Big changes for superannuation funds on remuneration disclosure and trustee independence
12/03/2012
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The Australian Financial Services Council (FSC) represents and sets the governance standards for its member companies from the retail and corporate superannuation sectors (not industry funds). On 6 March 2012 the FSC released its policy on superannuation governance (see HERE), but also the original Cooper review recommendations (for example, see the part on trustee governance HERE).

The policy will form the basis for new mandatory standards on superannuation governance for the FSC’s member companies. These will commence at the same time as MySuper and APRA’s new prudential standards for superannuation funds on 1 July 2013 (see HERE).

The FSC’s new policy will require that funds:

  • have an independent chairman and a majority of independent directors;
  • disclose remuneration of their directors and senior management; ban multiple and competing superannuation fund directorships; and
  • introduce mandatory policies on proxy voting and environmental, social and governance matters.

The most significant change is the requirement for a board to have a majority of independent directors. This will have an impact, because while some retail funds already comply with this standard, many do not.

The FSC reforms also prohibit multiple directorships of super funds. While many would consider it unacceptable for a person to sit on the board of two competing super funds this is what happens, particuarly for “industry” superannaution funds.

In addition the policy requires director and senior management remuneration to be disclosed where it is paid from the superannuation fund.  The policy does not prescribe the standard or disclosure, although many will probably follow the standard for listed companies.

The policy also requires trustees to develop and publicly disclose a proxy voting policy and publish their Australian proxy voting record.

Industry superannuation funds are not governed by this policy. As the Cooper review noted, many industry fund boards do not have any independent directors. The government’s Cooper review recommended the end of “equal representation” of employee and employer groups on super fund boards. It proposed that one-third of directors be independent. The FSC policy goes further and requires a majority of independent directors to reflect contemporary best practice. For the moment industry funds will most likely just comply with the minimum regulatory standards policed by APRA. These allow the board not to be independent, and conflicts of interest to be maintained.

However, APRA does propose that SPS 510 (the new standard) require the superannuation fund’s remuneration policy to be published in the public section of each fund’s web site (see HERE). “Policy” does not mean that actual remuneration levels are to be disclosed.

A separate body, the Australian Institute of Superannuation Trustees, which represents the not-for-profit superannuation sector, covering industry, corporate and public sector superannuation funds, supports disclosure of trustee remuneration in $50,000 bands. That’s not much help as most would be in band 1. It also harks back to corporate disclosures of two decades ago, which have since been superseded.

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