Goyder questions independence of industry super fund boards

The Australian

3 June 2019

Ticky Fullerton – Business Editor

In two years, Richard Goyder has transitioned pretty seamlessly from managing one of Australia’s biggest businesses, Wesfarmers, to the most senior positions in Australia’s boardrooms.

He is now chair of Qantas, Woodside and the AFL Commission. In a broad-ranging interview, what stood out was less his views on the election or the RBA rates decision, and more his experience with investors, in particular some of the industry superannuation funds.

To be clear, Goyder sees industry super as playing a vital investment role, helping to build Australia.

After all, the industry funds now manage billions of dollars in retiree savings. And he scoffs at warnings that company directors should fear industry super on the register as predators in waiting.

“Not at all. Industry super funds should be long-term investors and should be very supportive shareholders but also hold companies to account for what they’re doing in the environment and with all stakeholders in an appropriate way,” he says.

Where Goyder does have a concern is on independence of the boards of industry super.

It’s no secret that many in corporate Australia remain sceptical of the role of these union-backed funds, with major stakes in listed companies.

Their indisputable track record of returns and low-fee reputation have lured hundreds of millions of dollars in retiree savings away from retail funds.

But calls by union leaders like the ACTU’s Sally McManus to use the funds’ financial muscle to influence ASX-listed boards with activist agendas, including wage hikes for employees, have rattled business. “Just as directors’ obligations are pretty clear, I think the obligations of trustees of superannuation funds are pretty clear as well and their obligations are to the members of the fund,” says Goyder.

His own experience has caused him to question whether industry fund directors are living up to their obligations.

“Interestingly, as a CEO, when I would go and see shareholders, including superannuation, they want to talk about how the company was going and performance and outlook and investment.

“Now that I’m a non-executive director, I spend more time talking about remuneration, climate change and other factors.

“One of the things that struck me is that these funds want independent directors, but when I go and see them, they actually don’t want us to be independent, they want us to do their bidding for them.

“And at the end of the day, directors will be independent. And we’d expect them to fulfil their roles as trustees as well.”

The re-elected Morrison government says it will bring back, from the dead and buried basket, its campaign to make industry fund boards independent, which is sure to be a good stoush; the current dual representative model is strongly defended by both the unions and employer organisations.

The campaign looks to have Goyder’s support.

“Independence a two-way street and I smirk a bit when I go into some of these meetings and they talk and they say, are your directors independent? And then ‘this is what we want you to do’. There seems to be some sort of conflict there.”

With Labor so roundly beaten, one business leader suggested privately that business had dodged a bullet on industrial relations, but Goyder sees this as harsh.

Business like almost everybody had been planning for a Shorten government and the boardroom chief says Labor would have been quick to pick up the phone to corporate Australia had it won. But clearly a clean Coalition victory is welcome news.

“Business will work with whoever, but I do think Josh Frydenberg handed down a really good budget and I feel like the table is set and we can get on with things,” he said.

It is true that the surprise result delivered a boost of confidence for business, but there one notable exception: energy.

Here Goyder has a battle on his hands. During the election campaign at Woodside’s May AGM, he lobbied hard on behalf of the gas sector, calling for leadership from the next government on a comprehensive energy policy, including emissions.

On the Monday after the surprise Morrison victory the market rallied strongly, but the energy sector fell.

Since then, Energy Minister Angus Taylor was sworn in again with emissions in his new portfolio, and he was straight out of the blocks claiming a “silent Australian” mandate to shut down any thoughts of a carbon pricing ­policy.

Resources Minister Matt Canavan doubled down at the APPEA annual gas conference last week accusing resource companies of taking unfortunate positions in their calls for a generic price on carbon.

At the same conference Conoco’s global chief Ryan Lance made it clear that investment certainty in Australia on energy was in question and that his investment capital was footloose. Goyder’s gas challenge is just beginning.

“Woodside is looking with our partners in investing millions of dollars in the northwest of the country in the coming years with Scarborough and Browse and we want certainty around what emissions regime we will be in and how we’re going to look at meeting our Paris obligations.

“These are 20 and 30-year projects. These aren’t small deals — they’re big deals employing thousands of people.”

Compounding the pressure for Woodside is the Western Australian EPA’s proposal for zero emissions from resource companies.

“Nowhere in the world is there full abatement on the sort of projects we’re looking at,” Goyder says. Energy aside, Goyder sees better times ahead for business and welcomes the prospect of an interest rate cut by the RBA tomorrow.

“Presumably there’s issues around currency, there’s issues around the housing market and consumer confidence.

“Post the election, there is an opportunity to inject some confidence into the economy and that would be a really good thing.”

He says he’s hopeful the big banks will pass on a rate cut to customers and certainly Commonwealth Bank CEO Matt Comyn in his first speech to a market event last week acknowledged that the battle to restore trust will be top of mind when he reacts to a cut in the cash rate.

I ask Goyder what on earth he makes of the quiet Australians and whether the new government hands business an opportunity to reset the relationship between them and business.

“I’ve always felt that business is a part of the solution, not part of the problem.

“The reputation issues that came from the royal commission — business does have to make sure that we operate sustainably, we operate looking after all our stakeholders, but on balance I think businesses in Australia do a pretty good job on that front and there is an opportunity to reset.

“People say actually what matters to them is their own security, their personal financial security, and business, particularly large business, employs many millions of Australians, so there is an opportunity to embrace those employees and our suppliers and our customers so they understand the really good things business does, whether it’s Woodside or Qantas, I think we do amazing things in the community.”