Push to reveal fund manager pay

FUND managers would be forced to disclose their pay packets under proposed new laws aimed at boosting transparency in the $1.3 trillion superannuation system.

By InvestSMART · 13 Mar 2012

By InvestSMART ·
13 Mar 2012

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FUND managers would be forced to disclose their pay packets under proposed new laws aimed at boosting transparency in the $1.3 trillion superannuation system.

Independent senator Nick Xenophon is preparing legislation designed to give fund members more information about their retirement savings, including more disclosure of fund manager pay.

Top fund managers can earn millions of dollars a year for managing Australia's super savings, but details of their pay are closely guarded in what Senator Xenophon described as an "anomaly".

"The transparency framework for super funds hasn't caught up with their exponential growth or their critical importance to the savings of millions of Australians," Senator Xenophon said.

"If you're pocketing millions of dollars in fees from handling billions of dollars of other people's money, what's wrong with disclosing that? These fund managers need to be accountable."

Senator Xenophon, who will aim to release the draft legislation next month, said disclosure could be boosted without adding unnecessary red tape.

But any move towards greater disclosure is opposed by the industry, which argues fund manager salaries are "proprietary information" and should be kept confidential. The Financial Services Council also argues that the fees paid by members from their super funds are already disclosed and are more relevant, a stance backed by Mathias Cormann, the Coalition's shadow assistant treasurer.

"In super, we believe that remuneration where paid from the super fund should be disclosed," he told BusinessDay.

When asked to comment on the issue, Superannuation Minister Bill Shorten said: "Better disclosure should be the aim of all those who operate in the financial services industry."

According to IBISWorld, Australia's super fund management industry is on track to reap $9.4 billion in revenue from fund members this financial year, in what would be the sector's best year since 2008.

Listed companies are required to disclose the pay packets of key management personnel in their annual reports. Most listed fund management groups do not include their top fund managers, even when they earn more than those executives whose salaries are made public.

One exception is British-based First State, whose parent company Commonwealth Bank disclosed the salaries of top-earning members of its investment teams in its 2011 annual report.

These included Martin Lau, director greater China equities, whose $7.6 million total package was boosted by almost $7 million in long-term incentives, and Stuart Paul, joint managing partner of the Asia Pacific and global emerging markets equity team, whose total package of $8.2 million included almost $7.3 million worth of long-term incentives.

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Frequently Asked Questions about this Article…

What is the proposed fund manager pay disclosure aimed at improving superannuation transparency in Australia?

Independent senator Nick Xenophon has proposed laws that would force fund managers to disclose their pay packets to boost transparency in Australia’s $1.3 trillion superannuation system. The draft legislation is expected to be released next month and is intended to give fund members more information about how their retirement savings are managed.

Why do advocates say disclosing fund manager salaries matters for everyday super fund members?

Supporters argue disclosure increases accountability and transparency when top fund managers can earn millions a year managing billions of members’ money. Greater visibility is intended to help members understand who is being paid from the system and why, without necessarily adding unnecessary red tape.

Who opposes greater disclosure of fund manager pay and what are their reasons?

The fund management industry opposes broader pay disclosure, calling individual salaries 'proprietary information' that should remain confidential. The Financial Services Council also says the fees members pay are already disclosed and are more directly relevant to members than individual pay packets.

What do Australian politicians say about disclosing remuneration in the superannuation sector?

Senator Nick Xenophon has pushed for stronger disclosure and plans to release draft legislation. Superannuation Minister Bill Shorten has said better disclosure should be an aim of the financial services industry. Coalition shadow assistant treasurer Mathias Cormann has noted that fees paid by members are already disclosed and has said remuneration paid from a super fund should be disclosed.

Are fund manager salaries already disclosed by listed companies in Australia?

Listed companies must disclose pay for key management personnel in their annual reports, but most listed fund management groups do not include top fund managers in those disclosures even when those managers earn more than reported executives. Disclosure practices vary by company.

Which companies have publicly disclosed top fund manager pay?

One notable example is First State, via its parent Commonwealth Bank, which disclosed salaries for top members of its investment teams in its 2011 annual report. That report showed large total packages—for example, Martin Lau’s $7.6 million package and Stuart Paul’s $8.2 million package, much of which came from long‑term incentives.

How large is Australia’s fund management industry and how much revenue does it generate for managing super funds?

According to IBISWorld, Australia’s super fund management industry is on track to earn about $9.4 billion in revenue from fund members this financial year—potentially the sector’s best year since 2008—while the overall superannuation system holds roughly $1.3 trillion in assets.

How might greater disclosure of fund manager pay affect the fees or information available to super members?

Proponents say disclosure would give members more information about who is being paid to manage their savings and improve accountability. The industry counters that member fees are already disclosed and are the more relevant figure for most investors. The proposed changes focus on transparency rather than directly mandating fee reductions.