The Governance Institute of Australia is proposing superannuation members at not-for-profit funds be given the right to vote for trustee directors as a solution to the governance debate.
Governance Institute of Australia chief executive Steve Burrell said controversy around how many independent directors should be on the board of a not-for-profit super fund and what constitutes 'independence' could be resolved if members were granted the right to elect directors of their choice.
"There can then be no dispute about 'independence' because the members themselves have chosen the directors they believe will represent their best interests," Burrell said.
"Good fund governance starts with the basic principle that members must have a voice. Yet at the moment, members of most funds have no say in who represents their interests. That is currently decided by third parties."
The Institute has submitted to the Bernie Fraser-led review of governance arrangements at not-for-profit super funds which was set up as a result of Senate cross-benchers opposing federal government reforms. The review was part of a last-minute deal organised between cross-benchers, Industry Super Australia (ISA) and the Australian Institute of Superannuation Trustees (AIST). Submissions close today.
The Governance Institute's submission added members of other not-for-profit organisations have long had the ability to vote in directors of their choice and to hold them accountable with their voting power.
"There's no reason why NFP super fund members should not have the same rights in view of the growing size and importance of the retirement savings industry," Burrell said.
"With Australian superannuation now comprising the fourth largest pool of savings in the world and rising, members have a significant financial interest in their funds and every reason to be engaged in their investment."
The Institute has also told the Fraser Review that the governance code it is seeking to develop should not be limited to the issues of board composition and director independence, but encompass broader governance issues as well.
"We think the Fraser Review should consider not only adopting a wide-ranging fund governance code similar to the ASX Corporate Governance Council's principles and recommendations applying to listed entities, but also ensure that there is a disclosure obligation to members about how their super funds track against the code's recommendations," Burrell said.
Like the council's principles and recommendations, the recommendations in the code would not be mandatory but an 'if not, why not' disclosure requirement would promote transparency to members.