In a keynote speech to the Australian Institute of Company Directors in early March, ASIC chair Joe Longo described the superannuation industry as “the current poster child for what can and does go wrong when governance fails”.
But in the aftermath of scandals at WiseTech and MinRes that have wiped billions from the valuations of both companies and, in the case of WiseTech, sparked divestment action by AustralianSuper, Longo has been questioned as to whether that’s really the case – and why the regulator seems to be coming down harder on super funds that have self-reported breaches.
Responding to a question from the audience during the Australian Council of Superannuation Investors (ACSI) conference on Wednesday, Longo differentiated between investment governance – which has been uniformly good across the industry – and the failings that have seen AustralianSuper and Cbus dragged to court and other funds named and shamed for delays in death benefit claims handling.
“The example I gave is where superannuation trustees, in spite of years of warnings, failed to take action in a timely manner to deal with poor member services,” Longo said. “That was a failure of governance and a failure to invest in systems to supervise those entities that they outsource to.”
“I think it is a failure, and I don’t resile from those comments at all. I think it’s a bit naive, and shows very poor understanding our legal arrangements, that because somebody has complied with the law and self-reported a reportable situation or a breach that that somehow lets them off the hook… the fact that they self-reported is the law, and not every situation that is self-reported leads to an investigation and court action.”
Longo noted that there was an “outbreak of issues in the bedroom migrating to the boardroom” but defended ASIC’s regulatory approach to the ASX-listed companies currently lighting up the front pages of the mainstream papers, saying “what happens in people’s personal lives is a matter for them”.
“The issue for me and the regulator is whether that alleged misbehaviour starts to impact good governance in the boardroom and becomes a distraction,” he said.
“If that’s the case then that might be something we’d be interested in.
“But not every unattractive incident in the boardroom of a major company is a breach of the Corporations Act. It might be poor behaviour and poor governance but it’s not something you would always go back to a court to deal with. It’s on all of us to do everything we can to encourage high standards of corporate governance. And so the regulator has a role to play, and the courts have a role to play.”
Longo also said that his preference was for less regulation, not more, around how superannuation funds invest in private markets, while highlighting the need for more data to create greater levels of transparency and ensure equity for members.
“I mean it,” Longo said. “I do have an open mind. I don’t go into this exercise wanting to regulate where it’s not needed.”
“I’m into simplification. We all accept the need for good regulation, but as far as the private markets are concerned the themes that have real traction are that we need more transparency – how do we achieve that? Our data sources are not comprehensive and in some respects they’re behind internationally. When I think about regulation I’m not talking about rules; I’m talking about levers. But I’ve got no desire to regulate more than we have at the moment.”
Longo said super funds are “doing the right thing” by looking for more investments in private markets, and with vast infrastructure needs going unmet around the world, “the opportunities for patient capital are very serious”.
“As we all know, superannuation trustees have to act in the best financial interests of their members,” he said.
“We’re a relatively small economy, we’re running out of investible assets – not running out of assets altogether, but from the point of view of what the superannuation sector is trying to achieve, the public markets are probably topped out, let’s put it that way. The ASX is between a third and a quarter superannuation investment, and there are so many opportunities in the private space.”
