Retail funds in pledge to lift standards on governance

Proposed policies flagged by the Financial Services Council, which represents retail or "for-profit" super funds, will require boards of funds to appoint an independent chairman and have a majority of independent directors - defined as someone not employed by the company running the fund.

The standards would also require funds to disclose, in a way easily accessible to members, the remuneration paid to directors and management, and would bar directors from holding multiple super fund board positions.

Funds would also be required to adopt and publish policies on environmental, social and governance risk, and to cast and disclose their proxy votes at annual meetings.

The move follows criticism of what the 2010 Super System Review - led by former Australian Securities and Investments Commission deputy chairman Jeremy Cooper - called a lack of "systemic transparency", with standards of disclosure lagging those of listed companies despite fund members being compelled by law to invest in super.

The FSC standards are still to be finalised but will come into force in July 2013, when the Australian Prudential Regulation Authority will roll out its own rules for super funds in a move linked to the federal government's Stronger Super reforms.

But the FSC chief executive, John Brogden, said the new rules would go "over and above" APRA's yet-to-be-finalised standards.

APRA has flagged a likely requirement for funds to publish remuneration policies and the pay of directors and executives, but has shied away from imposing a minimum number of independent directors on boards and an independent chairman.

Mr Brogden said lifting standards of governance in super was "long overdue".

"This is quite a radical step forward," he said. "Having said that, these standards are exactly what a superannuation fund would expect of a company in which they invest."

Mr Cooper, now chairman of retirement incomes at FSC member Challenger, said the FSC's move was a "really positive step" and resembled measures recommended by the Super System Review.