The Australian Institute of Superannuation Trustees (AIST) and the Financial Services Council (FSC) are on opposite ends of the proposed legislation to change the composition of not-for-profit super boards.
While the FSC welcomed the Superannuation Legislation Amendment (Trustee Governance) Bill 2015 introduced to Parliament on Wednesday by Assistant Treasurer, Josh Frydenberg, AIST urged all parliamentarians to reject the proposal.
AIST executive manager, governance, Eva Scheerlinck, said the bill was unwarranted, not supported by evidence and would dilute the voice of member representation on the boards of the top-performing super funds.
“This is a bill that rips the heart of the consumer voice out of superannuation fund boards,” she said,
“There is no evidence that these changes will improve members’ returns. Instead they will disrupt the consumer focused model that has delivered superior performance.”
However, the FSC chief executive, Sally Loane said the proposal was in the best interest of consumers and will deliver lower fees to working Australians.
“There is no downside for consumers for their super funds to include a proportion of independent directors with diverse skills on their boards,” Loane said.
“Legislation currently denies Australians joining superannuation funds which have lower fees than some default funds.”
As part of the proposed changes, super fund boards will be required to have a minimum of one-third independent directors on their boards, including an independent chair.
Speaking at Parliament on Wednesday, Frydenberg said “Having independent directors on boards is consistent with international best practice on corporate governance.”
The Assistant Treasurer cited that in Canada, it is recommended the board of directors of every corporation should be constituted with a majority of individuals who qualify as unrelated directors, and in the UK it is recommended that at least half the board should comprise of non-executive directors determined by the board to be independent.
However, Scheerlinck noted that international best practice guidelines such as those provided by the OECD recognised the importance of significant member representation on boards of pension funds, adding that the track record of representative trustee directors was far superior to that of independent directors in the corporate world.
“This bill demonstrates the government is delivering on its election commitment to align superannuation governance with ASX-listed company corporate governance principles and elevates superannuation to a comparative standard that other APRA-regulated entities are required to meet,” Frydenberg said.
“The bill mandates the need for independent directors to ensure improved member outcomes for all superannuation funds members.”
