Need for super fund balance
Industry funds have criticised the Government’s move to impose one-third independent directors on superannuation funds plus an independent chair but, as Mike Taylor reports, many funds have already moved.
It was eminently predictable that particular sections of the industry funds movement would express concern at last month's release of exposure draft legislation to alter the governance arrangements of superannuation funds entailing at least one-third independent directors and an independent chairman.
Given that most industry funds had agreed, under the auspices of the Australian Institute of Superannuation Trustees (AIST), that the so-called third-third-third approach was acceptable, it follows that what the critics of the Government's move are really talking about is the requirement for an independent chairman.
And this is understandable in circumstances where an examination of the make-up of the boards of many industry funds reveals that the chairmen are almost inevitably former union or employer representatives and cannot therefore be deemed to be "independent" in the sense that would be required under the Government's legislation.
As an example, the chair of Australia's largest industry fund is Heather Ridout who is described as an employer director and the former chief executive of the Australian Industry Group (AIG), which is the umbrella body for many of the employers who utilise AustralianSuper as a default fund.
As well, Media Super is chaired by Gerard Noonan, who is described as being a nominee of the trade union covering journalists, the Media Entertainment and Arts Alliance (MEAA) and who has also been president of the AIST.
But, equally, the chairman of Cbus is former Victorian Labor Premier, Steve Bracks, who might arguably be deemed independent despite his affiliations.
The same applies to MTAA Super which has another former Victoria Labor Premier, John Brumby as its "independent chair". Just as importantly, the chairman of REST, Rohan Jeffs, is currently a solicitor and an adjunct professor at the University of Queensland, but he was previously a senior executive at big retailer Woolworths, while the chair of Care Super, Cate Wood, is the former assistant secretary of the Victorian branch of the Australian Services Union.
This compares to the chair of HESTA, Angela Emslie who, while having conducted a consultancy business within the health services sector, can probably genuinely be viewed as being an independent director.
And so it goes. Some industry funds have obviously independent chairs, others have chairs which are arguably independent but philosophically aligned and still others have chairs who are clearly not independent and who have been appointed via their industrial relations affiliations.
And, objectively, appointment to the chairmanship of many superannuation funds can prove a remunerative proposition for people who retire from positions within employer organisations or trade unions with most such positions carrying six figure salaries.
Industry Super Australia (ISA) and the AIST were last month right when they suggested that their existing governance arrangements had not acted as an impediment to the generation of better than average investment returns for members. On all the available evidence, industry funds have, on average, outperformed their retail counterparts over the past 15 years.
But the Government's move has not been predicated upon relative investment performance, it has been based on addressing the negative perception attaching to reports around issues such as multiple fund directorships and industrial relations expediency.
While it is these days difficult to identify people undertaking multiple fund directorships, this has not always been the case and this history carries its own consequence.
The industry funds movement has known for at least the past three years that the current Coalition Government was likely to pursue such a move which is why groups such as the AIST have seriously workshopped the issue and why they landed on the third-third-third scenario.
In these circumstances, it is going to be difficult to conduct a campaign around the issue of independent chairmen/women when, patently, such roles should not be viewed as post-retirement sinecures for employer and or union representatives.
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