(Bloomberg) -- Three directors of Cbus, one of Australia’s biggest pensions, have left its 14-strong board as the fund faces a regulator-mandated review about its close ties to a construction union.
Jason O’Mara, Dave Noonan and Rita Mallia are no longer on the board of the A$93 billion ($63 billion) fund, according to a spokesperson for Cbus. All three were nominated by the Construction, Forestry and Maritime Employees Union, which has been put into administration following allegations of corruption and links to organized crime.
“Decisions to appoint and remove CFMEU directors to the Cbus board remain with the National Executive of the union, which is currently under control of the administrator,” the Cbus spokesperson said in an emailed statement. “These decisions do not impact the daily operation of Cbus.”
There are currently no directors linked to the CFMEU listed on Cbus’s website. The Guardian reported earlier Thursday that two directors had resigned.
The Australian Prudential Regulation Authority this month said Cbus, which was initially formed as a construction workers’ pension, must undergo an independent review based on regulations around fitness and propriety. The fund would be required to report on the trustee’s compliance with its “duty to act in the best financial interests” of members.
As Australian superannuation assets near the A$4 trillion mark, funds are attracting more scrutiny around environmental, social and governance issues. While most of the regulatory attention has so far been on environmental pledges, governance is also coming under the spotlight as boards navigate higher-stakes investment decisions.
APRA this month noted “the recent public allegations regarding serious misconduct” within the CFMEU. “While these allegations are yet to be tested or proven through a court or tribunal process, APRA is concerned about the potential impact on trustees,” it said.
Some of Australia’s largest pension funds have their roots in the union movement. The compulsory system was brokered during wage negotiations between the country’s biggest unions and employers, which resulted in firms contributing a portion of wages to retirement savings.
On Wednesday, APRA Chair John Lonsdale said pension fund board members must have the “appropriate capabilities and skillset to make decisions” regarding billions of dollars worth of member funds. He said it was not appropriate for the regulator to discuss whether unions should have such strong representation on boards of pension funds.
Cbus will “await further advice from the National Executive of the CFMEU and will engage as appropriate on future appointments to the board,” it said on Thursday.
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