Industry funds have sought to counter the Federal Government’s legislative moves to change their governance arrangements claiming not for profit funds “have not been at the centre of the recent financial planning scandals that have plagued the banks”.
In a submission responding to the Government’s release of exposure draft legislation on the changes, the Australian Institute of Superannuation Trustees (AIST) said not for profit funds had also not experienced any prudential failures or losses.
“Yet these proposed changes will have a bigger impact on equal representation boards than the for-profit retail sector,” the submission said.
As well, the submission argues strongly against the legislation imposition of independent chairs to superannuation fund boards, claiming that chairmen should be selected by the super fund boards and be the best person for the job.
“AIST submits that these changes will impose significant costs and introduce risks to the industry for no good reason,” it said.
“The changes also take Australia in the opposite direction to the rest of the world by removing member representation from boards of occupational-based retirement savings funds.”
The submission claimed the proposed changes would do nothing to “address the real and demonstrated conflicts associated with board structures in the retail superannuation sector where it will still be possible for the staff of a bank (dedicated to the profitability of their employer) to form the majority of the bank superannuation fund board, and for the ‘independent’ directors to be the same ‘independent’ directors that sit on other boards of the same banking institution, where again they are responsible for maximising profits for the bank’s shareholders”.
“AIST disputes the need for change in light of the existing prudential framework and the powers available to the regulators to rectify or address any issues that arise,” it said.
“With the changes, APRA is granted powers that should only lie with the legislature in the proposed package of reforms, as well as powers that are significantly broader than those available to the in the regulation of other APRA-regulated industries.”
The submission said the AIST was concerned at the level of board disruption that was proposed within a short time-frame and therefore cautioned against such significant changes being implemented in haste.
“The impact on decision-making and boardroom culture poses a risk to the best interest of members. Coupled with the proposed removal of the two-thirds voting rule, AIST believes that good governance practices will be diminished as a result, with members bearing the cost,” it said.
