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Published online by Cambridge University Press: 01 January 2023
The amendments to Schedule 1B of the Workplace Relations Act have given the government substantially new means of controlling the internal affairs of industrial organisations. At the government's behest, the Review of Current Arrangements for Governance of Industrial Organisation (the review), used concepts borrowed from the Corporations Act as a basis for recommendations regarding union accounts, accounting procedures, fiduciary obligations of office-holders and organisational rules. This study is a critique of the review and the consequent amendments. It argues that notions borrowed from the Corporations Act are inappropriate for unions and will cause problems for them. The amendments also contradict the government's avowed policy of deregulation of labour market institutions.
I would like to thank Dr Graeme Orr of the Griffith Law School; Professor Peter Brosnan and Dr Marco Michelotti of the Griffith Department of Industrial Relations; Professors Philip Bohle and Michael Quinlan of the UNSW, as well as the anonymous referees of this Review for their helpful comments on the study. Of course any errors and omissions are entirely my own.
The title was inspired by Michel Foucault's analysis of control in Discipline and Punish, Penguin Books, London, 1991.
2 The review was conducted by Blake Dawson and Waldron for the Department of Workplace Relations and Small Business, see Department of Workplace Relations Small Business/ Blake Dawson and Waldron, Review of Current Arrangements for Governance of Industrial Organisations - Report and Recommendations, June 1998.
3 In a valuable collection of readings entitled Foucault, Management and Organisation theory, A Me Kinlay and K Starkey (Ed) Sage Publications, Great Britain, 1998 show how historically accounting has been used to control business organisations and the individuals within them. In particular, I would commend Chapter 8, ‘Management Accounting Numbers: Freedom or Prison’ by Trevor Hopper and Norman Macintosh (pp.126-150) and Chapter 3, ‘Foucault, Power and Organisations’ by Stewart Clegg.
4 For a comprehensive analysis of Schedule 1B see the Department of Workplace Relations and Small Business web site at http://www.workplace.gov.au/workplace/Category/Legislation/WRActOutlineandKeyDifferencesoftheRegisteredOrganisationsLegislation.htm.
5 The most comprehensive collection of ministerial speeches and announcements concerning the government's policy of de-regulating labour market institutions may be found at http://www.mcdonaldassocs.com/irreforms/recon.htm.
6 Thynne I, and Goldring J, Accountability and Control: Government Officials and the Exercise of Power, Law Book Co Ltd., Sydney, 1987 especially Ch. 1.
7 This definition is a based on that of Webb, S and B, The history of Trade Unionism 1666-1920, R&R Clark, Edinburgh, United Kingdom p.1; the Shorter Oxford English Dictionary ; and Smith RC and Rawson D, Trade Union Law - the legal status of Australian Trade Unions, 2nd Ed (1985) Butterworths, Sydney, 1985, pp.7-9.
8 The review had to examine both the “financial accounting auditing and reporting requirements of the Workplace Relations Act” and “their practical operation”. It was also asked where appropriate “to recommend changes” to ensure that industrial organisations were “accountable to their members”.
9 The reviews’ terms of reference included an examination of whether “proper accounting records were maintained and audited“; that reporting requirements “were consistent with statutory obligations to be met by corporations and comparable organisations“; that there were “effective means of compliance“; and that the obligations did not “impose unnecessary costs or administrative burdens on small organisations”. The review was also asked to appraise the “fiduciary duties” of office holders and “to consider the extent if any to which model rules should be developed to address the issues identified”.
10 For a summary of the review's findings see Mourell M, ‘Industrial Organisations and Corporate Accountability', (1999) 12 Australian Journal of Labour Law, pp. 136-141.
11 The government indicated its intention to implement the report's findings in separate legislation governing industrial organisations and their internal operations - see http://www.dewrsb.gov.au/ministersAndMediaCentre/reith/discussionPapers/accountability.
12 See Hooper and Macintosh, op.cit. (particularly pp.144-149) as to the consequences of such controls on organisations and Professors Ron Ma and Russell Mathews Financial Reporting by Government Departments, 1993, pp.67-88 as to the inappropriateness and specific impact of accounting standards on non-profit-making organisations.
13 To the authors knowledge submissions were not made available to the public. References to the submissions are only as summarised in the report - see pp. 13-17 of the report.
14 See pp. 13-14 of the report.
15 See p. 15 of the report.
16 See pp. 15-16 of the report
17 See W A Howard, “Australian trade unions in the context of union theory“ 19 Journal of Industrial Relations, Sept 1977, pp 255.
18 This is apparent from a consultation of the standard texts with specific references to the need for reform - R Tomasic, J Jackson, R Woellner, Corporations Law: Principles policies and process (4th Ed.), Butterworths, Australia, 2002 , particularly Chapter 1 at pp.7 and 15; and S. Berns and P. Baron, Company Law and Corporate Governance: An Australian Perspective, OUP Australia, 1998, particularly Chapters 1 and 2; Wishart D, Company Law in context, OUP, 1994 p.77; Farrar J, Corporate Governance (2nd ed.) OUP, Australia, at p.17; M J Whincop, An Economic and Jurisprudential Genealogy of Corporate Law, Ashgate, England, 2001, at p.17.
19 See Lord Wedderburn, Labour Law and Freedom, Lawrence & Wishart Ltd, London, 1995 for the contradictions associated with this view, p.200.
20 For the classic rebuttal see Alfred Marshall's Principles of Economics, (8th Edition), Macmillan & Co. London, 1936 particularly pp.702-710. For more recent analyses L G Reynolds, S H Masters and C H Moser, Labor Economics and Labor Relations (11th Edition), Prentice Hall New Jersey, 1998, especially Chapter 17.
21 See Employment Act 1990 (UK) and Trade Union Reform and Employment Rights Act 1993 (UK) and Lord Wedderburn's penetrating analysis in Labour Law and Freedom, op. cit.
22 See p. 18 of the report.
23 See C B Fox , W A Howard and M J Pittard, Industrial Relations in Australia, Longman Australia, 1995, especially Chapter 6; M Gardner and G. Palmer, Employment Relations (2nd Ed.), Macmillan Australia, 1997, especially Chapter 4; and N F Dufty and R E Fells, Dynamics of Industrial Relations in Australia, Prentice Hall Australia, 1990, especially Chapter 5.
24 See pp.3-4 of the report.
25 Reference is made also to dual registration of organisations under the principle in Moore v. Doyle (1969) 15 FLR 59.
26 Perhaps the government might consider giving an organisation's accountant the right to veto industrial action: “Sorry comrades but your cash flow statement does not allow you to go on strike this year”.
27 For a detailed discussion of incorporated not for profit associations and the impact of the Corporations Act on respective State Associations Incorporations Acts, see Sievers A S, (1996) Associations and Clubs Law in Australia and New Zealand , (2nd Ed) Federation Press, Annandale, NSW, especially chapter 4.
28 See the government's discussion paper and response endorsing the review's recommendations in https://www.dewrsb.gov.au/ministersAndMediaCentre/reith/discussionPapers/account_democrat.asp (accessed 20th November 1999).
29 What are also overlooked are the wider ramifications of organisational disunity, namely an increase in litigation between individuals and their organisation's and the possibility of increased factionalism and wildcat strikes.
30 See Bramble T, ‘Deterring Democracy; Australia's New Generation of Trade Union Officials', Journal of Industrial Relations, vol. 37 (3), 1995, pp.401-26.
31 Because of this recommendation, it is suggested later in the report that section 285 of the Workplace Relations Act be repealed.
32 At the time of the review there were 122 organisations and 563 reporting bodies. It was proposed that the number of reporting entities be reduced wherever possible and that only in exceptional circumstances branches with less than 250 members be recognised as reporting bodies, see recommendations 6 and 7 at p.28 of the report.
33 The inquiry felt that the definition of reporting entity as advocated by the accountants was suitable to corporations where structures are more readily defined and ascertained and branches do not enjoy a degree of autonomy with respect to management and finances as in industrial organisations. It recommended that the definition of reporting entity as adopted by the public sector accounting Standards Board apply.
34 See recommendations 7 and 8 at p.28 of the report.
35 See for instance Re Humes Ltd (1987) 5 ACLC 64; Garina Pty Ltd v Action Holdings Ltd (1987) 7 ACLC 962; Intercapital Holdings Ltd v MEH Ltd (1988) 6 ACLC 1068; Tinios v French Caledonian Travel Service Pty Ltd (1994) 12 ACLC 622.
36 See p. 18 of the report.
37 See recommendation 4 of the review, p.22 of the report.
38 See recommendation 5 at p. 28 of the report.
39 See recommendation 9 at p. 29 of the report.
40 The Australian Accounting Standards Board has this power in relation to companies under the Australian Securities and Investment Commission Act 1989. The only limitation placed upon it is that standards developed must be consistent with both the Corporations Act and regulations -s.334 of the Corporations Act.
41 See p.39 of the report.
42 See recommendation 28 at p.45 of the report.
43 See p.46 of the report.
44 R v. Kirby; Ex parte Boilermakers Society of Australia (1956) 94 CLR 254.
45 See pp.46-48 of the report.
46 Recommendation 37 so far as it concerned the issue of financial viability was not enacted. However a similar effect could be produced under s. 30 of the Schedule which has been enacted.
47 See pp.49-50 of the report.
48 See p.51 of the report.
49 The relevant provisions are 206A, B, C, D, E and G.
50 See recommendation 34 at p.53 of the report.
51 Section 212 of Schedule 1B.
52 See recommendation 37 at p.57 of the report.
53 See recommendation 41 at p.59 of the report.
54 Adler v. Director of Public Prosecutions (Cth.) (2004) 51 ACSR 1.
55 See p.60 of the report.
56 The difficulties of getting compliance with such statutory rules was demonstrated by McBarnet D, and Whelan C, The Elusive Spirit of the Law: Formalism and the Struggle for Legal Control', The Modern Law Review, (November 1991), p.848. The most recent international study of such practices is Stlowy H and Breton G, ‘Accounts Manipulation: A literature review and proposed conceptual framework’ in Review of Accounting and Finance, Partington, 2004, Vol 3, No 1 p.5. The best Australian study is Clarke F, Dean G and Oliver K, Corporate Collapse: Accounting, regulatory and ethical failure, CUP, 2003.
57 As to the HIH and other Australian company collapses see Collapse Incorporated: Tales, Safeguards & Responsibilities of Corporate Australia CCH Australia Ltd, 2001. As to the Enron collapse, see How Companies Lie: Why Enron Is Just the Tip of the Iceberg, A L Elliott, R Joseph, H Schroth, Random House, 2002.
58 S Berns and P Baron, Company Law and Corporate Governance: An Australian Perspective, OUP Australia, 1998, particularly Chapter 2, and Redmond P, Companies and Securities Law - Commentary and Materials, (3rd Ed.), LBC Information Services, Sydney 2000, Ch 2.
59 See ASC v. Gallagher (1993) 11 ACLC 286 and Vrisakis v. ASC (1993) 11 ASCR 162. More recently when substantial financial collapses have occurred, ASIC has had a greater measure of success, see ASIC v. Adler (2002) NSWC 171.
60 This time-honored legal mantra borrowed from the Corporations Act adds little substance to the legislation. The interesting implication from s. 295(3) and s. 297 of the Corporations Act is that accounts which comply with Australian Accounting Standards may still not give a true and fair view, whatever that means.
61 See also Lockhart J's comments in QBE Insurance Group Ltd. & Ors v. ASC & Ors (1992) 10 ACLC 1,490 at p. 1507.
62 See for instance G W Dean and F L Clarke, ‘Creative Accounting, Compliance and Financial Commonsense', (1997), 7, Australian Journal of Corporate Law, pp.366-386.
63 For the consequences that befell British unions following the imposition of Mr. Major's controls, see P Willman and T Morris, ‘Financial Management and Financial Performance in British Trade Unions', (1995), British Journal of Industrial Relations, 33, pp.227-236 and their earlier work, Union Business, P Willman, T Morris, B Aston, CUP, 1993.
64 In this regard, Professor Breen Creighton argued that the previous provisions of the Workplace Relations Act “sailed close to the wind”, see Creighton B, ‘The Workplace Relations Act in International Perspective', (1997), 10, Australian Journal of Labour Law, 31-49, at p. 48. I would argue that the Schedule is even closer now.
65 Final report of the Royal Commission into Alleged Payments to Maritime Unions, Australian Government Publishing Service, Canberra, 1976.
66 For a critical and insightful appraisal of the report, see Anne Riches “Union accounts - A three ringed circus”, (1984), Australian Law Journal, 96.
67 See Industrial Relations Taskforce Report, Review of Industrial Relations Legislation in Queensland, Department of Employment Training and Industrial Relations, December 1998, p.84.
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