The SDA's Financial Warchest

Over the last two financial years the central office of the Shop Distributive and Allied Employees Association (SDA) made over 4.3 million dollars in profit. This is at a time when most unions have been losing money as they struggle with declining membership. Flipping through the asset listing on the SDA’s balance sheet, it’s hard to remember that this is a union for some of the lowest paid workers in the country, and not some large private hedge fund.

The SDA has always been a bit unique. Despite representing a largely young and mostly female workforce of checkout and retail workers, the union has been vocal within the Australian Labor Party campaigning on a conservative Christian platform against abortion and gay marriage. One of the original anti-communist unions in Australia, the SDA is also known for taking a non-combative negotiating approach when talking to businesses, winning the dubious honour of being the only union that has been praised by Eric Abetz.

More recently, the SDA has come under criticism for deals struck with major employers that appeared to be too soft on the companies involved, with workers losing penalty rates and overtime in exchange for minimal increases in their hourly pay. Fair Work Australia found that workers with more weekend and night shifts were actually worse off under these deals. Considering the whole purpose of a union is to gain better working conditions for its workers, this finding raised serious questions about the credibility of the SDA.

Despite the controversy the SDA has attracted over the last six months, it doesn’t seem to have effected their bottom line. The 4.3-million-dollar central office profit from the last 48 months came off revenue of just 18.3 million, giving the central office a profit ratio of over 22%. Most companies would kill for margins like that. To put these figures in perspective, the Construction Forestry Mining and Energy Union (CFMEU) central office posted a loss of $433,256 over the last two reported years, the Australian Workers Union (AWU) central office lost 1.36 million and even the Australian Nursing and Midwifery Foundation (ANMF), one of the only unions increasing in members made a small loss.

For a Not-for-Profit organization to be making profits like this is pretty strange. The basic long term financial principal for this type of organization is to break even, while ensuring you have enough money in the bank for a rainy day. While you want to save some money, overall your revenue should be close to matching your expenses to ensure you are doing as much as you can while at the same time not charging members more fees than you need to. The SDA central office doesn’t seem be run per these principles. In February 2015, the same financial year the national organization made a profit of over 4 million the SDA released a press release stating that they needed to increase their membership fees as their costs had gone up. You do have to wonder how those same members would have felt a couple of months later if they looked at the annual report of the national office. It’s not as if these profits were a one off either. The central office has built up an impressive amount of equity on its balance sheet; 26.7 million in term deposits, an 18.5 million-dollar portfolio of investment property, far more than any other union I could find. The below graph compares the net balance sheet position of some of the national offices of the major unions in Australia. As you can see, the SDA easily has more money than these four other unions combined.

In addition to the money held by the central office, the SDA has significant funds held by their state branches and other offices. The Victorian branch for example made its own profits of 1.56 and 2.37 million in financial years 2015 and 2014 respectively, and has over 30 million dollars in net assets. For NSW it’s harder to find up to date numbers as most financial activity is funnelled through the interestingly named SDA NSW Deductions Account Office, a separate entity that does not seem to have to report its financial statements under the Fair Work act. Accounts lodged as evidence during the Royal Commission into unions show the Deductions Account Office had 40 million dollars in net assets in 2013, and this amount could well have grown substantially since then, with the organization reporting a cash surplus of 2.7 million during the 2015 financial year under disclosure laws for politically related entities. When you add up the wealth of the various separate entities of the SDA, there is easily more than 100 million dollars that has been saved by the organisation.

The idea that the SDA has built this level of wealth while putting together soft wages deals with the likes of Coles, Woolworths and Hungry Jacks is distasteful. To put it another way, it means that a substantial portion of these same members’ union fees were going to buying term deposits for the SDA as opposed to genuine union expenses. Could the SDA have negotiated better deals if they had spent more money by employing more people? Would more representatives on the ground have allowed them to realize that their deals were disadvantageous to some workers before Fair Work Australia pointed it out to them? These are hypothetical questions, but reasonable given the events of the last six months. The SDA might argue that by building up profits they are ensuring the long-term life of the union, but most people joining a union would reasonably believe that their fees are going towards the running of the organisation, and not whatever empire building plan the union has in mind.

A couple of weeks ago, a rival to the SDA was announced, the Retail and Fast Food Workers Union. Explicit in their criticism of some of the SDA’s past practices, they are positioning themselves as a more progressive and combative alternative.  One of the main things they are campaigning on is the reinstatement of penalty rates for those workers that do not have them under SDA deals. While the SDA may not be particularly popular, trying to build a union at a time like this will be a difficult task. Union membership nationally has been declining, and the SDA are well entrenched at many large employers. You would imagine the new union will need a significant membership base before any of the larger companies agree to even talk to them. Whatever the SDA’s reasoning for building up their balance sheet to where it is now, one thing is clear: They have a significant war chest to see off this latest challenge.