APRA signals no back down on super boards

27 March 2017

The Australian Prudential Regulation Authority (APRA) has sent another clear message to industry funds that it will not be backing away from its view that superannuation funds should include more independent directors on their boards.

What is more, amid suggestions that industry funds are looking no further than a narrow pool of candidates, the regulator has signalled that it also wants funds to choose their directors from a deeper and more qualified pool of candidates.

The comments from APRA deputy chair, Helen Rowell have come as the industry funds insist that their current governance arrangements are broadly appropriate.

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Rowell told the industry funds-focused Conferenced of Major Superannuation Funds that in circumstances where superannuation fund were running more complex financial service businesses, they needed to adopt the sound governance and business management practices that are expected of such businesses by financial sector stakeholders and the wider community.

“That means that all trustees must move beyond a focus on just meeting minimum legislative requirements, to an approach that seeks to embed the principles of the prudential standards into their business practices, meeting the spirit and intent and not just the letter of the standards,” she said.

“Doing ‘just enough’ is not good enough to meet member and community expectations. And there is no room for complacency – all trustees need to review and enhance their operations and practices on an ongoing basis.”

Rowell said she had spoken on many occasions on APRA’s observations on governance practices in the superannuation industry and whilst there were some very good practices, APRA’s experience was that there was room for improvement for many funds across all segments of the industry, with some board practices failing to live up to expected standards of good governance.

“A particular current area of focus is practices for board selection, appointment and renewal,” she said. “Not all trustees have clear policies or approaches on key areas, such as the skills and capabilities that are needed on the board, and how to ensure that they get the right balance between experience and renewal on boards.”

“We would encourage all boards and nominating bodies to look broadly in determining where the potential pool of director candidates is coming from, and to strengthen board performance assessment and follow up actions to ensure that all directors are adding value to board decision making,” Rowell said.



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Encouraging boards to look around is not an offensive idea, nor a dangerous one in itself. I am sure most industry funds are on the look out to improve further from the generally successful and leading results they are getting. That APRA should move towards compulsion at any point in the future, is the worry. I have often had the image of the fox in the hen-house when thinking about the infiltration of inappropriate interests into Super boards. Lo and behold! There's no a commercial on TV showing the very thing!

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