The proposed changes to the composition of super fund boards are not evidence-based and contrary to international best practice, argues CareSuper.
Speaking at an Australian Institute of Superannuation Trustees (AIST) event in Sydney yesterday, CareSuper member director Cate Wood said the removal of ‘equal representation’ from the legislation is “not evidence-based decision-making”.
Under the government’s proposal, superannuation funds will be required to have one-third member representatives, one-third employer representatives, and one-third independent directors.
Chairing a panel discussion of not-for-profit super fund chairs, AIST chief executive Tom Garcia noted the concept of equal representation (of member and employer directors) is set to be “expunged” from the Superannuation Industry (Supervision) Act.
Ms Wood said it is a “serious matter to remove the rights of member and employer voice and representation at the table”.
“And given that there’s no evidence of [problematic] issues I think it is fascinating to take a third of the industry that has a set structure, has operated very well, and then take that away,” Ms Wood said.
AvSuper chair George Fishlock said he objected to being forced to “get rid of good, capable and competent people” in order to meet a legislative definition of independence.
“It’s hard enough to get the right people on the board in the first place,” Mr Fishlock said.
“Most chairmen would be delighted to get really good people on there and all of a sudden you have to push people out the door or you have to increase the numbers on your board.
“I don’t think that’s really going to improve poor governance,” he said.
UniSuper independent chair Chris Cuffe said his board would either have to include a fourth independent director or shrink its numbers in order to meet the new requirements.
Mr Cuffe pointed to “plenty of literature” that indicates that eight or nine members is the ideal for a superannuation board, and he questioned the efficiency of boards with as many as 16 directors.
“[In order to meet the requirements you might have to] shrink the member representative directors. And there’s a lot of politics involved in that.
“The size of the board is going to be an issue for the [superannuation] industry,” Mr Cuffe said.
Ms Wood agreed, adding that it does “not seem rational to force change”.
“It’s difficult for boards. We all as chairs will try and manage our succession planning, when directors are coming and likely to leave boards and what kind of skills you want.
“And the boards have been very effective at doing that. And they’ve taken a variety of approaches. I think there is no evidence that there is a problem with governance in that sector so I don’t quite understand the rationale,” Ms Wood said.