“To date we have been unable to provide any documentation of the proposal, a situation we find untenable given our fiduciary duty to act in the best interests of our members.”
In its December meeting, the LGSS called for Powis to stand down, a demand also voiced by the USU, stating that his role as CEO of EISS and FuturePlus, the investment services provider jointly-owned by the two funds, is “impossibly conflicted”.
They have questioned why the CEO of FuturePlus did not feel compelled to inform LGSS of the merger discussions. But Powis said decisions about including LGSS in the merger groundwork belonged to the EISS board. “CEOs don’t have the capacity to talk on behalf of boards,” he said.
“It was the board who recommended the philosophy of who we communicate with. CEOs don’t develop strategies, they implement them. CEOs are invitees to the board.”
John Eisenhuth, EISS chairman (pictured), could not recall when the merger talks with Treasury began, but said that EISS aimed to include LGSS towards the end of 2009.
“In mid-November we started to think about seeing how LGSS would consider such a thing,” Eisenhuth said.
“One board starts to form the view that something’s worth considering. Once it’s reached a point, it raises the matter with another board.”
Eisenhuth denied that EISS put the merger proposal to the Treasury.
“It wasn’t the EISS board that put the proposal to Treasury. It’s inappropriate for me say [who did], but the initial proposal didn’t come from the EISS board.”
Peter Lambert, chief executive officer of LGSS, said the fund would consider the proposal if it could access the merger documentation – the forecast cost savings, board structure and constitution – from EISS and Treasury.
“If it’s in the best interests of members, we wouldn’t oppose it. But we haven’t had the chance to [consider it],” he said.
The USU claimed that it had not yet received any information about the proposed merger beyond a one-page summary sheet.
In principle, the USU is not opposed to a merger, but Kruse stated that “any such proposal must be transparent, stand up to scrutiny” and comply with principles set by its superannuation review.
Powis said that EISS’s desire to merge was motivated by benefits of scale and the opportunity to introduce independent directors to the board of the merged entity.
“We said we believed in the interests of public policy – and that successive federal governments have recommended mergers – and left it with Treasury.
