The Financial Services Council (FSC) has released a draft version of its superannuation governance policy designed to ensure best practice standards among fund trustees and improve operational transparency for fund members.
"The draft standard builds upon APRA's (Australian Prudential Regulation Authority) prudential standards and delivers on our commitment to develop a higher mandatory benchmark for FSC superannuation providers," FSC chief executive John Brogden said.
Under the proposed policy, FSC members will have to comply with a series of specified criteria covering areas such as independence, conflicts of interest, and environmental, social and governance (ESG).
In regard to independence, the majority of the directors of the board of an FSC member licensee must be independent. In addition the chair of the board must also be independent and a quorum made up of a majority of independent directors must be present before board proceedings can take place.
The standard also provides a definition of independence that incorporates rules such as a director can't have a substantial shareholding of the organisation, the director cannot be a material supplier, and the director must not have been employed in an executive capacity in the preceding three years.
Directors will also no longer be able to have multiple directorships across multiple boards. This stipulation has been included to specifically address situations where an individual holds directorships in more than one registrable superannuation entity operating in an identical market.
Another proposed requirement is for an ESG policy be developed for MySuper investment options.
To satisfy this condition, FSC members must consider: how the fund will consider ESG issues in its investment decisions, how the fund will monitor its ESG exposure across its investment portfolio, how the fund will act on ESG risks, and how the fund will report actions over an ESG issue to its members.
While not included in the draft superannuation governance policy, the industry body has also extended its Standard 13 covering proxy voting to apply to superannuation entities. Until now this standard was only applicable to fund managers.
It means super fund members of the FSC will in the future have to disclose their proxy voting records on Australian equities.
"This standard, which has been released for consultation today, is a first for the industry in providing clarity and transparency on how proxy voting by fund managers or super funds on all Australian-listed company resolutions should be disclosed," Brogden said.
"We expect this enhanced reporting requirement will result in better quality dialogue between listed companies and institutional investors."
Members have two months to provide the FSC with feedback on the draft standards.
The governance policy will be come binding upon all FSC members as at 1 July 2013.
