Bragg calls for investor guardrails against big super

Noting the growing influence of Australia’s major super funds, Senator Andrew Bragg has put forward reforms to protect Australia’s retail investors from what he has termed ‘Canberra’s Frankenstein’.

In an op-ed penned for The Australian, the senator noted implications arising from the formation of the Super Members Council in October last year from the merger of Industry Super Australia (ISA) and the Australian Institute of Superannuation Trustees (AIST). 

It is to be led by Misha Schubert as its first chief executive, commencing from February 2024 and based in Canberra.

“At the end of last year, eight major super funds co-ordinated themselves formally into a collective of eight – known as the Super Members Council. This means they will be co-ordinating to lobby for their interests. Note this will be the interests of the funds themselves, not the members of the funds,” Bragg said. 

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He highlighted the case of AustralianSuper doubling down on Origin Energy in November. It increased its holding 15.03 per cent, thus solidifying its position as Origin’s biggest shareholder and reaffirming its rejection of the current takeover bid from a consortium comprised of investment manager Brookfield and private equity firm EIG.

“AustralianSuper may have had commercial or investment reasons for doing so, but given the nature and heritage of the super industry, there may have been political motivations. Given the board dynamics of industry super funds, there is always the risk of union interference in the funds,” he said.

To combat this, the senator advocated two major reforms. Firstly, he proposed an expansion of the Takeover Panels’ remit by introducing a requirement for the mega funds to consult with and consider the interest of mum-and-dad investors on major transactions. 

“In the case of AustralianSuper and Origin, there would have been formal engagement between the major and minor shareholders, data analysis of the impact on small shareholders, and public inspection of these implications,” Bragg observed.

Alternatively, he suggested an “entirely reasonable policy option” of stopping super funds from owning more than 10 per cent of public companies.

“It would apply to major super funds and would only allow ownership of 10 per cent of the total stock on issue in an ASX-listed company,” Bragg said. 

“This way, Canberra’s Frankenstein (the super funds) could not eat up the whole local exchange and use it for political or semi-political purposes.”

Doubling down on his suggestions, the senator elaborated that these ideas could boost retail investor confidence.

“Both of these ideas should be in the mix to give confidence to all the mum-and-dad investors that you can still get a fair go in Australian capital markets,” he said. 

Previously, Bragg called for significant law reform to clamp down on super payments to trade unions back in March last year.

Data from the Australian Electoral Commission showed $12.9 million was paid from super funds to unions in the 2020/21 financial year. This was a record sum and up from $11 million in the previous year. 

This data was often not voluntarily disclosed in financial results or annual reports.

“Super funds are becoming the biggest political donors in the country. This is a disgrace,” he said.  

“Superannuation is supposed to be for workers, but it has turned into a sinkhole for unions and banks. 

“Union advertising during the upcoming election will be underwritten by superannuation. That is, retirement savings will pay for political advertising. 

“It is hard to think of another policy, which allows political and private interests to directly benefit at the expense of Australian workers.”