debate about the industry sector’s growing power.
Silk was also asked whether industry funds – and by extension trade unions – might come to have a disproportionate influence over the decision-making processes of boardrooms and politicians political issues like environmental policy and industrial relations.
Again, Silk remained firm.
“There is a debate about whether environmental, social and governance issues, so-called ESG issues, should factor into investment decision making. Our view is that they should,” he said.
“They’re legitimate factors shaping the long-term value of businesses and companies, and to ignore them is to ignore factors that are shaping, ultimately the investment performance of the companies invested in those organisations.”
That also includes wage growth, a contentious political issue leading up to the Federal election and one the Australian Australian Council of Trade Unions (ACTU), has long lobbied for.
“How a company manages its workforce, is it responsible for the chronic underpayment of its workforce? These are issues that go to, not just the social license to operate of a company, but to its long-term valuation,” said Silk.
“We are going to say companies need to respect their workforce.”
Silk also called for more spotlight on the self-managed super fund (SMSF) sector, saying the DIY market was not sufficiently scrutinised by the royal commission.
Watch the full interview with Ian Silk in the video above.