Without the guidelines public companies have, super funds abridge their annual reports with information that is “highly aggregated…usually presented as visually appealing graphics in the form of pie charts but which cannot be related back to the audited information in the financial report. “Similarly, investment returns are presented only as percentages, thus lacking transparency on how the numbers were derived. Also the expenses incurred by the fund as a whole cannot be traced back to the amounts of fees charged to members.” The super industry defends the status quo, saying funds will give their audited financial accounts to members upon request.

However as Gallery discovered, it’s not as easy as that sounds. SIS legislation has a provision whereby not only members, but “employers…and other concerned persons” can request the reports. These other parties “might include analysts, academics or journalists”, the legislation states. In 2000, Gallery wrote to all trustees of the defined benefit superannuation funds sponsored by Australia’s top 500 companies, requesting the funds’ audited financial reports.

As she related in the academic journal Abacus in 2003, only 25 funds – or 10 per cent – responded with the report. Some funds refused to give the reports with various reasons. Some said it was not a public document, it was private information, it was confidential, it was not fund policy to circulate this information, it was not available to non-members, and so on. Gallery followed up with a letter referring to the SIS requirements. A further 40 per cent of funds sent the audited financial report. But some continued to question her purpose, and one fund suggested she had misinterpreted the legislation, another said the requirement was “morally wrong” and refused to comply.

Gallery does not believe super funds are attempting to “keep secrets”. But she says the reluctance to provide these reports does demonstrate – apart from trustee ignorance of the legislation regarding disclosure – that, far from promoting transparency, “there is a culture of concealment, particularly among corporate defined benefit superannuation plans”. She suggests this culture is still evident today by the lack of audited financial reports being accessible through super fund websites.

And what does Gallery say to those who point to the lack of systemic failure or fraud within super compared to public companies as a reason to maintain the status quo? After all, if it ain’t broke, why fix it?

For Gallery, this is a straw man argument. “Fraud is not the big issue – and it has happened, they can’t say it hasn’t happened, it just hasn’t been publicised. But really, funds are more likely to be losing money through inefficiency than fraud,” Gallery says. With the corporate reporting framework – continuous disclosure, interim reporting, segment reporting – inefficiencies become clear quickly, and shareholders have a chance of legitimately determining whether their company should be subject to a takeover, Gallery says.

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