Chairs of industry funds have reacted with pragmatism to the Government’s move to enforce one third of their boards to be independent and to have an independent chair.
Many have already anticipated the change in legislation by hiring their first or second ever independent trustees with the explicit intention of filling skills on their board.
As such funds spoken to over the last three days do not foresee the transition from July 1, 2016 to July 1, 2019 as being difficult, though several have pointed out the illogic of the government’s position and the double standards with regards to retail funds.
Bruce Hartnett, chair of VicSuper, said: “The time frame required for the change will enable progressive implementation without adversely affecting the culture of the board and the collegiate environment at our board table.”
He foresaw the additional costs as “negligible” as any new board member would be appointed on the same “modest” emoluments as current directors.
“We look forward to the definition of independence and will engage a search consultant to assist the board in this process,” he said.
Andrew Fairley, chair of Equip, pointed out his fund had long had an independent chair and was already in the process of using a skills matrix assessment to guide its choice of new trustees, particularly independents.
“We have been alert to the proposed change coming from government to the trustee representation rules,” he said. However, he thought skills were the most important factor.
“Our board’s view has been that the necessary skills around the board table are what is important to members, rather than whether they are member/employer or independent.”
Angela Emslie, the independent chair of HESTA, made a similar point.
“We seek to work with our nominating bodies to select people who have alignment of interest in the sector as well as the skills and experience we need,” she said.
She added that retail funds such as BT required a majority of independents as they do not have this alignment of interest. She suggested that retail funds could have member elections to gain this alignment, which she added was integral to the success of industry funds such as HESTA.
First Super is another industry fund which has recently appointed a second independent director and may well appoint a third by 2016. However, its chief executive, Bill Watson, believes funds’ boards and shareholders should have the freedom to choose their optimal governance structure.
One of the key concerns about enforcing a one third independent rule has been around a shortage of suitable candidates for all the industry funds concerned, but Frank Gullone, the independent chair of Kinetic Super, said he did not see “any battle” to win the best independents as there was already a “very good supply of candidates”.
This was confirmed by Scott Bunny, a director of recruitment firm B&K Consulting, who said there was no shortage of candidates interested in these types of roles and that the pool of semi-retired people was a good source of experienced, independent candidates.