The members of not-for-profit superannuation funds should be able to vote for fund directors, says the Governance Institute of Australia.
“There’s been a great deal of controversy around how many independent directors should be on the board of a NFP [not-for-profit] super fund and what constitutes ‘independence’, but that debate could be resolved if members were simply granted the right to elect directors of their choice”, said Governance Institute chief executive Steven Burrell.
The Governance Institute has made this argument in a submission to the Fraser Governance Review, a review of super fund governance commissioned by Industry Super Australia and AIST following moves by the Government to legislate changes to the governance of large super funds.
“Good fund governance starts with the basic principle that members must have a voice,” said Mr Burrell.
“Yet at the moment, members of most funds have no say in who represents their interests. That is currently decided by third parties.”
Mr Burrell said, given members of other not-for-profit organisations have “long” been able to vote for directors, “there’s no reason why NFP super fund members should not have the same rights in view of the growing size and importance of the retirement savings industry.”
“With Australian superannuation now comprising the fourth largest pool of savings in the world and rising, members have a significant financial interest in their funds and every reason to be engaged in their investment.”
“If, as the announcement of the Fraser Review rightly points out, a key distinguishing feature of NFP funds is ‘the over-riding primacy of members’ interests’, there can be no basis for continuing to deny fund members the right to vote directly for directors they believe will act in their best interests.”
The Governance Institute also wants the governance code being developed by the Fraser Review to go further than only issues of director independence and board composition, with a “wide-ranging fund governance code similar to the ASX Corporate Governance Council’s principles and recommendations applying to listed entities” along with disclosure obligations.
“NFP superannuation funds rightly claim that their ‘members come first’. The challenge for the Fraser Review is to introduce the governance mechanisms which genuinely make this a reality,” said Mr Burrell.
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