EXCLUSIVE | Longstanding board transition plans at VicSuper are in doubt following the retirement of chair Bruce Hartnett at a time when his heir apparent, deputy chair Bill Lyons, is the subject of an internal review.
Hartnett retired as chair of the $16.4 billion super fund on December 31, 2016, after 12 years on the board. Lyons was set to be his replacement but is now facing allegations he behaved inappropriately at an industry event in late 2016.
Lyons has denied any wrongdoing.
VicSuper, a public offer fund, is the default super fund for most Victorian public servants. It is yet to announce the change in board leadership to its members.
Director Christine Stewart is acting as interim chair after the VicSuper board elected her over Lyons for the temporary caretaker role.
In response to questions from Investment Magazine, VicSuper chief executive Michael Dundon confirmed that the board is conducting an investigation into allegations Lyons behaved inappropriately at an event in late 2016.
“We’re responding to an issue recently raised and have commenced a review in line with our current policy,” Dundon said. “This matter does not impact our members. At this stage, given the matter is currently under review and we need to respect the confidentiality of all involved, we are unable to provide further details.”
Succession plans uncertain
Speaking to Investment Magazine, Lyons confirmed he was on leave from the VicSuper board over the summer holiday period until the review was concluded. He has strongly denied any wrongdoing.
Dundon said VicSuper was following all appropriate protocols to ensure due process is followed.
“We anticipate the matter being resolved in the weeks ahead; however, we cannot confirm an exact date at this stage,” he said.
VicSuper director and investment committee chair Wayne Kayler-Thomson has been tipped as a possible successor to Lyons as deputy chair.
The next VicSuper board meeting is scheduled for late January, when the succession plan is expected to be discussed.
“No decision on a permanent appointment to chair or deputy chair has been made at this point in time,” Dundon said.
Outgoing chair Hartnett had been a director of VicSuper since 2004, taking on the role of deputy chair in 2009, and chair in 2014. His retirement at the end of 2016 was expected.
APRA focuses on director tenure
When Hartnett stood for election as chair, he asked for a term of three years, rather than five, to limit his director tenure to 12 years. VicSuper’s charter places a 15-year cap on director tenure. Many super funds have no limit on it.
In December 2016, the Australian Prudential Regulation Authority released updated guidance on governance standards for super funds that included a recommendation that trustee tenure be limited to a maximum of 12 years, consistent with the guidelines that apply to listed companies.
Hartnett’s departure presents an opportunity for VicSuper to add an independent director to its board, which now comprises four employer group-nominated directors and four union-nominated directors.
This style of representative board structure is traditional among not-for-profit corporate, government and industry funds – although many now also include independents.
The Turnbull Government has pledged to resume in 2017 its push for a mandate that all super funds appoint a minimum of one-third independent directors, including an independent chair.
Last year, Hartnett broke ranks with the VicSuper board to pen a personal submission to the Bernie Fraser-led industry review into governance in the not-for-profit super sector. In the letter, he stated that industry funds should ensure “at least two and up to one-third” of their directors are independent.
In his submission to the Fraser Review, Hartnett said it would be too prescriptive to force super funds to appoint an independent chair