The trustee boards of superannuation funds must recruit independent members immediately if those boards are to be ready for increased governance standards to start on 1 July next year, Deloitte partner superannuation assurance and advisory Tony Brain said yesterday.
"The bar and the expectations are being well and truly raised," Brain said.
The Australian Prudential Regulation Authority's (APRA) second draft of prudential standards on trustee governance (SPS 510) is open for submission until next month, after which final standards will be formulated by the end of this year.
Brain urged trustees to begin meeting the higher standards now.
"Trustee duties will be further clarified and there'll be a level of prescription in there and policy guidance and management of conflict will become more important," he said.
"It's a constant topic of conversation - politicians, representative bodies, regulatory bodies, and the media.
"In that context, you can't ignore it. Don't just focus on what's being prescribed, focus on what's right to do."
Industry Super Network chief executive David Whiteley was approached for comment but he was not available.
Deloitte's Brain said there would be 12 governance standards, to be in force by July 1 next year, including a temporary MySuper transition standard.
Half would cover current practices, Brain said, and the other half would be new areas: governance for trustees, fit and proper officers, conflicts of interest, and investment governance.
"The topic of independence of directors is all guidance at this stage," he said.
"It's not being suggested by APRA that it's mandatory. But when APRA issues guidance - and particularly on the back of standards - I certainly don't think you can turn a blind eye to it."
For example, in the draft guidelines, the independent director could not be associated with the employer sponsor nor the member representatives. As well, previously, fund members were not allowed to be on the board, but in the future, they would be allowed.
Further, exclusions would cover those who in "recent years" had been in various roles.
These were: executive roles; officials or representatives of a body which held nominating rights; director, employee or shareholder of the registrable superannuation entity (RSE) licensee or standard-employer sponsor; or a director, employee or shareholder of a material service provider.
Brain said there were "quite a few issues" to be clarified around this question.
"What is the meaning of independent and non-executive clarity," he said.
"And, how many is recent years - three years perhaps?"
The APRA guideline relating to the independence of the chair was a crucial one, Brain said.
"My point of view is that this important role of stewardship of the board be an independent party," he said.
Tenure and renewal was a new area in the draft guidelines.
"I encourage trustees to start thinking about this now. Don't wait until 1 July, 2013," he said.
"Don't live in hope that it won't come through - I'll shout you a Tatts ticket if it doesn't come through. It will be there. It's something you can't just achieve overnight. There has to be some transitional allowance.
"There s no set maximum (on tenure). APRA isn't saying you need to have a policy - you set the maximum in the context of your fund."
