Super fund governance is getting more publicity than ever lately, after APRA undertook a study into the persistent outperformance of the not-for-profit superannuation funds relative to the commercial retail funds. While the prudential regulator concluded governance was not the reason for the overall performance differences (and is embarking on other studies to determine what is behind it), super funds should nevertheless be prepared for a spotlight on their governance structures that is only going to intensify. As the $1 trillion superannuation industry continues to prosper, it will need to start demonstrating to the public, not just the regulators, how it is walking its talk on corporate governance.

Queensland University of Technology academic Natalie Gallery has long questioned some of the privileges afforded to super funds around transparency and accountability, particularly in regards to financial reporting. Gallery has written a number of papers demanding more disclosure requirements be brought to bear on super funds.

Transparency and accountability are the mantra of governance buffs, yet a super fund’s disclosure obligations to the public are far less strenuous than what is demanded of a public company. Defenders of the current disclosure requirements will argue super funds should not be likened to a public company because they are different entities serving different purposes.

Gallery agrees that while this is true, the gap in differences is closing. She argues that superannuation’s shift from a defined benefit footing with employer liability, to today’s defined contribution or accumulation landscape where the individual member wears the risk, coupled with the era of competition introduced by choice of fund, has raised similarities between public companies and super funds that didn’t exist when the Superannuation Industry (Supervision) Act was legislated in 1993. “The superannuation industry has transformed since then,” Gallery says, “but the legislation hasn’t.”

Gallery says super fund financial reporting is a key area that needs to be brought up to par. “The current information available to members is insufficient to provide for fully informed decision-making in a choice-of-fund environment.” But further to this, she argues that accountability needs to be measured in some fashion, and a means of doing this is in providing easily accessible and substantial financial information to the public. “These organisations are getting public benefits with a concessional tax of 15 per cent. They’re underwritten with public money, entrusted with the public’s money.

It’s the trustees’ duty to discharge of their responsibility by accounting for how they have used that money,” she says. “It’s in everyone’s interest for super funds to be more publicly scrutinised.” Gallery presented the argument in the National Accountant magazine earlier this year with fellow QUT academic Gerry Gallery, that accounting requirements for super funds are “piecemeal” and “not sustainable”. Consolidated reporting needs to be introduced. The practice of separating the corporate trustee financial accounts from the super fund accounting of investment performance is widespread. The article says annual reports provided to super fund members have no prescribed format, unlike concise company reports, and so introduces a platform for “biased reporting”.

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