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Royal Commission: Does Bill Shorten really deserve this free pass?

Bill Shorten during his time with the Australian Workers Union.

AAP: Dale Cumming

Win-win is not the test of propriety for people who are placed in positions of absolute trust. There are real concerns about some of the deals with businesses that Bill Shorten oversaw as a union leader, writes Michael Bradley.

One thing Dyson Heydon has ensured, after 67 pages of exhaustive rationalisation as to why nobody really thinks a Liberal Party fundraiser is a Liberal party fundraiser, is that nobody is going care what he says in his final Royal Commission report.

This is a genuine shame because, politically motivated as the Commission was, it has sniffed out some seriously dodgy stuff.

So we'll have to do the Commissioner's job for him and examine whether Bill Shorten deserves the free pass he looks like getting.

There are two central allegations against Shorten.

While he was its national secretary, the Australian Workers Union negotiated a number of workplace deals for its members with major employers, at the same time accepting large payments from those employers for various ostensible purposes.

Separately, after Shorten went into politics, a labour hire company paid most of the salary of his campaign director in the 2007 election campaign, a fact which Shorten failed to declare to the AEC until days before his appearance at the Commission.

Do these stack up as "union rorts, rackets and rip-offs" to match the Prime Minister's current three word slogan? No, there's nothing criminal here, no fraud or theft or extortion. There is, however, a strange set of ethics at play, which is worth a closer look.

A lawyer's response to a layman's test

The AEC non-disclosure barely justifies a raised eyebrow let alone a royal commission. All political parties are guilty of disclosure failures, and the fact that a company was providing a benefit to a politician in the presumed hope that he'd think kindly of it if and when he ever achieved power is hardly exceptional. It's entirely whiffy, but no more than a million other examples of money chasing patronage in Australian politics. That's the system we've built.

What went on while Shorten was running the AWU is rather more interesting. It's exemplified by a deal the union struck in 2005 with Thiess John Holland, which was building the EastLink tollway in Melbourne.

Shorten negotiated a workplace agreement which saved the company millions and accelerated the project. In a side deal, Thiess agreed to pay the AWU $100,000 a year for three years. The union issued invoices for this money, for advertising, training and events including a union ball.

There is a question over to what extent if at all these services were actually provided, which Shorten furiously denied in the Commission, but that isn't actually the point. Assume Thiess did pay $300,000 for things it didn't need, or assume it just handed the cash over and got nothing in return. Same result either way. The critical point is that the AWU's members were not told about nor asked to approve this side deal.

Similarly, glass maker ACI paid $500,000 to the AWU over three years while negotiating an enterprise agreement with Shorten. This was ostensibly in return for "professional fees" and "training", whatever that may have been. Again, the workers were not troubled with the knowledge of this side deal.

Another interesting case was that

of building company Winslow, which paid the AWU dues of its employees for many years under a deal struck by Shorten.

Shorten has been on the front foot in and out of the witness box defending the propriety of these deals and rejecting any suggestion of a conflict of interest. In relation to Winslow, he said that "if the choice came down between someone being in the union and if their employer wanted to pay it as opposed to no one being in the union. then I have no problem with that." On doing sweet deals with employers, his defence is that they were favourable to AWU members.

When everyone's a winner how can there be a conflict of interest?

Well, I'll call it. Win-win is not the test of propriety for people who are placed in positions of absolute trust.

Union executives are analogous to company directors or trustees of super funds; they have been entrusted with the power to make decisions in the interests of others. Directors and trustees are burdened by the law with fiduciary duties, which are absolute duties to act in the best interests of those whose interests they are tasked with protecting, to not prefer their own interests in any circumstances, and to not ever place themselves in a position where their duties conflict with those interests.

Whether trade union leaders are also fiduciaries is a nice legal question; I have no doubt they should be. Their job - their only job - is to advance and protect the interests of their members. The sole reason unions exist is the reality that, otherwise, vulnerable workers with no individual bargaining power are prone to exploitation. The 7-Eleven scandal amply illustrates that (and they have a union! Evidently a useless one.)

What legitimate interest does a union have in soliciting money from employers with whom it is negotiating on its members' behalf? Its real interest, no doubt, is in funding its own operations and perhaps pursuing broader political purposes. The money comes in very handy, I'm sure.

If a union is negotiating a deal for its members and, on the side, is also secretly negotiating to be paid money by the employer, then the union has a conflict of interest. The conflict lies between its interest in receiving the money and the explicit or implicit obligations it undertakes in return (please let's not pretend that there are ever no strings attached), and the interests of its members. Yes, it may well be a win-win and everybody's happy. But conflicts, by their nature, corrupt; if the employer was saying or hinting that, if the union pushed just a little less hard or promised industrial peace, a cash bonanza may be coming its way, then how could the workers ever be confident that their specific interests (as opposed to the union's more global interests) had been honestly and fearlessly pursued?

The only way to cure a conflict of interest is to fully disclose all relevant facts and obtain informed consent. If Shorten believed the side deals he was doing were entirely beneficial to his members, then all he had to do was tell them and get their consent. That clearly never occurred to him.

The really troubling aspect of all this is that Shorten genuinely seems to see no problem at all.

Michael Bradley is the managing partner of Marque Lawyers, a boutique Sydney law firm.

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