Remove union veil of secrecy

Source: The Australian (19 October 2011)
Author: Judith Sloan

UNION-PROVIDED credit cards, supplier-provided credit cards, prostitutes, school fees, jobs for relatives and friends, subsidised premises for relatives — let’s face it, the Health Services Union story has it all.

But putting the high farce to one side, the regulation of registered trade unions is an important public policy topic. How can trade unions be made more accountable to their members? What legislative changes are required to ensure that registered unions deserve their legal and taxation privileges?

It has taken a bitter internal brawl within the HSU to reveal the gory details of union officials’ personal indulgences being financed at the members’ expense. But there were always reasons to suspect that this sort of activity was possible. After all, the required transparency expected of registered trade unions is set at such a low level that members cannot even establish what the key officials are paid.

Even the reporting of the number of union members is fudged by the inclusion of non-financial members.

And because the financial records are not consolidated – the accounts of the branches and divisions are often reported separately – it is impossible to judge the overall financial performance of many trade unions.

According to Ged Kearney, president of the ACTU, “unions are accountable to their members and also to regulators.

They are required to provide annual reports and audits, in much the same way as a public company is. Australia’s requirements for union financial probity and governance are among the most onerous in the world.”

While this last sentence may be true – although it reflects very badly on the governance standards imposed on trade unions overseas – the idea that registered trade unions in Australia are regulated in much the same way as public companies is simply incorrect.

The amount, accuracy and timeliness of information required of public companies by the Australian Securities & Investment Commission are in a different league from what must be submitted to Fair Work Australia by registered trade unions.

Take the HSU as an example. There were years and years of flouting the (weak) regulatory requirements and yet nothing happened other than the occasional exchange of letters between the regulator and the union.

In 2001, the accounts were 14 months late. In 2002, they were four months late.

The accounts for 2007, 2008 and 2009 were submitted only this year! And the auditor was unable to form an opinion about the accounts because “the books and records of the union had been removed from their premises and had passed through the hands of several other organisations.”

Fair Work Australia launched an investigation into the affairs of the HSU two years ago and is yet to report. It is hard to escape the conclusion that FWA has sat on its hands and failed to progress this investigation in a timely manner. In this sense, FWA may be as unaccountable as the HSU, yet the recent promotion of the general manager to the position of commissioner means he will not be required to answer any questions from parliamentarians about the investigation.

There was another glimpse into the internal workings of trade unions this year when it was revealed that the Australian Workers’ Union paid the legal expenses of its long-serving national president, Bill Ludwig, for a defamation matter related to his position as director of Racing Queensland – not as a union official.

The cheques for $45,000 were personally signed by Ludwig. His defence was that the AWU had a longstanding policy that “an attack on a union official was an attack on the union” and that there had been a resolution approved by the executive to pay the legal costs.

So what should happen to the regulatory requirements imposed on registered trade unions? The ones that are contained in The Fair Work (Registered Organisations) Act 2009 are clearly inadequate.

A good starting point would be to take up Kearney’s suggestion to transfer the financial regulation of trade unions to ASIC and impose the same requirements on trade unions as apply to companies.

In addition to the inclusion of a remuneration report in the annual reports, information would need to be consolidated across the branches and divisions to give a true financial picture.

Information should also be provided of all the fees earned by union officials in their capacity as trustees of superannuation funds (and other paid outside positions) and whether these fees are remitted to the union, or retained by the officials.

There would be stipulated monetary penalties for late financial statements.

While this change would be useful, a much more fundamental structural change is required if we are to expect trade unions to be truly accountable to their members.

Existing registered trade unions are currently protected from the emergence of rival organisations that could cater to the needs of the members by virtue of the “conveniently belong to” rule.

According to the law, an organisation cannot be registered if there is already “one to which the members could more conveniently belong and that would more effectively represent those members.” This is an extreme form of protection designed to circumvent the possibility of contestable unionism.

The law should be changed to allow for the formation of all organisations that are prepared to meet the general legal requirements of registration. In this way, different unions will vie for new members by offering superior services at competitive rates.

A much greater diversity of organisations is likely to transpire: some will be small, perhaps based on one organisation, and some larger covering particular industries could emerge.

The key is that competition is a better solution to ensuring accountability than any form of regulation.