In her recent speech to the Conference of Major Superannuation Funds, APRA Deputy Chairman, Helen Rowell, pulled no punches in describing APRA’s observations on governance practices in the superannuation industry.

 

APRA’s view is that because “trustees today are running more complex financial service businesses, (they) need to adopt the sound governance and business management practices that are expected of such businesses….”

 

There was no mistaking APRA’s concerns with the industry’s poor governance standards.

 

While there are some very good practices, APRA’s experience is that there is room for improvement for both retail (i.e. for-profit) and industry/employer (i.e. not-for-profit) funds. APRA’s view is that some board practices fail to live up to expected standards of good governance.

 

A particular area of focus for APRA is the trustees’ practices for board selection, appointment and renewal.

 

Not all trustees have clear policies or approaches on key areas, such as:

 

• the skills and capabilities that are needed on the board, and

 

• how to ensure they get the right balance between experience and renewal on the board

 

APRA is encouraging all boards and nominating bodies:

 

• to look broadly for the potential pool of director candidates, and

 

• to strengthen board performance assessment and follow up actions to ensure that all directors are adding value to board decision-making.

 

At an operational level, APRA has observed laxity of governance and oversight practices by boards in relation to their business operations. In APRA’s experience, board and fund expenditure and related party arrangements are a particular concern. These stem from poor processes and board oversight.

 

APRA’s assessment is consistent with the observations of Guerdon Associates. A good place to start would be for superannuation funds to commission independent assistance in evaluating individual director as well as overall board performance. While this can be a difficult process for some boards and their members, it would be a good first step to ensure superannuation members’ interests come first.

 

Helen Rowell’s speech (see HERE) is a must-read for all directors of superannuation fund trustees

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