Every trustee of every APRA-regulated super fund in the country should by now have read Deloitte’s independent report into Cbus from cover to cover, and it should be the number one item on the next board meeting agenda.
Over the course of close to 100 pages, and despite some clear limitations on its scope, the report reveals a fund riddled with poor governance practices and questionable board appointment processes.
That should be of prime concern to the trustees of Cbus, led by chair Wayne Swan, of course; but the real worry for trustees of other funds is that Cbus may not be an isolated example.
Any board that does not now actively and urgently seek (or has not already sought) both independent assurance and evidence that the issues exposed at Cbus are not also present in their fund might be seen as complacent at best, and negligent at worst.
Obviously, it could be an uncomfortable task for trustees to consider the outcomes of the Deloitte report and how those recommendations apply to their own skills, competence, and how they were appointed to the boards on which they serve.
Brave trustees
It might be a brave trustee who knowingly and willingly scrutinises their own ability to discharge their trustee obligations, and how they were appointed to the board in the first place, let alone the competence, skills and appointment process for those who sit at the table with them. But brave is what trustees must be.
Asking too many questions might threaten some of the cozy little cliques and the snug little deals and relationships that continue to exist in some pockets of the superannuation sector. The Deloitte report has put any trustee who believes they’re at the board table even partly for their own benefit, enrichment or advancement on notice that their days are numbered.
It takes more than ditching fleets of cars and cutting back on business-class travel for family members to demonstrate a commitment to good governance.
The implications and impact of the Deloitte report will be front and centre and will deeply inform debate when the chairs of APRA-regulated superannuation funds gather at the Investment Magazine Chair Forum in Sorrento, Victoria, in January next year. It’s a conversation that every chair must engage with constructively.
It should not have taken an independent report to be commissioned at the peak of outrage about the structure and governance of the Cbus board to drag these issues into the daylight. They have, after all, occurred on the watch of a regulator charged with overseeing these things.
Even so, the message from the Deloitte report is clear for Cbus and just as clear for other funds.
Trustees must be appointed on merit.
Individuals nominated to board positions but who do not measure up should be rejected.
Any conflicts of interest between an individual’s obligations and duties as a trustee and any other positions they hold should be avoided in the first instance (and might be a reason to reject a nominee) but, at the very least, fully disclosed.
And if a trustee is going to hang around on a board for decades there must be a very good – and well-documented – reason why.
Good governance
“APRA has rightly sought actions on good governance given the issues surrounding the Cbus board – more by associations than performance,” the Deloitte report says.
But the implications may be broader than for just this fund and “may have flow-on consequences more generally for corporate boards in Australia under the auspices of APRA and/or ASIC, especially given the nature of media commentary on various corporations in the public domain”.
Deloitte noted that as its review progressed, “the critical importance of decision making by boards, and the risk appetite of boards and the regulator have become clearer”.
“This review has attempted to provide a balanced view of some fundamental issues underlying the scope of the review – all in the interests of driving better decision making by a board in a market economy,” it said.
“Change is not pre-ordained, and the status quo in governance is dangerous. Good principles, systems, and processes will ensure the continued evolution of governance at Cbus and in the superannuation sector more generally.”
