The Bernie Fraser review of industry superannuation fund governance puts the onus of proof back on the government to demonstrate that one-third independent boards are the best way forward.
"It is far from self-evident that simply mandating minimum numbers of 'independent' directors will deliver quality or 'best practice' board governance for all super funds: that case has to be made, not inferred or asserted," Fraser said.
His review, published almost a year since its due date, goes on to say the original Superannuation Legislation Amendment (Trustee Governance) Bill and its attack on the equal representation model of not-for-profit funds "is contrary to the support shown worldwide for this model, including in a majority of OECD countries."
Fraser said the Australian Institute of Superannuation Trustees (AIST) should implement his four recommendations in its new governance code developed in tandem with the review. Notably, he suggests director tenure be subject to reasonable discretion rather than rigid rules and that board governance could be improved with a renewed focus on gender equality.
AIST released its draft governance code yesterday, reinforcing the importance of member representation on the boards of superannuation funds and with the aim to keep profit-to-member funds positioned "at the leading edge of governance practices."
The code is proposed to start date on 1 July, 2017 and has been circulated to the AIST membership for feedback and consultation. It will apply to more than 50 profit-to-member funds with recommendations that exceed existing legal and APRA regulatory requirements on Australian super funds.
Outgoing AIST chief executive Tom Garcia said the code - modelled and built around the ASX Corporate Governance Principles - reflects the importance of safeguarding members' retirement savings through robust governance practices.
"Despite the overwhelming legal and regulatory requirements that already apply to super funds, AIST believes more can be done to safeguard members' compulsory retirement savings," Garcia said.
The code covers a broad range of governance issues, with 22 recommendations including recommendations on member engagement opportunities; equal director voting rights; strong risk culture; board renewal, chair appointment, disclosure, transparency and remuneration.
The code requires funds to maintain an equal representation governance structure (involving both member and employee representation) whilst also allowing the appointment of up to one third independent (non-representative) directors.
Federal Minister for Revenue and Financial Services, Kelly O'Dwyer, slammed both the Fraser review and the AIST's governance code.
"I am pleased that ISA and AIST have finally conceded to the release of 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," she said.
"Given that it recommends adoption of the AIST's draft code of governance which appears to at best entrench the status quo and at worst further dilute the value of independent directors on superannuation fund boards, what is clear from this almost 15-month review is that we could have had very reasonable independence requirements legislated since 2015.
"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."