“The disclosure of executive pay is different for companies because when people invest in a company, one way they can make sure the board is investing in its staff is to know how they are rewarding their performance – they want to make sure that reward structure is in alignment with the shareholders’ [return].” She says members of super funds should not be compared with shareholders in terms of the level of knowledge they require. It is sufficient for a member to know that the super fund is doing its work properly by checking whether the fund is consistently meeting the expectations it sets out in its various investment options, and is sticking to the management costs it asks of members.

Chief executive of $30 billion industry fund AustralianSuper, Ian Silk, also says current super fund financial disclosure is sufficient because members know exactly how much they’re paying, and that’s what matters. “With all industry funds you know how much you’re paying: you’re paying a clear administration cost and an identifiable basis point amount for investment costs, depending on what investment option you’re in,” he says. “This is important in a choice of fund environment because costs are a critical factor in making judgements between superannuation providers.” The accuracy of reported fees was disputed in a study released last month by superannuation consultancy Chant West Financial Services.

Covered in-depth elsewhere this issue, the study found that across 35 major super funds of all four fund types, there was much inconsistency in disclosure of investment performance fees. Furthermore, “there is almost universal non-disclosure of underlying manager fees (base fees and performance fees) in fund-of-fund type investments (private equity, infrastructure and hedge funds).” “This can materially understate the true cost of these investments and the true cost of a fund as well,” the report says.

The prudential regulator has undertaken its own review of governance structures of all superannuation funds, compiling the most comprehensive data to date on the make-up of super fund boards. It found that explicit disclosure to members of service providers’ fees was not commonplace. Retail funds are among the most likely to explicitly state fees, with around 75 per cent of funds disclosing them, while corporate funds were the least likely to disclose this, with around 70 per cent of corporate funds often not disclosing.

APRA says its study had sought to ascertain whether governance could be a reason for the “systematic difference” in super fund returns between the four super fund sectors: corporate, public sector, retail and industry. Among other structural problems, APRA’s study revealed a high percentage of trustees with “one or more associations” with a fund service provider. Retail funds had the highest prevalence of trustees – 60 per cent – with such an association. This was double that of corporate fund boards, and almost triple the level of service provider associates to be found on public sector and industry fund boards. SuperRatings managing director, Jeff Bresnahan, says conflict of interest is one of the persistent problems of super fund governance. In the six years SuperRatings has been operating,

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