On 12 February 2014, Company Directors lodged a submission in response to a discussion paper released by Treasury, “Better regulation and governance, enhanced transparency and improved competition in superannuation” (Discussion Paper).
Company Directors supports the Government’s commitment to ensuring the superannuation industry remains stable and efficient and to working closely with the sector to ensure that this is done in a way that does not impose excessive, black-letter regulation.
Our submission was limited to commenting on the governance-related measures proposed under the Discussion Paper. Broadly speaking, Company Directors consider that these proposed measures will generally lead to a marked improvement in the governance practices of superannuation funds. Our specific comments included:
- The regulatory framework that is adopted for the governance of superannuation funds needs to recognise and address a number of key differences that exist between the corporate structures of superannuation funds and listed entities and also between superannuation funds and other financial institutions. One way of addressing these differences would be to require superannuation funds to provide greater disclosure of their governance arrangements.
- It would be most logical for governance standards to be introduced through amendments to the current Australian Prudential Regulation Authority (APRA) Prudential Standard that applies to superannuation funds relating to governance (ie SPS 510). To achieve this, it would be appropriate to align the requirements of SPS 510 with the governance requirements that apply under APRA’s cross-industry Prudential Standard CPS 510.
- Independent directors can make a valuable contribution to the boards of superannuation funds. There should be enough independent directors appointed to the board to genuinely influence and affect the decisions of the board. It is widely accepted that at least a majority of the directors on a board should be independent. The Company Directors also considers that the Chair of a superannuation fund’s board should be independent.
- The processes for appointing directors, board and director assessment and board renewal are already adequately addressed under the current Prudential Standard that applies to superannuation funds (ie SPS 510).
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