CHAIR’S SEAT | In July 2017, the board of $3 billion Kinetic Super voted to roll into Sunsuper, creating the nation’s ninth-largest industry super fund, with $45 billion in assets. The deal comes as the prudential regulator urges more “sub-scale” funds to look for partners, amid allegations that some trustees are eschewing mergers due to self-interest. In this Q&A with Investment Magazine, outgoing Kinetic Super chair Frank Gullone explains how he and his fellow directors embarked on a plan to put themselves out of a job.
Investment Magazine: Having just completed the deal with Sunsuper, what advice do you have for other small and medium-sized funds that may be looking for a partner?
Frank Gullone: Our first step was to start with a strategic review of the market and identify potential partners with similar values, vision, member demographics and history of success. That process included making a list of weighted reference criteria against which we benchmarked these considerations. Through this review process, we came up with a list of 12 potential partner funds.
Through a series of meetings – with CEOs, chairs and boards – we narrowed this down to a shortlist of three funds. Then, with a clear focus of what we were looking for and the assistance of external and internal parties, we landed on Sunsuper as the preferred partner. Our final step was to undertake an extensive due diligence process over a number of months to ensure that each party was satisfied with the potential benefits that a merger could bring to all members.
IM: Why did Sunsuper emerge as the preferred fund to take on Kinetic’s members?
FG: Sunsuper was a great fit for Kinetic Super because of the shared focus on member and employer services, not to mention the complementary values, culture, cost structures, investment returns, governance frameworks and internal talent. The merger will not only leverage scale and capabilities to deliver enhanced member benefits, it will also deliver lower fees and an expanded range of products and services to our members.
IM: Do you think having independent directors contributed to the board’s ability to think boldly about the fund’s long-term strategy?
FG: ‘Independence’ in isolation did not contribute to the board’s ability to think boldly about the fund’s long-term strategy. Rather, the skills, experience and independent thinking of all directors contributed to their determining the fund’s strategy.
Above all, directors need to have an affinity for understanding the priorities of key stakeholders in the fund, such as members, employers, staff and associations. Collectively, this is what enables all directors, not just independents, to think about the long term and make the right decisions for the fund and its members. Kinetic’s board has a broad skill base and each director has successfully completed the Company Directors Course through the Australian Institute of Company Directors, as well as various superannuation industry–based courses.
IM: Having only a few years earlier completed a major rebranding exercise, was there some ego to be overcome in recognising that rolling into a larger fund was in the best interests of members?
FG: Ego really did not come into the equation. We felt that members were not engaging with the fund, and the rebranding was one avenue we had to take to become more relevant with our changing and more mobile member demographic. The rebranding proved to be beneficial, as members loved it and felt it was more modern than the previous branding. Many members commented then, and still do today, on how the brand is fresh and stands out in the super fund crowd. As a progressive fund, it is imperative that we constantly evolve to meet the changing needs of our members and the industry. This will continue as we embark on the next phase of our merger with Sunsuper.
IM: What’s next for you personally?
FG: In the immediate future, I will continue to focus on ensuring a sccessful transition. But early on in the review of a merger, the entire Kinetic board – me included – agreed to give up our Kinetic Super board roles if we could successfully find a merger partner. We did not want to stand in the way of a successful merger and what it could bring to members in the form of new or additional benefits. For me personally, I will be looking to join another board and continue my strategic consulting work.
IM: What is the most valuable professional education or development program you have experienced that has helped you as a trustee?
FG: My involvement in financial services started in 1982, and since then I have really benefited from a blend of exposures and interactions. I have been fortunate to work with some great people and in some great organisations. The stand-out development programs for me have been undertaking a three-month residential advanced management program at the Harvard Business School in the 1990s, and more recently the Company Directors Course in Australia. These programs really taught me how to be a better leader.
IM: How have your views about what makes a good chair changed since you took the role in 2012?
FG: Over the last five years I think that the role of the chair has become more blurred and complex. My sense is that a good chair needs to be more strategic and able to orchestrate outcomes by working with people at all levels in the organisation. A good chair also needs to know how to motivate and develop the CEO. The chair–CEO relationship will make or break organisational success. No matter what role you fill as a leader, it is important to surround yourself with great people. A chair does not have all the answers, but in relying on great people to provide insight, opinion and care, you tend to land on the best answer given the circumstances in front of you. A good chair needs to listen; be pragmatic and principles-driven; and ultimately keep the best interest of members in their sights.
IM: What is your top tip for how to facilitate a constructive board meeting?
FG: There are quite a number of elements that go into making a board meeting constructive. At a base level, determining the agenda, priorities and length of discussion is a core factor. Keeping the board discussions focused on strategic and policy matters – as well as allowing a productive debate for critical issues – is just as important too. As a former CEO, I feel it is important that the CEO is clear on the decisions being made. The chair needs to work with the board and executive management to ensure a clear strategic focus is maintained at all times.
IM: The Kinetic Super board had a 50:50 gender split. What do you make of the fact that ASX 200 companies are on average still struggling to reach 30 per cent female representation on their boards?
FG: I can’t speak on behalf of other companies, but as a progressive fund, we at Kinetic Super believe in fostering an inclusive and diverse workplace where all contributions are valued. We have found that diversity, not only from a gender perspective, but also in other forms – such as ethnicity and age – can add enormous value to decision making as long as the individuals have the right mix of skills, experiences and training to begin with. Boards do need to more closely reflect the society in which we operate.