The Governance Institute of Australia has called on the Federal Government to abandon legislation changing the governance requirements of large superannuation funds.
Legislation is currently before the Parliament which, if passed, would require large superannuation funds to have at least one-third independent directors and an independent chair, among other changes.
The Institute has told a Senate Committee conducting an inquiry into the bill that “a legislative solution with prescriptive criteria for director independence will have unintended consequences, is unlikely to be effective and should be replaced by a principles-based approach to assessing ‘independence’ similar to that applying to listed companies under the ASX Corporate Governance Council’s principles and recommendations.”
“Superannuation governance is in vital need of reform and we support moves to increase the number of independent directors on superannuation trustee boards,” said Steven Burrell, the Governance Institute chief executive.
“However, the blunt club of legislation is not the way to do it.”
“We believe a better solution is to take the principles-based approach recommended by the Cooper Review and establish a superannuation industry-led body to collectively develop guidance on governance matters, similar to the ASX Council’s principles and recommendations.”
“The guidance would incorporate indicators of director independence and it would be up to each fund’s board to assess its non-executive directors against the criteria, then decide if there are any conflicts affecting their independent judgement and ability to act in the best interests of fund members.”
Mr Burrell said due to the problems with defining independence in the legislation, it should not proceed “in its current form.”
He went on to says that the focus should be on the best interests of fund members, not “political outcomes.”
“Public company shareholders have long had the right to vote in directors of their choice and hold them accountable with their vote.”
“It’s high time fund members have the same rights to decide whether a director is independent and acting in their best interests, particularly in view of the growing size and importance of the retirement savings industry.”
“Good fund governance should seek to empower members and give them a voice.”
The Senate Standing Committees on Economics is due to give its report on the Superannuation Legislation Amendment (Trustee Governance) Bill 2015 on the 9th of November, the next sitting day of the Senate.
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