The unions are running a shadow economy

When the Royal Commission into Trade Union Governance was established, the leader of the Opposition positioned it as a political ploy, suggesting to the Prime Minister, “give our police the resources they need to catch the crooks and keep the politics out of this.”

Given the expense and the clear vested interest the Abbott government had in a poor outcome for the unions, he was not the only one wondering if the exercise was a judicial sledgehammer aimed at a political walnut.

However police cannot generally prioritise resources away from murder, sexual assault, armed robbery and gang crime to pursue allegations of fraud, breaches of privacy or improper relationships. Least of all when many of the offences concern the internal affairs of a private organisation like a union. A royal commission allows the specific resourcing of investigations that have a broader importance for society than is calculated by an itinerary of the substantive criminal acts they entail.

Impacts on the wider community from the activities alleged at the commission are significant, and they are felt well beyond the private sphere of the union organisations. Theft of personal financial records, the employment of middle men with links to jihadists, and misuse of monies from a redundancy account funded by employers all have impacts well outside the voluntary association.

However, the most significant community impact would appear to be a sort of shadow regulation of some key sectors of the economy. The Commission heard evidence that a maritime union had secured arrangement with several companies “in order to buy, or maintain, industrial peace”. Alleged payments ranged from the thousands up to $1 million. Whatever these companies paid for was presumably passed on to consumers in the form of higher prices for imported goods.

In another case, two Boral employees gave evidence regarding a meeting with a union official who told them, “The CFMEU will decide who gets what and what market share Boral will get.” In the commission’s words, this suggests officials of the union, “are no longer focused on the traditional aspects of trade unionism – namely protecting workers’ rights and entitlements and giving assistance to workers in trouble. They are, instead, concerned with controlling the commercial construction industry in Victoria, and determining which companies get what share of that market”.

This amounts to reducing competition in all of the markets that Boral supply, which is a massive number given the company is involved in concrete, timber and bricks – literally the building blocks of society. If true, the union’s shadow regulation has interfered with the market price of everything from new apartments to decorative cornices.

At the other end of the industrial food chain are people even more acutely affected by poor governance in the trade union movement – the members. A union managing markets to the advantage of its favoured employers has a clear and unacceptable conflict of interest. The union cannot pursue its members’ best interests if it has direct financial support from employers. Worse still, if that support is illicit, the parties to it are bound by strong ties regarding their mutual fear of exposure. Similarly, alleged arrangements, “which require employers to make payments to, or acquire services from, relevant entities associated with” the unions can only be conflicting industrial officials.

This is the very nature of governance – to ensure an entity is clearly aligned in culture and purpose to its mission, and protected from conflicts of interest and accountable to its stakeholders. Governance sounds quite bureaucratic but it’s fundamentally a democratic discipline. It is the means by which the endeavours of the many can be protected from the weaknesses, failings or betrayal of the few.

Commentators, including politicians, need to be circumspect until charges are proven. The police task force now established will be the proof of whether this sledgehammer has been proportionate or not. If the bulk of allegations fail to be proven, the unions will be owed an apology. If, however, a substantial number of the larger charges are proven, then honest trade unionists and the ALP should be first in line to support a clean-up. The people who will benefit from cleaner trade unions will be their members, consumers, and ultimately the labour movement itself.

Casssandra Wilkinson is External Engagement Manager at the Centre for Independent Studies.