Tom Garcia
by Greg Bright
In a surprise supplementary submission to the Government over its proposal for compulsory independent trustee directors on big super fund boards, AIST last Friday launched a stinging attack on the proposal and APRA’s involvement. AIST questioned APRA’s role in defining, interpreting and judging the ‘independence’ of trustees.
The AIST submission, announced on Friday, July 31, supplements its views presented to the Government just a week earlier, on July 23. Tom Garcia, AIST chief executive, announced the submission.
Unlike previous commentary about the proposal from both AIST and individual not-for-profit super funds – as well as the Industry Super Network – AIST has adopted a legalistic approach, questioning whether APRA should have the ability to add to and decide on new requirements for independence above those in the established SIS legislation.
The new AIST submission recommends:
> That the key terms of the definition of ‘independent’ should be defined in the legislation and not in APRA Standards
> That the term ‘material relationship’ should relate to the nature of the relationship, not the mere existence of a relationship that may not be material
> That APRA not be granted the power to make determinations on an individual’s independence or lack thereof but, rather, give guidance to RSE licensees where it is requested or required
> That the mandatory composition of audit and remuneration committees be revisited and that there be no requirement for a majority of independent directors on those committees where there is no financial conflict
> That further guidance on the appointment and removal of directors be outlined in SPG 510 but that any changes to SPS 510 recognise the rights and powers of sponsoring organisations
> That the transition timeline (from July 2016 over three years) be extended, and
> That the requirements of the transition plan be clarified and achievable if required within the proposed short timeframe.
The submission says: “AIST submits that the costs and risks associated with the adoption of the reform package are not supported by evidence that demonstrates beneficial outcomes for RSE licensees and their members. AIST has made representations to the Treasury opposing the introduction of the legislation.”
The new AIST submission is worth reading. It encapsulates the consensus thinking among big not-for-profit funds and throws some interesting legal questions into the mix.
My view, for what it’s worth, is that AIST and the funds it represents are probably best to just let the issue go. Annoying as it is to have one-third ‘independent’ directors prescribed by legislation and then adjudicated by APRA or any other group of public servants, the general thrust is probably inevitable.
Not-for-profit super funds have taken the lead on many issues since the 1980s when the industry was re-born, to the betterment of all Australians, and I hope they continue to do so. However, this one is not worth fighting over.
