The Australian Prudential Regulation Authority (APRA) has sent a clear signal to superannuation funds that it is unhappy with the manner in which some unions and employer bodies can nominate their officials to the boards of superannuation funds virtually without challenge.
The regulator has pointed to the danger that such processes will deliver appointees who are not appropriately qualified and whose selection cannot then be vetoed by the super fund board.
APRA deputy chair, Helen Rowell has used an address to the Australian Institute of Superannuation Trustees (AIST) to make clear the regulator’s concerns about such arrangements and to urge superannuation funds to consider changes in the context of adopting new governance arrangements.
Reinforcing APRA’s view on the desirability of superannuation boards having at least one-third independent directors, Rowell said her view had not changed since 2015 in the context of independent directors broadening the skills and capabilities and improving decision-making.
“They [independent directors] are also well-placed to hold other directors accountable, particularly in relation to conflicts of interest,” she said. “This is as relevant for directors of industry and other not-for profit funds that may face potential conflicts with the interests of their stakeholders (such as nominating organisations), as it is for directors of retail funds.”
Discussing what APRA believed better superannuation fund governance looked like, Rowell nominated a clearly articulated view of the optimal board composition (in terms of size, skill mix, and relevant diversity considerations) including independent directors.
She then also nominated: “A director selection process that provides a clear role for the board (and not just nominating bodies) in the appointment of candidates, with a view to ensuring that candidates bring the skills and capabilities needed to oversight execution of the trustee’s strategy and its ongoing business operations and are a ‘good fit’”.