Big Brother, in the form of the Australian government, may be looking over the shoulders of Australian pension fund managers.
At least, the managers fear Big Brother may be watching how they invest the country's U.S.$150 billion in assets in the wake of an extraordinary outburst last month by Prime Minister Paul Keating, in which he called the institutional money managers "donkeys" who mismanaged pension fund assets.
The prime minister's comments in Parliament were part of his defense of an apparent intervention by a friend, Bill Kelty, in the Coles Myer Ltd. corporate governance battle. Mr. Kelty is the secretary of the Australian Council of Trade Unions, the top trade union body.
Mr. Kelty, in turn, was intervening on behalf of another of his friends, Lindsay Fox, a tough-talking, self-made trucking millionaire and director of Coles Myer who has toured Australia with Mr. Kelty setting up youth employment plans.
The battle involved institutional investor demands for reforms to the board of directors of Melbourne-based Coles Myer Ltd., Australia's biggest retailer with up to 20% of the Australian market.
The demands followed a series of scandals:
Two years ago, the company had to issue an amended annual report because of inadequate disclosure of third-party transactions between the company and companies owned by Mr. Fox, and Solomon Lew, Coles' executive chairman.
A former chief executive of the company has been charged with conspiracy and theft of over $4.5 million spent renovating his home. The money was allegedly company money.
The company's chief financial officer was dismissed, allegedly for disclosing company matters to his girlfriend. But the dismissal followed the CFO's persistent inquiries into a deal between the company and a major shareholder that reportedly cost the company more than U.S.$12 million.
The Coles Myer battle is now over - Nobby Clark, former National Australia Bank and Foster's Brewing chairman, has been installed as the new chairman, with Mr. Lew, the former chairman and a major 13.5% shareholder, stepping down to deputy chairman amid a raft of other board changes.
But the investment scene has been changed, for the foreseeable future, by Mr. Keating's intervention in the investment debate.
While the political pundits can excuse the prime minister's intervention on behalf of Mr. Kelty, they are finding it harder to explain a further statement by him in an interview with the major business paper, the Australian Financial Review.
In it, Mr. Keating mused that the U.S.$4 billion of tax concession the government gave to the pension industry (mainly tax deductibility for employer contributions and a concessional 15% tax on earnings) gave the government "heaps of prerogative" over how the industry is run.
"It is very difficult to mandate, but one of the things that is left to me is to pressure them to remind them of their inadequacies," Mr. Keating said. He added he, as the architect of the Australian pension fund system, had more rights than fund managers.
It is this statement, as much as the "donkeys" jibe, that is worrying the fund trustees and investment managers, despite reassurance from Treasurer Ralph Willis.
"I want to make it abundantly clear that the government will not force or mandate superannuation funds or trustees to invest in particular areas," Mr. Willis said, speaking at the major conference of pension funds run by the Association of Superannuation Funds of Australia. "I say that as emphatically as I can," he added in an unscripted aside.
Despite regular assurances from Mr. Willis on this matter (and earlier from Mr. Keating when he was treasurer), the industry is still nervous that with a government-mandated system of contributions, politicians will not be able to stop interfering.
The opposition Liberal Party's Treasury spokesman, Peter Costello, speaking at the same conference, reminded the industry of five other occasions (apart from Mr. Keating's recent comments) where ministers or, in one case, the ACTU, had publicly advocated some form of investment direction.
The head of the Australian Investment Managers' Association, Ian Matheson, said Mr. Keating's intervention in the Coles Myer debate was "unwarranted" and Mr. Keating and Mr. Kelty's comments must have related more to their friendship with Mr. Lew and Mr. Fox than anything else.
After this earned Mr. Matheson a further burst from the Prime Minister, comment from fund managers tended to dry up.
But the Prime Minister's outburst seemed to have focused the industry's mind on finding ways of moving beyond traditional investment. The main task will be to develop new vehicles run by fund managers through which fund trustees can invest outside traditional securities and property.
Susan Ryan, the executive director of The Association of Superannuation Funds of Australia and a former federal government minister, said the association was willing to work with the government and other major players in productive investment of funds' money.
Similarly, Elizabeth Bryan, deputy chairwoman of the AIMA and head of the New South Wales State Superannuation Board, said it is important for special industry and development needs to be met through measures that do not compromise the international standing of the industry or its objective to provide retirement income for its members.
And Ken Lockery, ASFA president, told members of the industry they all would need to seek out new ways to invest their growing funds. This would be the best way of avoiding any direction from Canberra.