Unions call the tune on investing their money
THIS week, Labour Minister Mildred Oliphant set the cat among the pigeons when she confirmed her Cosatu national congress comments to POWER 98.7’s Tim Modise. She said trade unions in and outside Cosatu had interests in labour-broking firms and remained invested in companies benefiting from the Gauteng freeway improvement project.
Challenged to present evidence, Oliphant said she had the evidence in her possession and had also requested that the unions carry out their own investigations.
The minister must have touched the National Union of Metalworkers of South Africa on its studio, leading to a lengthy press statement in response to her “spurious accusations”.
The union said the minister was “subtweeting” it in her comments.
This exchange has reopened the issue of the purported independence of union-owned investment companies and their shareholders.
Naturally, Numsa denies that it has any financial interest in any company involved in labour broking. But hold on. If the Numsa Investment Company is independent of the union, why not invest in any company it wishes, including labour-broking firms?
If CEO Khandani Msibi’s main concern, as head of an independent investment business, is deriving maximum return on the capital deployed, why would he not consider an investment in a business that supplies temporary staffing solutions?
Says Msibi: “If you look at the listed environment, shareholders like pension funds and the like would decide that they do not want to be associated with certain products like cigarettes or liquor for various reasons.
“Similarly, I think we need to be sensitive to the aspirations and, sometimes, the dislikes of our shareholders. However, there have been instances where unions instruct their investment companies not to invest in industries where the union is organising.
“And when we [management] came in and took over the Numsa Investment Company, it was one of the resolutions we took up for review and we said to Numsa: ‘If you are organising in a company that we believe is of value from an investment point of view, we should not be precluded from investing in that particular company.’ We were able to persuade Numsa to revoke that resolution.”
This would mean that an investment company wholly owned by a trade union could easily find itself on conflicting sides to the interests of its shareholder — which in itself contradicts the notion that union investment company interests must always be aligned, or at least sensitive, to the aspirations of its shareholder.
By way of example, imagine that the Numsa Investment Company was a shareholder in a motor manufacturer that found itself in the middle of a dispute with Numsa. In whose interest would the investment company act?
Let’s suppose the union is demanding a 15% wage increase and the board is offering 6%. What does the nonexecutive director serving on the investee company board as a representative of the union investment company do?
According to the Companies Act, that nonexecutive director’s fiduciary duty is to the investee company, not the union investment company, and certainly not the union. By law, the director is obliged to act in the best interests of the company.
In this instance, the best commercial interests of the company could be settling on the lowest possible wage increase, while the union would seek to secure the highest possible increase for its members.
The irony of this independence debate is that Kopano ke Matla, Cosatu’s investment company, invested in construction company Raubex prior to it being awarded work in the e-tolls project.
Of course, that didn’t stop the DA and other opposition parties calling out the “hypocrisy” in Cosatu, which, on one hand, wanted e-tolls abolished and, on the other, benefited from the project through its investment company.
I think we need to be sensitive to the aspirations and dislikes of our shareholders The truth is union-owned investment companies are not independent
The CEO of Kopano had to resign as chairman of Raubex, in an unsuccessful attempt to prevent a perceived conflict of interest.
Trade unions will do well to park the Marxist literature and heed the Good Book’s advice: “Then you will know the truth, and the truth shall set you free.”
The truth here is that unionowned investment companies are not independent of their shareholders. Unions know this. Union-owned investment companies know this.
Numsa’s response to Oliphant’s utterances, essentially on behalf of its investment company, underscores the inextricable and umbilical cord-like connection between the union and its investment company. The rest is just a smoke screen.