The chief executive of the Financial Services Council (FSC) has been forced to defend the association's superannuation governance policy after the policy's interpretation of the independence of directors was publicly questioned.
FSC chief John Brogden yesterday released a statement in response to Industry Superannuation Network (ISN) claims that the FSC's new policy proposed to allow retail superannuation funds to appoint 'in-house' directors to their boards.
ISN claimed such a proposal "fails to address one of the major governance issues for retail super funds".
"The Financial Services Council's new governance policy fails the basic test of ensuring that their directors face no potential conflict of interest in terms of putting the interests of members first," ISN chief executive David Whiteley said.
ISN then labelled the FSC policy as having a "flawed conception of independent directors".
"The most significant governance challenge for retail fund directors is the conflict which exists between their duty to shareholders of the parent company versus the duty held by trustees to members of the fund," Whiteley said.
"While the FSC has recognised this conflict with respect to executive directors, it is silent on the similar conflict in duty that would exist for directors if they were directors of both the RSE (registrable superannuation entity) and a related-party service provider or parent entity."
Brogden labelled the criticism of the policy's definition of independence as uninformed.
"Our superannuation governance policy adopts ASX (Australian Securities Exchange) Corporate Governance Council, Corporations Act and APRA (Australian Prudential Regulation Authority) definitions of independence," he said in a statement.
"It uses the highest standard available in defining independence of a director from a super entity. There is no higher alternative.
"Our policy demands true independence from the company (and the super fund) in order to be an independent director.
"This is the definition used by leading listed companies to appoint independent directors and the definition APRA uses for banks and insurance companies."
He also responded to questions about the FSC's provision on conflicts.
"Our policy expressly prohibits multiple directorships where a director sits on competing public offer super fund boards," he said.
"This is designed to prevent directors from having conflicted directorships where funds compete for the same members - to do otherwise would be to allow Virgin and Qantas to share directors.
"This particular conflict cannot be managed, so we have sought to prohibit it as it is not covered in APRA's prudential standards for superannuation."
In March, the FSC announced its "Superannuation Corporate Governance Policy", which has resulted in the development of a new superannuation governance draft standard.
Under the FSC's policy, superannuation members would have access to "transparent information on" a fund's behaviour, such as proxy voting, environmental, social and corporate governance risks and structure, including independence of directors, chair and conflicts prohibition.
