The chairs of AvSuper and CareSuper say proposed legislative changes to superannuation boards will increase risk to a sector that has not experienced wide-spread issues with governance.

While the chair of UniSuper, who is an independent, was more reticent in his criticism he too foresaw problems with changing the size of boards – a necessary move by some super funds to comply with the legislation.

Cate Wood, chair of CareSuper, told delegates at an AIST Thought Leadership series in Sydney on Monday, that the government’s decision to change governance in superannuation was certainly not based on evidence.

“Given that there is no evidence of issues, it is fascinating to take a third of the industry that has set structure, operated very well and then take that away,” Wood said. “I would have thought, for risk management practices, this doesn’t sound like best practice.”

Wood said (in the first draft of the legislation) half of her board met the requirements of being independent, despite it being an equal representative model. In the second draft of the legislation some who were initially included as independent were no longer classed as such. This made planning for the changes challenging.

This point was picked up by George Fishlock, chair of AvSuper.

“We’ve only got eight on our board, and as Cate said, in the first iteration of legislation we thought we had maybe four independents,” Fishlock said. “In the latest version we think we’ve got all eight as independents.”

He said he wanted a lot more guidance about what constitutes an independent, and what value of the independent was, adding that it would likely be very difficult for all super fund to accommodate the legislation once it was settled on.

“It places all of the funds in a very difficult position in terms of trying to work out their succession planning, where they are going to draw the independents from and where they are going to draw the chairs from,” Fishlock said.

He added he did not like getting rid of good, competent and capable people merely to meet a legislative definition, as it was hard enough to get the right people on the board in the first place.

“Unfortunately I think this is driven by ideology and to date we’ve been unable to see the definition enshrined in legislation that everybody can understand,” he said. “It’s very unfortunate. I think that sums up where the legislation is sitting. I can’t see that it’s going to add any genuine benefit to the system as a whole.”

“The challenge is where is the real value in this? I see this purely ideologically driven.”

Chris Cuffe, chair of UniSuper, said that the equal representative directors on his board had been polled on how they felt about their independent directors – UniSuper has had three independent directors since 2007 – with the answer coming back in favour of the independents because of the value they added.

“For us the changes as they go through might mean we have to add a fourth independent director or shrink,” Cuffe said. “That’s the only thing that concerns me. There’s plenty of literature on the optimum sized boards. For non-super funds I think it’s about eight or nine, so if you are getting up to boards of 12, 13, 14, 15, and, in some cases 16, I’m not sure that is going to be great.”

For all three chairs their highest priority was the skills the directors brought to the board, rather than definitions of independence, as it was this that enabled a fund to be successful.

In a point dealing with equal representation being expunged from the SIS Act, Wood said: “I think it’s a really serious matter to remove the rights of the member and the employer representation at the table, it goes against international best practice.”

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