Former RBA governor Bernie Fraser handed down his report on Board Governance of Not for Profit Superannuation Funds yesterday afternoon, recommending the adoption of the AIST draft code of governance with some additions.
Mr Fraser was commissioned by Industry Super Australia (ISA) and the Australian Institute of Superannuation Trustees (AIST) to report on the Coalition government's proposed changes to not-for-profit super fund boards in December 2015.
The Superannuation Legislation Amendment (Governance) Bill 2015 failed to gain passage through the federal Senate on 2 December 2015 after four crossbenchers sided with Labor and the Greens to oppose the bill.
The bill proposed to force not-for-profit funds to increase the number of independent directors on their boards to one-third, as well as having an independent director.
The ISA and AIST commissioned Mr Fraser to consider the bill, as well as the feasibility and nature of a governance code for not-for-profit super funds, on 20 December 2015.
The report was delayed until the completion of the 2016 federal election. When Minister for Revenue and Financial Services Kelly O'Dwyer announced the government's plans to re-introduce the governance bill at the ISA Conference on 22 November, the report was completed and subsequently released yesterday.
Mr Fraser begins the report by laying out the government's reasons for imposing a quota of independent directors: namely, that they would bring with them "independent thinking", make other directors "more accountable", remove "conflicts of interest", be "more representative" of members and bring Australia into line with "international best practice".
According to Mr Fraser, many of these arguments "rely heavily upon assertion, rather than reason and evidence".
"Sadly, this has come to characterise so much public policy “debate” in this age of assertion," he said.
"Whether driven by ideology, pressures from lobbyists or something else, the assertion card is increasingly and shamelessly played to trump sound reasoning and solid evidence – even on a matter as far under the radar as board governance of superannuation funds.
"Very much in this vein is the minister’s recent claim that '...governance standards for superannuation funds under the law are lower than for banks and life insurance companies ...'"
The report also pointed to the strong returns of industry funds over the past three, five and 10 years, as "the best evidence that the not-for-profit model is not broken".
Pointing to AIST's recently revamped code, Mr Fraser laid out a number of recommendations to strengthen the values, skills and experience of not-for-profit fund boards.
"The thrust of this report is that board governance of industry and other not-for-profit funds could best be improved – that is, best help to deliver superior outcomes for members – by continuing to build on their strengths in values and skills, rather than through mandated minimum numbers of independent directors on their boards," Mr Fraser said.
Reacting to the report late on Thursday afternoon, Minister for Revenue and Financial Services Kelly O'Dwyer said industry fund members had been "let down by industry self-interest".
"I am pleased that ISA and AIST have finally conceded to the release of Mr Fraser's report, but it is a shame it has been exposed for what it always was, a lobbying document to kill off legislation that applies equally across the entire sector in December, 2015," Ms O'Dwyer said.
"There is nothing in this report that negates the need for legislation to lift the standard of accountability, transparency and choice across the entire superannuation sector.
"I look forward to working constructively with the Opposition, the crossbench senators and my colleagues to ensure the Turnbull Government can deliver on its commitment to put members' interests ahead of the self-interest in the superannuation sector," she said.
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