A compulsory best practice code of conduct for not-for-profit funds will be developed by April 30, 2016, following a review of governance by the former RBA Governor and Treasury Secretary.

The Australian Institute of Superannuation Trustees (AIST) and Industry Super Australia (ISA) agreed to undertake a comprehensive review of not-for-profit fund governance as part of a deal to secure cross-bench support in the Senate against the largest changes to superannuation governance since its creation.

The review and resulting code would be mandatory for ISA and AIST member funds and would complement existing APRA prudential standards and guidance.

This review will be headed by former RBA Governor and Treasury Secretary Bernie Fraser, who was also one of the first independent trustees of an industry super fund. He will lead a panel of experts including input from academics with specialist knowledge of global pension fund governance.

“The investment beliefs held by representative trustees are the foundation of the success of the not-for-profit model. The code of conduct will preclude the need for legislation that would have dismantled the not-for-profit model of governance,” said David Whiteley, chief executive of ISA.

Tom Garcia, chief executive of AIST, added the development of a best practice code of conduct will ensure members confidence, “while avoiding heavy handed regulation that was unlikely to improve super fund governance”.

The code would include matters such as:

  • Comprehensive board appointment and renewal policies to ensure funds have the highest quality boards with the full range of skills and expertise and provision of independent directors where it is assessed they could add value;
  • A principle-based definition of an independent director based on the ASX guidelines and public reporting requirement on the proportion of the board comprised of non-associated independent directors;
  • Guidance to funds around circumstances where the presence of a non-associated independent director may be warranted, such as a seniors’ consumer representative for members in the fund’s retirement products;
  • Consideration of nomination and appointment processes for independent directors including: the feasibility of direct member elections, the merits of requiring an independent Chair and the merits of the “Cooper model” of board composition;
  • Comprehensive policies to disclose, manage, mitigate and avoid conflicts of interest;
  • Reporting mechanisms such as:
    • disclosure to members and APRA of a fund’s considerations in determining whether to appoint independent directors, and if it does not, an attestation it has the full range of skills and expertise required under APRA’s SPS 510
    • disclosure of the gender balance whether they have at least 40 per cent of either gender represented on the trustee board
  • Provision for annual general meetings (or equivalent member meetings), including online broadcasts;
  • Require that funds conduct all related party transactions on an arms-length commercial basis and to ensure that all such transactions are in the best interests of members; and
  • Provision of a compliance and enforcement regime including, where possible, integration into existing APRA supervision and reporting regimes.


Independent senator John Madigan, backed by two other cross-bench senators (Glenn Lazarus and Jaqui Lambie), the opposition and the Greens, opted for a review because he felt unjustifiable costs and burdens would have been placed on super funds if the Coalition’s governance bill passed.

Angela Emslie, president of the Australian Institute of Trustees (AIST) said the independent senators who had voted against the legislation were looking at the performance of the funds and what was in the best interests of the country “without the ideology”.

“What won the issue in the end was a greater understanding by the cross benches of the complexity of the issue and the different motives involved combined with the lack of evidence for such a heavy handed approach,” Emslie said.

“The outcome clearly represents a triumph of good sense of the Senate over bad public policy and legislative over reach.”

The Financial Services Council (FSC) said it looks forward to the continued discussion on the governance of superannuation funds, but added the proposal for independent directors on the superannuation trustee boards was a “moderate” reform.

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