Transparency vow by funds

Proposed new policies flagged by the Financial Services Council, which represents retail or "for-profit" super funds, will require boards of super funds to appoint an independent chair and to 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 senior 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 company annual meetings.

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

The new 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 new governance rules for super funds in a move linked to the federal government's Stronger Super reforms.

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

APRA has flagged a likely requirement for funds to publish their 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 chair.

Mr Brogden said a lift in standards of governance 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 the measures recommended by the Super System Review.

While some funds had already adopted similar standards of transparency and governance, others would need to change practices to comply with the new polices, Mr Cooper said.

Mr Brogden challenged the rest of the super sector to meet the same standards, especially the rival industry super funds. Industry funds use an "equal representation" model for their boards, under which directors represent either employers and employees and are therefore not considered "independent".

But David Whiteley, Industry Super Network chief executive, said the equal representation model had served members well. He said there was "increasing expectations" in the community for higher standards of disclosure and transparency, "which the industry as a whole should be looking to meet, and go beyond".