The Industry Super Network (ISN) and the Financial Services Council (FSC) are at loggerheads over FSC draft governance guidelines on the definition of independent directors on super funds operated by banks and insurers.
ISN chief executive David Whiteley has told I&T news in a telephone interview that the FSC regulations, which he claims would allow a bank director to serve on the board of a super fund operated by the same bank, are “untenable” and “not a credible definition of an independent director.”
“My understanding of their proposal is that a director of a parent entity could be appointed to the fund itself and under their proposal would be defined as independent,” said Whiteley.
“There would be a clear conflict of interest. As a director of the bank or parent company they would have a legal obligation to maximise shareholder returns and, of course, as a trustee director of a super fund, they would have an obligation to maximise returns to members, and that is a conflict of duties that is utterly irreconcilable.”
The FSC has hit back at the ISN, claiming the criticism is “uninformed and incorrect” and that the policy is consistent with ASX, APRA and Corporations Act definitions of independence.
The FSC says that under its policy, a person could not become an independent director where he or she held a substantial holding in the super fund, had been employed in an executive capacity in the past three years or was a “material supplier or contractor” to the super fund.
“Our policy demands true independence from the company (and the super fund) in order to be an independent director,” said a statement from FSA chief executive John Brogden.
“Our policy expressly prohibits multiple directorships where a director sits on competing public super fund boards.
“This is designed to prevent directors from having conflicted directorships where funds compete for the same members – to do otherwise would be to allow Virgin and Qantas to share directors.”
The ISN has enlisted the support of Professor Thomas Clarke, from the UTS Centre for Corporate Governance, who has issued a statement saying there is “substance to these governance concerns”.
“It is clear that the ISN is right to question the viability of the FSC Superannuation Governance Policy on the grounds of a lack of definition of what constitutes an independent director of a superannuation fund,” Professor Clarke’s statement said.
The FSA, for its part, says it welcomes discussion on the draft standard announced in March this year, and has asked people interested in the issue to visit its website.