CHAIR’S SEAT | In the boardroom, as in the classroom, the loudest voice isn’t always the one to heed. Recently installed VicSuper chair Christine Stewart, a former teacher and long-serving deputy secretary of the Australian Education Union, is an advocate for ongoing trustee education and consensus decision-making.

Stewart was promoted to chair at VicSuper in January 2017. The $19 billion default superannuation fund for Victorian public sector employees is recognised for its commitment to socially responsible investing and leadership in offering an innovative retirement income solution to members. In this Q&A with Investment Magazine, Stewart reflects on lessons in decision-making, communication with fund managers, and the fund’s strategic thinking around mergers and acquisitions.

Investment Magazine: Six months into your tenure as VicSuper chair, what would you say is the biggest challenge that comes with the role?

Christine Stewart: Having been on the board since 2009, and chaired a range of committees over the years, I already knew all the people around the table and how the board worked so there have been no real surprises. I think the biggest challenge in being chair rather than a director is the responsibility for time management. It is important to ensure that there is adequate discussion and all views are canvassed on important issues. But once people start repeating themselves it is time to move on.

IM: The fund launched its socially conscious option in February 2017 and an ESG focus is an increasingly strong part of the brand identity. How is ESG thinking integrated into the way the board works?

CS: The focus on ESG has always been there for us, having been absolutely crucial to founding chief executive Bob Welsh when he set up the fund in 1994. It is an important part of our heritage and our members expect us to be good corporate citizens. When we got out of tobacco production in 2013, the reaction from most of our members was, ‘We thought you would have done that years ago.’ Their shock was a reminder of the high expectations our members have.

More recently, we have talked more publicly about the way our management and investment committee work with our fund managers on ESG issues. The board also recently spent some time looking at our proxy voting arrangements to ensure our votes were being cast in line with our principles, and it was good to be reassured that they were.

IM: In June 2015, VicSuper became one of the first super funds to launch its own version of a comprehensive income product for retirement (CIPR). What is your advice to other trustees on developing new post-retirement solutions?

CS: Michael Dundon, our CEO, was one of the first to recognise that accumulating super savings is only half the story. Half our assets are held by people aged over 50, mostly public servants and teachers. We began with a research project breaking the membership down into different demographics, based on age, balance size, and expected time until retirement based on their industry. That allowed us to look closely at who our members were, what they needed, and what we could do for them. Management then led the work of examining a number of different options before we settled on offering an account-based pension with an annuity component.

My advice to any trustee not sure what approach their fund should take to building a CIPR is to begin by having a very detailed look at the demographics and characteristics of your particular members. Don’t just follow what others are doing, it has to suit the profile of your members.

IM: What is your best advice to investment managers for improving communication with trustees?

CS: Remember that directors aren’t investment experts. Be mindful of the jargon, and take care to really explain things clearly. As a director, I want to understand clearly what makes [a manager] different, how that complements and adds value to our investment strategy, when they will outperform the benchmark and even more importantly when they won’t. It’s very important to manage expectations. Investment managers addressing a board need to realise that even though we might not all be investment experts, we are all genuinely interested in learning and are the people with the capacity to analyse, question and then sign-off.

IM: How does the VicSuper board work to increase its understanding of complex investment issues?

CS: Internally, we openly discuss issues and are good at recognising where we need help and immediately getting it. Most months, we will have a one-hour training session immediately before or after our board meeting. Usually if the board is considering making an important investment decision, we’ll get some specific briefing that allows us to get a much deeper understanding of that particular asset class. The thorough processes of our investment consultants and our CIO and CEO ensure that each recommendation is thoroughly substantiated, with the investment committee openly discussing the merits of the recommendation and how it will help achieve our investment objectives.

IM: Who have been your mentors or most important influences as a trustee?

CS: The first time I experienced genuine consensus decision-making was years ago when I was part of a Victorian Board of Studies Year 12 curriculum committee chaired by Elida Brereton. At the start, a lot of the men were complaining about
her style – that the meetings took too long, that the discussions weren’t focused enough. But I quickly realised she was actually very focused at leading us through the concerns around the issues we didn’t agree on. The end result wasn’t a compromise but something the whole committee was genuinely happy with.

I also learnt a lot about leadership from working with [AEU then-president] Mary Bluett during my time as deputy secretary of the Australian Education Union. She had little time for hecklers or people being abusive and would cut them off, but always had plenty of time for those people who just wanted to discuss the issues.

At the moment, if I want any advice, not about issues but about process, I usually turn to former VicSuper chair Barbra Norris.

IM: VicSuper recently formed a merger steering committee. What is that about and what is the most important lesson the board learned from the 2012 merger talks with Vision Super that did not proceed?

CS: We established a merger steering committee a few months ago, so that in the case of any future merger discussions, it would already be in place. At the time of the talks with Vision Super, we didn’t have a formal merger committee, not that I think that would have made a difference to the outcome. In terms of lessons learned from that experience, I would say the big one is that in merger talks, both parties should go in from the outset with a statement of their core values and really lay out early what the deal-breakers would be for them. There also has to be a clear business case where everyone’s members are set to benefit, if not in the immediate term then in the near-to-medium term. We are not in any detailed merger talks at the moment, although we are always open to options that are right for our members.

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