A long-awaited review into the governance of industry super funds by former Reserve Bank governor Bernie Fraser has found no grounds for legislation that would force boards to have a minimum number of "independent" directors.
The review, commissioned by industry groups Industry Super Australia and Australian Institute of Superannuation Trustees, said mandating a quota of independent directors would not necessarily deliver "best practice" and instead recommended a mandatory code of conduct be introduced across the sector.
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The Coalition tried unsuccessfully in 2015 to introduce new laws requiring super funds to appoint one third independent directors, including an independent chair.
The legislation was blocked when crossbenchers Jacqui Lambie, Glenn Lazarus, John Madigan and Nick Xenophon sided with Labor and the Greens to vote it down in favour of a review.
![''You've only got to look at the arithmetic,'' said former Reserve Bank governor Bernie Fraser.](/web/20170216123604im_/http://www.smh.com.au/content/dam/images/g/s/b/c/u/m/image.related.articleLeadwide.620x349.gue6ho.png/1487227150833.jpg)
Most industry funds currently follow an "equal representative" model, whereby the board is made up of an equal number of employer and employee directors nominated by employer associations and unions.
Mr Fraser, a former director of several large industry super funds, said it was "far from self-evident" that simply mandating minimum numbers of "independent" directors would deliver better performance.
"In the retail sector the mention of just two words – 'financial planners' – is sufficient to evoke visions of scales of harm and injustice that have heavily weighed down for-profit funds," he said.
Not-for-profit funds outperformed for-profit funds with independent directors by 1.5 to 2 per cent per year.
![Kelly O'Dwyer said the review was a ''lobbying document to kill off legislation''.](/web/20170216123604im_/http://www.smh.com.au/content/dam/images/g/q/a/x/9/c/image.related.articleLeadwide.620x349.gue6ho.png/1487226201407.jpg)
The proper focus was to get people with skills, commitment and values rather than those that satisfied a test of independence. This meant often the best person to chair the fund be someone who wasn't independent.
"You've only got to look at the arithmetic," he told a Parliament House press conference. "If you've got nine directors sitting around a table, and the government proposal is to pick the chair out of one third of them, which is only three, I would say that's not very sensible."
The legislation could actually reduce the number of independent directors needed on bank-owned super boards, given the current retail code of conduct calls for a "majority" of independent directors.
A spokesman for the Financial Services Council, which represents the big bank-owned retail funds, said consumers had a right to ensure their retirement nest eggs were governed by the highest possible standards. "These should be both consistent across all types of APRA-regulated super fund – retail, industry and corporate – and enforceable under a single legislative framework," he said.
Financial Services Minister Kelly O'Dwyer said the review was a "lobbying document to kill off legislation".
"The Turnbull government remains committed to legislation to improve the accountability of boards and member outcomes regardless of whether they are retail, industry or corporate funds," she said.
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