In July last year, an Association of Superannuation Funds of Australia (ASFA) workgroup consisting of lawyers and actuaries set out on the unenviable task to translate the Australian Securities Exchange corporate governance council's principles for governance to the language of superannuation funds.
The task turned out to be more elaborate than first anticipated.
ASFA policy and industry practice general manager David Graus could almost be heard uttering a sigh of relief when he announced the launch of the final report on Tuesday evening.
"As you can imagine, considering the arguably complex and subjective nature of governance issues, reaching agreement on the various recommendations in this paper required extensive research, vigorous debate and at times laborious redrafting," Graus said.
"I have at least 30 to 40 drafts of this paper still sitting on my desk. I'm seriously looking forward to this conclusion."
The problem is that what constitutes good governance is often subjective.
Governance, in its archaic definition, means simply to rule, which in the context of super funds could be translated as making the right decisions for members.
And here it touches upon morality, because the question of what is right and, more importantly, what is wrong is not easy to answer.
In reality, most members could not care less about the morality of a decision; they care about the outcome.
If the outcome is right, then the decision-making process that led to it can often be easily justified and even glorified.
The father of modern capitalism, Adam Smith, already pointed out this human trait in his 1759 book The Theory of Moral Sentiments.
"We frequently see the respectful attentions of the world more strongly directed towards the rich and the great, than towards the wise and the virtuous," he said.
Wisely, the group of ASFA volunteers decided to focus their recommendations on the practical implications of good governance, rather than providing a framework for what is right and wrong.
The result of these deliberations is that the governance guidelines ASFA has put on the table have a strong focus on risk and compliance.
"Governance and risk management are intrinsically linked," Aon Hewitt principal and actuary Jenny Dean said.
"And if you consider compliance as the reporting and monitoring function, it then becomes a governance, risk and compliance framework."
Disclosure then becomes the focal point of good governance and although this can be a burdensome process, trustees would do best by giving as complete an insight as possible into how decisions are made.
"Too often we assume what those interests are and convince ourselves that members do not really need to know what is going on as they would not understand," Dean said.
"For good governance you need to be completely transparent. Disclosing details around your governance framework improves the confidence of your members of how their money is being handled."
Dean provided a simple but effective method of determining whether a decision is worth disclosing or not: "A good rule of thumb is: if this decision made the media, would you be comfortable?"
