December 22nd 2012

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Articles from this issue:

FRONT COVER: Picture Credit

EDITORIAL: Hard landing likely for Australia's economy

CANBERRA OBSERVED: Julia Gillard's survival strategy for the New Year

WATER POLICY: Disastrous Murray-Darling Basin Plan is now law

ENVIRONMENT: Australia signs up for Doha cash grab

EDUCATION: Kirby attacks state aid to non-government schools

AUSTRALIAN SOCIETY: The left's long march through Australia's institutions

LABOUR RELATIONS: How to make unions accountable to members

POLITICS: The challenges that await Australia in the New Year

ENERGY: US to achieve energy independence in 15 years

ECONOMIC AFFAIRS: Time to reappraise the Washington Consensus?

OBITUARY: International advocate for family values dies

CINEMA: Well-crafted tale about an ageing pro

BOOK REVIEW A divided calling

BOOK REVIEW Atheist philosopher now sceptical about Darwin

POEM: Enlightened Willie's Prayer

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How to make unions accountable to members

by Jeffry Babb

News Weekly, December 22, 2012

Australians have misconceptions about the nature and purpose of industrial unions.

These outdated ideas are rooted in a reality that has long since passed. Unions are no longer poor organisations battling against the overbearing forces of capital. Especially since the round of union amalgamations in the later 1980s and early 1990s, unions have become major corporations.

Unions no longer represent even half of Australia’s workers. In 1986, according to the Australian Bureau of Statistics, 46 per cent of the workforce was unionised. Now, it is 19 per cent, with only 13 per cent in the private sector.

Unions represent their members, not all workers. This is an important point to bear in mind.

Say you work in a small metal-working shop with six staff members. Is the Australian Manufacturing Workers Unions (AMWU) going to unionise this shop? No, because it is not worth their while financially. If you work on the line at Ford, will the plant be unionised? Yes, of course, because Ford employs hundreds of workers.

Unions are simply responding to an organisational imperative. The primary aim of any organisation is to survive. Very few healthy organisations voluntarily dissolve themselves. To survive, all organisations must generate a surplus.

This surplus may be called a transfer to reserves, a fighting fund, a profit or an interest payment. It’s the same thing. They need a surplus to fund capital purchases, to tide them over slumps in business or falling revenues — or memberships — and to give their members some return for their effort and loyalty. An organisation that does not generate a surplus will not survive, be it a junior football club or a huge corporation like BHP.

Unions are big business. In 2010, the CFMEU’s Construction and General Division (Victorian branch) held net assets worth $42 million, including $4.5 million worth of investment properties and $25 million worth of property, plant and equipment. In addition, the branch earned $7.3 million from matured investments. The branch employed 89 people. United Voice NSW Division reported $24.5 million in net assets in 2011, with member contributions amounting to $9.8 million.

Given these examples, two things are readily apparent. First, these unions are major enterprises; and, second, while member contributions are the major source of income, they are not the only source of income. Many unions have substantial investment portfolios, and even business interests.

Union members are the owners of the enterprise, because that is what a union is — an organisation devoted to serving its members’ interests. Unions justify their existence by saying they are providing a service.

Apart from Bob Hawke singing “Solidarity forever”, and the construction workers marching down the street chanting “The workers, united, will never be defeated”, what do union members get for their dues? Do they even know what they are getting for their dues? The answer to the latter question is no.

Unions fall under the Fair Work (Registered Organisations) Act 2009. If any piece of legislation could be called “mates’ rates”, this is it. Other major surplus-generating organisations fall under the Corporations Act 2001.

These two classes of organisation are treated very differently. Why? Because one form of organisation is called a “union”, and the other form of organisation is called a “business”.

The members of a company are usually a lot less dependent on its fortunes than the average union member is on his union; yet, paradoxically, the average company member — or shareholder — knows more about the company in which he has invested than the average unionist knows about the union he has paid to join. Why? Because by law any shareholder must be supplied with an audited annual report unless he specifically opts out.

The auditing process for unions is far less demanding than for companies, and the reporting process is such that many union members know very little about the financial status of the union.

In the case of the notorious Health Services Union (HSU), many union members earn around $30,000 a year, while some union officials — both the “good” and the “bad” ones — earn in excess of $300,000. If you are a union member, then you should, as a matter of right, be supplied with an audited annual report setting out how the union hierarchy is managing your funds.

However, current enforcement of even today’s lax reporting standards is a joke.

In a company, the interests of the shareholders are represented by the board of directors. Who represents the interests of the union members? Can union members even find out how their money is being managed?

All organisations have an implicit or explicit contract to govern relations between the managers and the members. Unions rely on the assumption that union officials are motivated by altruism and that members can trust them implicitly.

The HSU scandal (leaving aside other union scandals which have been covered up) shows that this is a naïve assumption. The best thing for union members would be for these entities to be governed by the Corporations Act, like other surplus-generating entities.

Jeffry Babb is a Melbourne-based writer. He has been a paid-up member of the Government Water, Sewerage and Drainage Employees’ Industrial Union of Workers; the Australian Workers Union; the Federated Clerks Union; and the Australian Education Union. 

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