Governance legislation will fail objective: ISA

The Federal Government's legislation aimed at imposing one-third independent directors on superannuation fund boards, including an independent chairman, will not achieve its objective of injecting diversity, according to Industry Super Australia (ISA).

ISA chief executive, David Whiteley has used his opening address to the Senate Committee reviewing the legislation to claim that the current make-up of industry fund boards delivers greater diversity than would be delivered under the Government's changes.

"One of the government's objectives is to better align fund governance with the Australian Securities Exchange (ASX) approach," he said.

"However, the prescriptive approach of the Bill and unprecedented powers proposed for the Australian Prudential Regulation Authority (APRA) are inconsistent with the principles based approach of the ASX."

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Whiteley claimed that, equally inconsistent, was the proposed mandating that at least one third of trustees should be independent.

"We agree with the AICD and Governance Institute that mandating a governance model is inferior to a principle based approach, a conclusion reached by Justice Owens following the HIH Royal Commission," he said.

"To lock the super industry into a rigid model is unnecessary and counter to governance principles in other APRA-regulated entities such as banks."

Whiteley said the bill was intended to build diversity on boards, but would do the opposite.

"Currently industry super funds directors are drawn from all walks of life, but by virtue of an association with a union or employer body deemed to be from the same gene pool. Yet four in five directors from bank owned funds are finance industry insiders," he claimed.