POWERED BY MOMENTUM MEDIA
Union/employer directors conflicted, claims Governance Institute
Superannuation fund directors drawn from unions or employer groups could be perceived to have a conflict of interest, according to the Governance Institute of Australia.
In a submission filed with the Productivity Commission (PC), the Institute has suggested the conflict arises because of the duty such directors feel is owed to their sponsoring bodies and has suggested that, moving forward, the members of not-for-profit funds should be responsible for appointing board members.
“Not-for-profit superannuation entity boards are typically comprised of an equal number of directors appointed by either an employee body (a union) or employer body or, in the case of public-sector funds, a state or federal government,” it said. “A conflict of interest or duty of loyalty or a perceived conflict of interest or duty of loyalty may arise where a director is appointed to the board by such a sponsoring body.”
The Institute then exampled that a director may have in mind that they had been appointed to a superannuation entity to represent the interests of a particular union or industry body — “they may be of the view that their appointment has been made in order to ensure they can control or influence, as well as monitor, the activities of the superannuation entity to which they have been appointed”.
“Alternatively, a director appointed to the board by a sponsoring body could be perceived to have been appointed in order to control and influence, even when the director is clear that they have been appointed to represent the best interests of the beneficiaries rather than those of the sponsoring body,” the submission said.
“Governance Institute is strongly of the view that the key governance outcome from which questions of board composition and management of conflicts of interest flow is to aim for greater empowerment of members and greater accountability of directors to members,” the submission said. “As a matter of good governance, therefore, members should have a direct say in the governance of their superannuation fund.”
“We note that [not-for-profit] NFP superannuation funds exist solely for the benefit of, and to protect the interests of, their members,” it said. “If the actual governance framework is to match this desired governance framework, then the principal say in the governance of these funds should be in the hands of the members of the fund, not third parties representing them.”
“The best governance outcome would be to introduce a mechanism which allows members of the fund — both at the contributory/accumulation and pension recipient phase — to appoint and remove directly the directors of the trustee and hold those directors accountable to members. That is, no-one apart from members should have the decision-making power as to the appointment of directors. If members are granted the right to elect — or not elect or re-elect directors — an independent director is essentially therefore one who has been elected by members, because members are of the view that the director is acting in their best interests.”
Recommended for you
Jim Chalmers has defended changes to the Future Fund’s mandate, referring to himself as a “big supporter” of the sovereign wealth fund, amid fierce opposition from the Coalition, which has pledged to reverse any changes if it wins next year’s election.
In a new review of the country’s largest fund, a research house says it’s well placed to deliver attractive returns despite challenges.
Chant West analysis suggests super could be well placed to deliver a double-digit result by the end of the calendar year.
Specific valuation decisions made by the $88 billion fund at the beginning of the pandemic were “not adequate for the deteriorating market conditions”, according to the prudential regulator.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
Spire Oaktree Opportunities XI Second Close
61.07 3 y p.a(%)
2
Spire Oaktree Opportunities XI First Close USD
59.21 3 y p.a(%)
3
DomaCom Lot 21 Chellaston Road Munno Para West SA 5115 Australia
31.56 3 y p.a(%)
4
Fidante Credit Suisse Global Private Equity
31.06 3 y p.a(%)
5
DomaCom 4/27 Crombie Avenue Bundall QLD 4217 Australia
26.81 3 y p.a(%)
Industry Super Funds must already be doing this anyway for their members cos of their superior performance over retail funds etc. That is "exist solely for the benefit of, and to protect the interests of, their members
“The best governance outcome would be to introduce a mechanism which allows members of the fund — both at the contributory/accumulation and pension recipient phase — to appoint and remove directly the directors of the trustee and hold those directors accountable to members. That is, no-one apart from members should have the decision-making power as to the appointment of directors. If members are granted the right to elect — or not elect or re-elect directors — an independent director is essentially therefore one who has been elected by members, because members are of the view that the director is acting in their best interests.
Industry Super Funds must already be doing this anyway for their members cos of their superior performance over retail funds etc. That is "exist solely for the benefit of, and to protect the interests of, their members