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Super trustee boards need to define which conflicts of interest they are willing to tolerate before they implement their management and disclosure, according to the Australian Prudential Regulation Authority’s (APRA’s) general manager of the specialised institutions division, Stephen Glenfield.
Speaking at the Australian Institute of Super Trustee’s fund governance conference, Glenfield said trustee boards needed to establish what board members can and can’t do in their role as a first step of defining conflicts of interest.
“The [APRA] policy is not just about ‘how I deal with a conflict when I find it’. You should also be thinking about ‘[which] conflicts is the board willing to have?’ Are you willing to let board members be from service providers? Are you willing to let directors make a profit from something?” he asked.
APRA expects that super funds identify and manage any conflicts of interest in regards to trustee duties, and they can’t do that unless they define what those conflicts are, Glenfield said.
There also needs to be a test to determine the suitability of directors before they are appointed, he said.
In a later session at the conference, Simon Longstaff, executive director of Saint James Ethics Centre, said the systems, policies and structures of a super fund need to be assessed so that they don’t send messages to members that are at odds with what members actually think.
Longstaff warned that if trustee boards did not consistently act within a framework of values and principles, the culture of the company would become selfish and systemic risk would “go through the roof”.
The role of corporate governance was to support the conditions in which members in an organisation consistently made decisions that were both good and right — whether it concerned the creation of capital or the appointment of mandates, Longstaff said.
Fund managers also need to be far more diligent as those who act on behalf of investors, to ensure that there is a proper pricing of systemic risk and opportunity, rather than just leaving it to management, Longstaff said.
“When you, as trustees, insist that those who receive mandates must ask the questions, and must demonstrate their capacity to make informed decisions about the full range of issues relevant to the pricing of risk and opportunity, then there will be change,” he said.
