The Governance Institute is continuing its push to increase the number of independent directors on superannuation trustee boards, a step it formalised in a recent submission to the Productivity Commission.
Governance Institute chief executive Steven Burrell says it’s the organisation’s preference for the boards of superannuation funds to have a majority of independent directors, set up through an appropriate election and with accountability requirements.
“Recent events, such as the revelations of the Hayne royal commission and findings of the [Australian Prudential Regulation Authority] APRA report into CBA, show that boards need to be in a position where they can ask the right questions, as well as challenge management,” Burrell says. “Independent directors are vital to this because they can be free from conflicts of interest and bring an outside perspective, helping boards avoid groupthink.”
Transitioning boardrooms to mostly independent directors may take time; therefore, the institute states that asking for at least one-third of each funds’ directors to be independent, as the Productivity Commission has proposed, is a pragmatic initial step.
The Governance Institute also agrees with the commission’s view stated in its draft report, Superannuation: Assessing efficiency and competitiveness, that “high-quality governance is integral to a system where members rely on others to make decisions on their behalf”. In this regard, it notes that a super industry-led body is the best solution to many governance issues and that this body should develop guidance on governance matters collectively.
Among its other recommendations, the Governance Institute advises that legislation require funds to make disclosures about their governance and that members of superannuation funds have the right to elect directors via direct voting.
It argues that employers, unions and employer organisations should not vote, control the voting process or set the rules for voting without approval by members.
Additionally, the institute recommends that the rules concerning voting be set out in funds’ constitutions and made available to members in an easily accessible corporate governance document that’s housed online, with constitutional amendments subject to member approval.
The Governance Institute of Australia states that it is the only independent professional association with a sole focus on whole-of-organisation governance.
