Superannuation funds will be required to follow stricter Governance arrangements under proposed new standards released by the Australian Prudential Regulation Authority (APRA), but they will still fall short on many of the obligations imposed on the boards of publicly-listed companies.
While the proposed APRA approach tightens up the Governance arrangements, they do not specifically preclude the holding of multiple directorships, and much will depend on the level of scrutiny applied by the regulator itself.
The APRA approach is a direct flow-through from the Government’s recently announced Stronger Super proposals and confirms that beyond the existing regulatory framework, board composition will be a matter left to the superannuation funds themselves.
In fact, the APRA discussion paper said the regulator does not propose to include a requirement for a minimum number of independent directors, but "does consider it appropriate to encourage a higher standard of governance through guidance".
However, in the event that a superannuation fund does opt to have independent directors, the proposed APRA standards have defined those would be excluded, stating that an independent director would be one who is not, and in recent years has not been:
- in an executive role with an employer-sponsor;
- an official or representative of a body that has the right under the governing rules to nominate or appoint directors (or individual trustees) to represent either member or employer interests;
- a director, employee or shareholder of a company related to either a standard employer-sponsor or to the registrable superannuation entity (RSE) licensee (other than in the case of a wholly owned subsidiary of the RSE licensee).
However, on a more positive note, the proposed new standards would allow superannuation fund members the same level of information on executive remuneration as that provided to the shareholders of publicly-listed companies.
Commenting on the release of the draft standards, Australian Institute of Superannuation Trustees chief executive Fiona Reynolds said the industry would need to further consult with APRA on the finer detail of many of the new requirements.
However, she said the proposal provided clarity on the missing elements of the Stronger Super announcements, such as fund requirements on scale and operational risk reserves.
However Rule of Law Institute of Australia chief executive, Richard Gilbert said the move by APRA was too little, too late in circumstances where the regulator could have acted years ago.
Gilbert said legislation had existed giving APRA sufficient power to have acted on superannuation fund governance for at least six years.
