Industry funds veto 10-year trustee/director limit
Major industry superannuation fund group, the Super Members Council (SMC) has strongly argued against the Australian Prudential Regulation Authority (APRA) imposing a strict 10-year time limit on fund trustee directors.
At the same time as forcefully arguing the superiority of the industry funds’ equal representation board mode encompassing unions and employers, the SMC warned that APRA’s proposed 10-year limit may have the effect of cause the loss of highly experienced, high performing trustee directors.
The SMC argument comes against the background of a number of superannuation funds having been the subject of criticism over the long terms served by some board members, particularly those nominated by trade unions.
However, the SMC said a detailed study in 2022 of five firms operating in the financial services industry demonstrated that ‘as long as they remain motived and empowered, long-tenured directors can continue to contribute at a high level to board task performance’.
The SMC’s response to APRA’s governance discussion paper argued against “a one size fits all” policy for director tenure and recommends “evaluating directors’ contributions on a case-by-case basis with a view to a reasonable tenure limit and a process for extension”.
It suggests a 12-year limit made up of four three-year terms with the option to extend beyond 12 years where a need can be substantiated as providing continuity and stability, board diversity or meets exceptional circumstances.
In its arguments underpinning the superiority of the equal representation model for superannuation trustee boards, the SMC submission pointed to research which revealing equal representation boards delivered “significantly stronger average net cash flows”, “a great share of their portfolios to unlisted assets and infrastructure and greater concentration on default strategy.
“Funds with non-equal representation boards typically offer an overwhelming number of investment options – far more than their equal representation counterparts,” it said. “In 2022 the median number of options for equal representation funds was just 20, while for non-equal representation funds it was an extraordinary 322.”
Elsewhere in its response to the APRA discussion paper, the SMC joined the growing number of stakeholders opposing the regulator having a say in board appointments, arguing that it could create moral hazard with boards relying on regulator vetting rather than rigorous internal assessments.
ISF Vetting = I’m a Union & or Bikie boss. I get the board job and kickbacks for as long as I want. Or my thugs will bash you. How’s that sound APRA
Only a terrible unqualified trustee would be worried they couldnt get another job in the open marketplace after 10 years of experience as a trustee in a huge organization like an industry fund with 10s or 100s of billions under management.
Are there any trustees in that category?
Surely this is a joke.
Interesting that the word “veto” was used in the article headline.
Super funds have never legally had the ability to veto regulators. But in practice union super funds have long had this power, through their influence over the Labor Party and the bureaucracy.
Well fancy that.
Who’d of thunk it ?