Today’s media predicts the announcement of a Royal Commission which will cover union corruption and corporate contributions to the “corrupt” unions. My hope would be that either the terms of reference cover more than this or that the announcement also indicates the government intends major reform of the Fair Work legislation and administration before the next election (see my letter below). But even though there is already available considerable evidence of union corruption, I fear this is unlikely. The government will want to use the RC report to justify subsequent major reform and, despite the belated revelations by businesses of the disastrous legislation, it will not want to break its pre-election promise of no major reform in this term.
As the analysis by Henry Ergas suggests in today’s article (below), this would be unfortunate. He perceptively points out that the underlying problem lies with the legislation and its administrators:
“Yet the case for reforming Labor’s industrial relations laws goes well beyond the gangrene it has caused. For the rot is only the most extreme symptom of the laws’ underlying flaws. At the heart of those flaws is what the industrial relations system seeks to do. It should serve to improve the functioning of the labour market by facilitating efficient contracting between employers and employees, thereby promoting trust and confidence in the workplace and encouraging the creation of secure, high-quality jobs. Instead, under the guise of fairness, Gillard’s legislation aimed at replacing market contracting by an administrative process, in which mandatory standards, awards and collective agreements would be the primary means for determining the conditions of employment. And with that legislation guaranteeing the unions a privileged role in framing each of those instruments, she sought to entrench a degree of union power entirely unrelated to the unions’ ability to attract and retain members. In those objectives Gillard’s legislation succeeded all too well”.
The legislation also succeeded, incidentally, in forcing “big business” to do deals with unions. While supporters of small business (and others) are right to criticise the apparent extent of concessions made by “big business”, some overlook the adverse effects of the legislation and its administration on the management of big business. Without those adverse effects, big business would have difficulty in doing deals with unions and sustaining a competitive position in the market.
Des Moore
Fruits of their labours
(Letter by ADes Moore published in the Australian Financial Reveiw, 10 February 2014.)
Prime Minister Abbott and associated ministers have rightly been criticised for their badly mistaken interpretation of the SPC’s current agreement with the AMWU.
Even so, overall working conditions (not just wages) seem overly generous in circumstances where the company faces increasing international competition.
This also seems evident for other businesses similarly exposed.
What is needed urgently is a major review of the Fair Work arrangements and the extent of union influence under those. If the Coalition waits until after the next election to implement reforms which are obviously needed, there will be continued closures and losses of jobs.
Des Moore
HR Nicholls Society
South Yarra, Vic
We’ll expose unions’ dark secrets, says Tony Abbott
(Article by David Crowe published in The Australian, 10 February 2014.)
TONY Abbott has vowed to shine a spotlight on the “dark corners” of national life by setting up a royal commission into the union movement as he accuses Labor of protecting dishonest officials.
As cabinet ministers prepare to sign off on the commission today, the Prime Minister sharpened the political contest over union finances to warn of “widespread corruption” that needed urgent investigation.
Bill Shorten stepped up his objections to the government plan by repudiating criminal behaviour but arguing that a police taskforce was the best way to punish those who abused the trust of the nation’s 1.8 million union members.
Amid fears the commission could cost hundreds of millions of dollars as the Coalition has vowed to cut spending, The Australian was told last night that ministers wanted it to have a tight focus on financial affairs.
The terms of reference to go to cabinet today are broad enough to cover all unions but focus attention on slush funds and financial entities set up by top officials, rather than more general issues of governance.
In a danger sign for company executives, the commission will also have the authority to capture financial transactions where businesses tip cash into union accounts.
Primary targets include the “slush funds” set up by union leaders to fund their election campaigns, in the wake of the political storm in recent years over Julia Gillard’s role in the 1990s advising officials at the Australian Workers Union.
Also under investigation will be payments to companies linked to top officials, after former Health Services Union boss Michael Williamson pleaded guilty last year to defrauding the union of about $1 million.
These “off the books” deals are said to be a bigger focus for the inquiry than the personal behaviour of officials, such as allegations that former Labor MP and HSU leader Craig Thomson paid for prostitutes with his union credit card. Mr Thomson has pleaded not guilty to 145 charges of fraud and theft.
The union crackdown will be one of the government’s dominant themes this week as federal parliament resumes amid Labor objections to two bills that would revive the Australian Building and Construction Commission and impose criminal penalties on union officials who misuse funds.
The commission will be led by former High Court judge Dyson Heydon and is expected to take a year but government sources would not say how much it would cost. A similar inquiry in 2003 cost $66 million.
Labor claimed the bill for the last inquiry, set up by Mr Abbott as workplace relations minister and led by former judge Terry Cole, meant the new commission would cost $100m after taking inflation into account.
Mr Abbott said he had promised before the election to set up a judicial inquiry into union “slush funds” but he suggested the situation had worsened in the light of recent claims from a former union official about corruption in the building industry.
“There’ve been very credible allegations, including allegations from senior officials in the union movement, of widespread corruption, standover tactics, even organised crime penetration,” Mr Abbott told the Sky News Viewpoint program in an interview aired last night. “We’re on the side of the honest unionist, we’re on the side of the honest worker against the dodgy official.”
Mr Abbott challenged the Opposition Leader to declare whose side he was on, given his background as national secretary of the Australian Workers Union before entering parliament.
“Mr Shorten is a former union official himself and as things stand it looks like Bill Shorten wants to run, to coin a phrase, a protection racket for a protection racket,” Mr Abbott said.
Labor attacked the commission as a political stunt and argued that a police taskforce would act more quickly to tackle the problem, saying Mr Shorten had held meetings with police in recent weeks to confirm this.
“In recent days and weeks, we’ve seen issues of corruption, of bribery, extortion, of outlawed motorcycle gangs in the construction sector,” Mr Shorten told reporters in Melbourne yesterday. “The best way to deal with these issues without a doubt is to support our police to do their job. This is a job for the police, not a job for the politicians.”
ACTU president Ged Kearney said the peak union body had “zero tolerance” for corruption and that any allegations should be acted on by police.
“The real issue unions are fighting for is to ensure that wages keep up with the cost of living, and the government has spent the last few weeks attacking ordinary factory workers and their take-home pay,” she said.
Attorney-General George Brandis said police investigations could go ahead as well as a royal commission, telling the Australian Agenda program on Sky News yesterday that it was not an “either/or” proposition.
“I think there’s been growing public concern about corruption in the trade union movement which has accelerated in the recent past, and I think it would be frankly irresponsible for the government not to respond to that growing public demand in a very thorough way, marshalling all of the appropriate institutions to address the problem,” Senator Brandis said.
The Prime Minister denied that the existing authorities could do enough to tackle the problem as he complained that it took four years for authorities, such as the Fair Work Australia, to look into the Health Services Union.
“The desert sands advance more swiftly than some of these investigations,” Mr Abbott told Sky News. “And as we have seen with other serious problems, serious criminal law-enforcement problems, sometimes you need to shine a big spotlight, a great big spotlight, into the dark corners of our national life.”
Business affairs are certain to be caught up in the investigation, given the way companies have met union demands in the past to keep the industrial peace.
Contracting company Thiess is said to have paid $100,000 a year to the AWU Workplace Reform Association set up by officials in the 1990s, with some of the cash allegedly going to buy a house rather than funding an election campaign.
Recent allegations of corruption in the building industry include reports that Sydney gang leaders are using bribes and threats to gain lucrative contracts for labour hire companies that have agreements with the construction union.
Australian Industry Group chief executive Innes Willox said companies must be prepared to answer for their activities. “If allegations are made against individual businesses, they would have to deal with it,” he said.
Devotional eulogies only entrench union thuggery
(Article by Henry Ergas published in The Australian, 10 February 2014.)
AFTER the 1983 election, when half the Australian workforce were union members, barely a third of the ALP’s new MPs thanked the unions in their maiden speech. By the 2013 election, union membership had fallen below 20 per cent of the workforce; but more than 90 per cent of Labor’s new MPs devoted part of their first speech to praising the union movement.
And the accolades were hardly understated. Craig Thomson had set a high bar in 2007 by claiming his elevation to parliament proved that “union is not a dirty word”. But Labor’s 2013 intake rose to the challenge, with Bendigo’s Lisa Chesters even managing a call-and-response ditty of “I say ‘united’, you say ‘voice’ “.
Yet these devotional eulogies are no laughing matter; rather, they reflect the complete inability of today’s ALP to distinguish its interests from those of the unions. The result is not merely Bill Shorten’s refusal to support a royal commission into union corruption; it is also Labor’s rejection of reforms to provisions of the Fair Work Act that have allowed union thuggery to become endemic.
Those provisions were anything but an accident. The Cole royal commission uncovered a pattern of criminal behaviour by building industry unions. But just as the Hawke government brushed aside the Costigan royal commission’s call for a new authority focused on eliminating union corruption, so Julia Gillard treated Cole’s findings with contempt.
Nor was Gillard swayed by the fact that retired judge Murray Wilcox, asked by Labor in 2008 to examine the building industry, concluded that significant lawlessness remained; instead, Gillard eviscerated the measures Howard had introduced to bring the criminality to an end.
Gillard did not just abolish the Australian Building and Construction Commission. She also modified the definitions of lawless behaviour in the industrial relations laws to make it more difficult to prove, while dramatically reducing the ability of the workplace regulator to evidence illegal dealings.
The effect was to vastly expand the scope for, and return on, union malpractice. And to aggravate matters the Fair Work Act also sheltered the unions from competition while doing virtually nothing to police their internal governance. It is all very well for Shorten, in tones reminiscent of Casablanca’s Captain Renault, to say he is “shocked, shocked” at the consequences; but they were entirely predictable, since the rents Gillard’s legislation allows unions to extract would inevitably act as magnets for sleazebuckets.
And environments in which violence, extortion and misappropriation can flourish attract those whose comparative advantage lies not in selflessly pursuing members’ interests but in illegally advancing their own.
Yet the case for reforming Labor’s industrial relations laws goes well beyond the gangrene it has caused. For the rot is only the most extreme symptom of the laws’ underlying flaws. At the heart of those flaws is what the industrial relations system seeks to do. It should serve to improve the functioning of the labour market by facilitating efficient contracting between employers and employees, thereby promoting trust and confidence in the workplace and encouraging the creation of secure, high-quality jobs.
Instead, under the guise of fairness, Gillard’s legislation aimed at replacing market contracting by an administrative process, in which mandatory standards, awards and collective agreements would be the primary means for determining the conditions of employment.
And with that legislation guaranteeing the unions a privileged role in framing each of those instruments, she sought to entrench a degree of union power entirely unrelated to the unions’ ability to attract and retain members.
In those objectives, Gillard’s legislation succeeded all too well, allowing then ACTU secretary Dave Oliver to proclaim last year that the unions were “out there representing about 60 per cent of the workforce”, although union membership was not even one-third that. Gillard’s laws thus trampled on freedom of association, which entails the right not to be represented by a union, all the more so when it is run by racketeers.
Yet it is not only democracy that Gillard’s laws undermine. Rather, it is Australia’s ability to prosper. There are, after all, good reasons why even New Zealand, which led the world in introducing centralised wage setting, abandoned it in 1991: to believe, in a modern, open economy, that tribunals can efficiently determine “fair and reasonable” wages is no more sensible than to believe Soviet planners could efficiently determine “fair and reasonable” prices.
Little wonder, then, that Australia is now literally unique in clinging to that illusion. But as the investment phase of the mining boom draws to an end, its effects will come home to roost. Nor will it be the first time that happens.
Rather, in each cycle since federation, our industrial relations system has acted as a faulty amplifier, magnifying the costs of the fluctuations to which we are exposed. By reinstating that system just as the greatest terms of trade shock in Australia’s history got into full swing, Gillard made a painful landing far more likely than it needed to be.
AWU leader Paul Howes is therefore right: the current situation is unsustainable. But, like the Marquis de Sade opining on the horrors of torture, his proposed cure - a new accord between government, business and the unions - perpetuates, rather than removes, the lash. The solution does not lie in yet more corporatism; rather, it must bring our IR laws into the 21st century.
The difficulties that raises are obvious. No doubt, they will give Tony Abbott plenty of opportunities to remember that, when asked whether the laws he established in Athens were the best, Solon replied: they were the best that the Athenians would accept. But one thing is certain: Australia cannot be the country where thugs relied upon by unions are treated as too big to jail. If Labor can’t understand that, all the panegyrics to unions in the world won’t save it.