The Financial Services Council (FSC) has asked its retail superannuation fund members to have a majority of independent directors on their boards by the end of this financial year.
The FSC defines independence as an individual not employed by the fund, its associated companies and material service providers either now or in the previous three years.
The target follows statements made by the new assistant treasurer Josh Frydenburg at the weekend, confirming the government will push ahead on regulations forcing industry funds to accept a greater number of independent directors.
Andrew Bragg, director of policy at the FSC, said: “Under our super governance policy which applies to our members in this financial year, they have to have a majority of independent directors. Independent directors are not employees of the company.”
He welcomed government reform in this area and criticised the policy of some funds in labelling trustees as independent who had historical links with the fund.
“You cannot be employed under the old mates act. You cannot leave Westpac or Australian Super today and come back to tomorrow as an independent. That is absurd.”
He based the logic of the change on matching ASX governance rules. “The suggestion that super funds would be the only part of the economy, where the board is essential central to the function, not to have independent directors is absurd and anachronistic.”
Bragg accepted there would need to be a transition period for funds with little or no independent trustee directors.
“We would support a reasonable transition period, you cannot just kick everyone off the board and start from scratch tomorrow.”
He added that within this model there would still be a place for employer and member representatives on the board.