Cbus rectification plan canvasses veto of board nominees

ANALYSIS

Industry superannuation fund Cbus has entered into its Court Enforceable Undertaking (CEU) with the Australian Prudential Regulation Authority (APRA) knowing that it has 16 months to get its house in order or face unpalatable consequences.

It also commits Cbus to justifying past expenditures under its so-call partnerships arrangements with trade unions in the knowledge that APRA will, itself, be closely examining those expenditures and whether they were justified in the context of member best interests.

In the context of the fund’s employer/union equal representation board model, the document also raises the prospect of the board being empowered to reject board nominations where it believes they would not be in the best interests of members.

The examination of past expenditures will undoubtedly draw attention to the claims of Cbus chair and Australian Labor Party president, Wayne Swan, that the partnership agreements delivered value to members far outweighing the value of advertising delivered by retail funds.

To understand the full implications of the CEU readers must access the highly detailed “Rectification Plan” developed by Cbus in response to the recommendations which flowed from the Deloitte Report

That “Rectification Plan” represents one of the foundations of the CEU and not only commits Cbus to implementing serious changes to its governance approach and expenditure management but also commits the fund to reviewing its past expenditures.

The most disturbing element of APRA’s announcement of the new enforceable undertaking is that it the regulator said it would “also be exploring possible breaches of the Superannuation Industry (Supervision) Act 1993 by Cbus through an investigation with a focus on expenditure management practices”.

Hardly surprising, then, that the Rectification Plan includes a “key action” to “Develop and document a plan for the Trustee to review and reassess the past Expenditure Decisions that were the subject of the Independent Review, applying the uplifted frameworks, policies, processes and procedures”.

The key action includes notes that, “the plan is to include the steps to be taken if a decision on review is different from the past Expenditure Decision”.

Importantly, the time-frames outlined in the “Rectification Plan’ envisage the process running through to the end of September, 2026, giving rise to the possibility of completion of the process being undertaken with a new Government sitting on the Treasury benches in Canberra.

APRA deputy chair, Margaret Cole noted that the court-enforceable undertaking is separate to the additional license conditions imposed on Cbus.

The response from Cbus to the APRA announcement was notable for the fact that it was attributable to the fund’s chief executive, Kristian Fok rather than Cbus chair, Wayne Swan.

Fok said the Cbus board “is united in its ongoing commitment to uplift practices to ensure members receive the best possible services.

“We take our responsibilities to our members very seriously and are committed to ensuring that we operate to the highest standards of governance and compliance to provide the best retirement outcomes for our members.”

“While we have made progress in some areas there is more work to be done, and it must be done at pace,” he said.