Do super funds have too much ‘clout’?

On the same day as NAB chief executive Ross McEwan questioned the potential influence of superannuation funds, Westpac chief executive Peter King has pushed back on the assessment the super industry has too much influence.

During a Parliamentary inquiry over capital concentration and common ownership in Australia, Coalition MP and committee chair, Tim Wilson, asked King whether super funds had used other people’s money as “clout” to force out his predecessor.

Brian Hartzer stepped down as CEO in late 2019, after allegations from AUSTRAC over breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act), although the allegations were dated from before Hartzer’s tenure.

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King said there was broad engagement on the issue from domestic intuitional investors, as well as international investors, which included the Norwegian sovereign fund, which was the sixth-largest shareholder of the bank.

“We definitely engaged with institutional shareholders including the super funds but my recollection of the time was there also views from other stakeholders,” King said.

“It was a dynamic situation – which is probably the best way to describe it – with a lot of views including shareholder views.”

Wilson rhetorically asked: “Perhaps the super funds were just boasting about their influence rather than it being practical?”

King was adamant that all major institutional shareholders were engaged and that when it came to any issue, not all of them necessarily agreed on issues.

“Our experience with the different institutional shareholders is that they have different views on matters, they’re not all the same, even within the industry super funds there can be different views,” King said.

“Those who represent universities will have a different view to those that work in construction or health, so I think there is quite diverse views.”

Money Management’s sister publication Super Review reported NAB’s CEO Ross McEwan questioned the potential influence super funds could have but said “that is not a concern for us yet”.

Vanguard and Blackrock were the largest investors of Westpac, sitting around 5% to 6%, which had similar holdings in NAB due to their tracking of ASX indices.

Other top holders were State Street, AustralianSuper, MLC and the Norwegian Sovereign fund, with the largest super fund holding being “a bit over 2%”.

King said he had not seen collusion between voting blocks.

“Ultimately, it’s the shareholders that appoint the board and the board is responsible for execution of the strategy,” King said.

“The board must balance the competing views of shareholders and shareholders don’t see issue the same way – each shareholder will share their view on strategic topics.”

King said he met with major shareholders once or twice a year, generally after results are reported.

Discussions were often focused on macro issues in the economy, as well as management of the company.

Environmental, social and governance (ESG) issues were also addressed, particularly around climate change.

“If I think about one thing that has changed in investor conversations in the last two to three years is there is much more focus on our plans to respond to climate change,” King said.

“I would summarise them at this moment as people interested in understanding our plans and getting clarity on them.

“I don’t feel it’s having a major impact on our ability to raise money or the price of that money.”

According to data from FE Analytics, Westpac was held by 145 managed funds, while NAB was held by 139, both across over 35 different investment managers.

“Westpac has diverse ownership with more than 670,000 shareholders, around 48% are retail shareholders – predominately individuals and self-managed super funds (SMSFs),” King said.

“The remaining 52% are held by institutional investors which include Australian fund managers, industry and retail super and global institutions.”

King also confirmed the bank followed through on its commitment to bring back 1,000 offshore jobs to Australia and had placed 1,169 Australians in those roles.

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What a nasty piece work is Tim Wilson. By ignoring Westpac's breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act), he wants to suggest former Westpac CEO Hartzer was forced out by super funds.

Westpac broke the Act and shareholders lost money.
Hartzer should have done something that was obviously smelly in Westpac, but he didn't.. But Wilson sees no fault in the CEO and wants to blame super funds (probably sees the chance to take aim at industry funds). Wilson looking after his mates in the big end of town.

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