Is the debate around independent directors joining industry funds losing its sizzle?
Back in November 2013, when the then assistant treasurer Arthur Sinodinos said he would tackle the issue, credence was given to the hysterical idea that the Coalition Government would seek to impose a majority of independent trustees onto industry funds.
Since then the position of industry funds and the Government has stealthily converged.
Josh Frydenburg, the new assistant treasurer, when speaking at a Financial Services Council breakfast in Sydney in April, conceded fund boards should not be denied the ability to maintain equal representation and these boards should only be “infused” with independent expertise.
So great is the change in tack that one suspects Frydenburg might have thought the issue is cursed with bad luck for new ministers – though his willingness to engage should be applauded; after Sinodinos gave his first FSC breakfast, he refused to talk to the press afterwards, while Frydenburg was genial.
Industry funds have been doing their bit to close the clash of beliefs. Energy Super recently appointed its first independent director and Local Government Super its first independent investment committee members. In the past year, seven out of 13 trustee appointments announced to the media were independents.
Of these seven, four were women, and some boards have reached several targets in one go, by choosing independents who are women with much needed legal or investment expertise.
On the surface industry funds look like they might have outwitted the government, but equally one could conclude that the government’s approach has scared boards into appointing independents so as to avoid any interference in their governance.
At the FSC breakfast last week, Frydenburg was less than convincing when answering the question of what evidence he has that independents improve governance. Notably, since the Sinodinos report on governance from November 2013, no great disaster has befallen industry funds, who as a bunch continue to outperform retails funds – though we all await the results of the investigation into what went on at HIP with interest. Frydenburg may well be tempted to park the issue, if only to spare himself the debate without an end on what an independent actually is.