Given APRA’s particular concern with the governance of superannuation fund trustees (see HERE), it is timely for the boards of fund trustees to check what APRA expects in respect of governance and remuneration.

 

APRA’s Prudential Standard SPS510 provides what it considers to be the minimum foundations for good governance. Yet Deputy Chairman, Helen Rowell’s speech to the Conference of Major Superannuation Funds indicated that APRA continues to find a laxity in meeting these standards that is not in members’ interests – a matter that should be of significant concern for directors (and members) of fund trustees, both retail and industry.

 

So, here’s a quick checklist that will assist superannuation funds to be in a better position for the inevitable visit by APRA.

 

#	Does the Board………….?	✓/✗
1	Have a formal charter setting out the roles and responsibilities of the board?
2	Clearly set out and document the authority it has delegated to management?
3	Have mechanisms to monitor the exercise of the delegated authority?
4	Have the full range of skills needed for the effective and prudent operation of the trustee’s business of managing the fund?
5	Have processes to ensure that individual directors have the necessary skills to effectively contribute to board deliberations and processes?
6	Have processes to ensure individual directors understand the legal, prudential and other risks of the business?
7	Engage external experts and consultants for advice in respect of these issues?
8	Have procedures for assessing, at least annually, its performance against its objectives?
9	Have a procedure for assessing, at least annually, the performance of individual directors?
10	Have a formal policy on board renewal?
11	Apply the policy on renewing itself to ensure it is open to new ideas and independent thinking?
12	Ensure the policy includes a process for appointing and removing directors?
Remuneration Policy
13	Is there a documented Remuneration Policy approved by the Board?
14	Does the Policy set out the remuneration objectives, the structure, and the performance-based remuneration arrangements of the trustee?
15	Are the performance-based components of remuneration designed to encourage behavior that protects member interests, supports the financial soundness of the trustee, and its risk management framework?
16	Are the performance-based arrangements aligned with prudent risk-taking, are risk-adjusted and tied to the business timeframes?
17	Does the Remuneration Policy set out who must be covered?
18	Does the Remuneration Policy form part of the trustee’s risk management framework? How?
Board Remuneration Committee
19	Does the trustee have a Board Remuneration Committee that meets all of the requirements of SPS510?
20	Does the Committee have at least three members who are directors, and not executives of the trustee?
21	Does the Committee regularly review the Remuneration Policy for its effectiveness and compliance with SPS510?
22	Is the Committee responsible for the remuneration of the people covered by the Policy and make annual recommendations to the Board in respect of their remuneration?
23	Does the Remuneration Committee have free access to risk and financial control personnel and other parties in doing its role?
24	Does the Committee have the power to engage third party experts who are independent?
25	If the trustee does not have its own Remuneration Committee but uses that of the group, what has the trustee board done to ensure it meets the requirements of SPS510?

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