The Governance Institute of Australia has pushed back against the Productivity Commission’s suggestion to impose extra regulation around the board governance of superannuation funds, calling instead for the creation of an industry-led body to develop such guidance.
In a submission to the Productivity Commission’s Superannuation: Assessing efficacy and competitiveness draft report, the Governance Institute of Australia — a professional membership association — shared the commission’s view that the regulation of super fund governance standards was important since members themselves had little voting rights or influence over board appointments.
However, the submission outlined that it did not support the commission’s “prescriptive” approach to board governance, proposing that a new body led by the superannuation industry should be created to develop guidance around governance of superannuation boards.
In particular, the institute resisted the draft report’s recommendation that the government require superannuation trustees to “use and disclose a process to assess, at least annually, their board’s performance relative to its objectives and the performance of individual directors” as well as maintain and publish a “skills matrix” of each board director.
“Governance Institute is a strong advocate for a non-prescriptive disclosure-based approach to governance.
“Our long-held belief is that the optimal solution to many governance issues in superannuation is to take a principles-based approach and establish a superannuation industry–led body to collectively develop guidance on governance matters,” the submission read.
Regarding board performance assessments, the institute said there was no “one-size-fits-all-approach” and that legislation might be appropriate for larger, mature, listed entities but end up being detrimental to smaller unlisted entities.
“While our members support such annual assessments, they would be reluctant to see annual board performance assessments legislated,” the submission said.
“We also have concerns about legislation requiring annual publication of the skills of individual directors,” the submission added.
“No one director on any board will have all the skills and experience required. What is important is that there is an appropriate balance of skills and experience across the whole board.
“Disclosure of individual director’s skills could also be open to misinterpretation by investors and fund members.”
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