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Cleanout and reform long overdue after the wild ride at MTAA super

AFTER reigning supreme for 22 years as founding CEO, Michael Delaney will pack up his desk and shut the door on the MTAA Super's Canberra headquarters for the last time tomorrow, resigning his role in a myriad of senior executive and director-related positions.

AFTER reigning supreme for 22 years as founding CEO, Michael Delaney will pack up his desk and shut the door on the MTAA Super's Canberra headquarters for the last time tomorrow, resigning his role in a myriad of senior executive and director-related positions.

His departure which was flagged in early August heralds a new era for one of the country's biggest and most controversial super funds. His replacement is the subject of intense speculation, with the board yet to make an announcement. A spokesman said: "My understanding is that the recruitment process is still under way as you would expect, it is a very thorough process."

The board, which is itself in the process of a cleanout, will need to decide whether to appoint an internal or external candidate. The decision will send a strong message about how serious the fund is about bringing change.

MTAA has been the subject of a full-blown investigation by the prudential regulator the Australian Prudential Regulation Authority for some time. It has also been embroiled in a payroll tax investigation into the MTAA motoring trade organisation, which previously administered the super fund and which Delaney headed until last year.

This column revealed that in August 2010 Delaney wrote a letter to trustees that said the trustee of the fund had been "bedevilled by APRA" for years, had been subject to "lurid" allegations by APRA and had been issued with a show-cause notice.

And in the case of the payroll tax investigation, a letter, written in March by the Department of Treasury's ACT Revenue Office, reveals the government office was having trouble reconciling two sets of accounts that exist in relation to the amount the motor trade association MTAA paid to MTAA Super directors. For instance, the total directors' fees MTAA declared in its payroll tax returns between 2005 and 2010 totalled $1.17 million, compared with a total of $2.9 million stated in its profit and loss accounts filed with ASIC.

The goings on at MTAA Super and MTAA have made them the poster child for change in the country's $1.3 trillion super fund industry. Some of these changes, including a new governance model and moves to bring its asset allocation into line with its target return portfolio of 40 per cent, are believed to have been at the direction of APRA.

MTAA Super chairman John Brumby told members in August he would introduce changes to improve its "transparency, accountability and governance".

This included publicly releasing its annual accounts as well as the remuneration of directors and the top five executives by bands and making available biographies so that members could see the faceless men and women who were overseeing or running their $6 billion in retirement savings. Unfortunately, some of this is yet to materialise. The MTAA Super website is yet to post the bios of its directors, including Brumby. A spokesman for the MTAA tried to play down this inaction by saying "there is little point in putting bios up of directors who will cease office imminently, but once the new board is announced the bios will go up."

While it is true that most of the directors will retire from the board later this month, it wasn't the case when Brumby made his statement more than three months ago. Posting bios on a website is a simple and quick job that would have been interpreted as a show of good faith.

While the financial accounts are now available online, transparency in remuneration has a long way to go. The fund has lumped directors' fees and executive salaries together and disclosed them in wage bands of $75,000.

Given the revolving door of three chairmen in the past year, providing information that four directors or executives received between zero and $75,000 and another seven received between $75,000 and $150,000 makes is confusing and is not a good indication of who is getting paid what. While it is better disclosure than what most industry funds provide to their members, it is still a far cry from the detail that listed companies are required to provide to their shareholders.

Most super funds don't bother informing members who the directors of the fund are or how much they are paid. This means members don't get to know who is looking after their retirement funds, how often these directors attend meetings or how long they have been on the board.

For MTAA members it has been a wild ride, with the fund going from being the top performing fund four years ago, to the worst in 2009. To put it into perspective, in June 2008 members' funds totalled $6.1 billion, compared with $6.01 billion three years later, yet over the same period almost $3 billion came into the fund in contributions.

The fund is desperately trying to claw its way back up the performance charts, but it has a long way to go. Its latest financial accounts show that the fund's net cash inflow from operating activities has fallen 68 per cent in the past two years from $540 million to $173 million.

It shows it has been busy selling a number of assets including its stake in the Australian Post building in Burke Street for $120 million, 50 per cent in a land holding in south-east Queensland for $45 million, its stake in Adelaide Airport and a shareholding in Thames Water. MTAA has a long way to go to restore credibility, let's hope 2012 marks a new beginning not just for the fund but other industry fund governance laggards.

aferguson@fairfaxmedia.com.au


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