The Productivity Commissions recommendation that all superannuation funds have an independent chairman and board seems reasonable, yet industry funds are vehemently opposed to it.Meanwhile the industry funds, on average, clearly outperform their retail opposition, but the Liberal Party has been explicit in its desire to undermine them and lift the retail funds market share.

As the saying goes, just because youre paranoid, it doesnt mean youre not being followed. Paranoia and conspiracy theories exist on both sides of the great superannuation divide.

In the meantime, it has taken the Productivity Commissions draft report to highlight the bigger failings within our $2.6 trillion superannuation system: the billions of dollars lost by people having multiple accounts with multiple fees and the billions more foregone by people either dumped or sold into dud, chronically under-performing funds that dud, chronically under-performing regulators have allowed to merrily roll along.

Fixing those two very real problems has tended to take a backseat to the war between industry funds and the Liberal Party and retail funds.

Why has the government targeted the well-performed industry sector? Conspiracy theorists on the industry side, when not shooting advertisements to scare kids about foxes getting at their pet chooks, might suggest on a background basis that its the Liberal Party looking after its supporters at the Big End of Town, citing the governments extreme reluctance to hold the current financial services Royal Commission as further evidence of such behaviour. And theres ideological fervour at work: a dislike of mutuals with their whiff of sulphurous socialism when capitalism is Gods chosen plan.

Then theres the conspiracy theory within Liberal ranks: the industry funds are funding the Labor Party, one way or another funnelling millions out of superannuation into the unions bank accounts and then into Labors war chest. Thus, weakening the industry funds will weaken the political opposition, ensuring longer possession of the keys to the Lodge the entire point of politics.

That provides a motive for the governments determination to reduce union-nominated directors to a minority position on superannuation fund boards by mandating an independent chairman and a majority of non-union directors. There are those within the Liberal Party who believe that would stop or reduce money finding its way to Labor.

The thing about conspiracy theories is that they dont have to be true to be fervently believed. Perception is more powerful than reality.

So whats wrong with an independent chairman, with neither union or employer bodies being able to control a fund? The Productivity Commission thinks its a good idea - basic governance.

Industry funds fear their enemies are playing a longer game with a baser motive: demutualisation.

It is easy to imagine the scenario because it has been played out so many times before.

A rich mutual finds itself with ambitious management and a majority of board members open to the siren song of investment bankers selling demutualisation. Every mutual senior executive and board member knows the immediate and most obvious impact of demutualisation is massive pay rises for those at the top.

Whether its a mutual like AMP, St George and NIB, or a government corporation such as Medibank, the CBA and Queensland Rail, the gravy flows uphill fast. The chairman and CEO remuneration skyrocket.

And with the board and CEO on side, its not hard to sell demutualisation and a stock market listing to the membership. It looks like money for jam, the existing membership gifted shares. The view of one mutual stalwart that theyre selling off the legacy of the dead and the inheritance of the unborn doesnt get much of a look in when theres a fabulous pot of money to be distributed to all.

With demutualisation comes a culture change. There are shareholders to be rewarded, not just members to be looked after, and the profit motive drives a big number bonus culture that in turn pushes sales with some of the end results being detailed by Hayne, Orr, Hodge & Co.

Are industry funds funding the Labor Party? Its highly likely well see that question explored by the Royal Commission it was the hope of finding some industry fund dirty linen that finally nudged the government over the line on establishing the thing after so much political capital was wasted on resisting what became inevitable.

Whatever the motives, pursuit of the industry funds and doing the banks wealth management bidding has not been a career highlight for any of the ministers with that job.

Arthur Sinodinos involvement in the Obeids water company was the former-bankers lowest political moment, but in my opinion, his attempts to neuter Labors Future of Financial Advice reforms would rank second.

Sinodinos successor, former-banker Josh Frydenberg, made taking on the industry funds his first priority when starting the job. As Fairfax Media reported (http://www.afr.com/news/policy/industrial-relations/frydenberg-plans-to-clip-union-wings-on-super-funds-20150118-12sxru ) at the time:

“Unions have been put on notice that their influence over Australia’s $1.9 trillion retirement savings industry will be dramatically scaled back under new Assistant Treasurer Josh Frydenberg, who plans to put superannuation governance and competition at the centre of his policy agenda.”

Given what has subsequently been discovered, that doesnt look so flash in Joshs rear view mirror.

Ditto his successor in the role, former-banker Kelly ODwyer. She might have had a worse period in politics than the weekend she spent denying opposing the Royal Commission was a mistake, but I dont remember it.

Yet the politics of the industry funds is not clear cut. As I noted elsewhere (https://au.finance.yahoo.com/news/just-what-the-banks-dont-need-right-now-054227519.html ) when Wolf Creek 3: The Henhouse was released, the advertisement had been signed off by the full Industry Super Australia board chaired by former NSW Liberal leader Peter Collins and including the employer representatives of Australian Industry Group.

AIG chief executive Innes Willox was Alexander Downers chief of staff when he was foreign minister. Willox also sits on the board of our biggest super fund and key ISA member, AustralianSuper.

As the Productivity Commission has demonstrated, there are dud industry, retail and public sector funds. Its also shown that, on average, the industry funds have clearly superior outcomes for members and would dominate any best of breed list.

Unless, of course, youre given to conspiracies.

Michael Pascoe is a correspondent with The New Daily. He was previously a senior columnist with Fairfax.