Xenophon plan demands clarity on fund managers' 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

Comments

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.

The independent senator Nick Xenophon is preparing legislation designed to give fund members more information about their retirement savings, including measures requiring more disclosure of fund manager pay, he said.

Top fund managers could earn millions of dollars a year, but details of their pay were 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," he said.

Senator Xenophon said he would release the draft legislation next month, adding that disclosure could be improved without adding unnecessary red tape.

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

When asked to comment, the 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.

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

Go to Google News, then click "Follow" button to add us.

Share this article and show your support

Frequently Asked Questions about this Article…

What is the proposed change to fund manager pay disclosure for superannuation funds?

Independent senator Nick Xenophon is preparing legislation that would require fund managers to disclose their pay packets, aiming to boost transparency in Australia’s $1.3 trillion superannuation system. A draft of the proposed law was due to be released next month, and the goal is to give fund members more information about how their retirement savings are managed.

Why does Nick Xenophon want more transparency on fund manager pay?

Xenophon says the current transparency framework hasn’t kept up with the growth and importance of super funds. He argues that top fund managers can earn millions but their pay details are often closely guarded, creating an anomaly that leaves fund members without clear information about where their money goes.

How would pay disclosure affect everyday super fund members?

Greater disclosure of fund manager pay would give members clearer information about how their retirement savings are being spent and increase accountability. The article notes that while member fees are already disclosed, revealing manager remuneration would be an additional layer of transparency for investors to consider.

Who opposes increased disclosure of fund manager salaries and what are their arguments?

The industry opposes broader disclosure, arguing that fund manager salaries are proprietary information that should remain confidential. The Financial Services Council also says fees paid by members are already disclosed and are more relevant. At the same time, Coalition shadow assistant treasurer Mathias Cormann said remuneration paid from a super fund should be disclosed, showing there are differing views on scope.

Aren’t some companies already required to disclose key management pay?

Yes—listed companies must disclose pay for key management personnel in their annual reports. However, the article says most listed fund management groups do not include the top fund managers in those disclosures, so current rules don’t always capture the highest-earning investment professionals.

Are there real examples of disclosed fund manager pay?

Yes. The article highlights British-based First State (via parent Commonwealth Bank) as an exception. Its 2011 annual report disclosed senior investment team packages, including Martin Lau with a total package of $7.6 million (boosted by almost $7 million in long-term incentives) and Stuart Paul with $8.2 million (including about $7.3 million in long-term incentives).

Could requiring pay disclosure create extra red tape for funds?

Xenophon believes disclosure can be improved without adding unnecessary red tape. The industry, however, warns that forcing disclosure of proprietary salary information could be burdensome. The final drafting of any law would determine how much administrative work is involved.

How big is the superannuation and fund management sector discussed in the article?

The article refers to Australia’s $1.3 trillion superannuation system. According to IBISWorld, the super fund management industry was on track to earn about $9.4 billion in revenue from fund members in that financial year—potentially the sector’s best year since 2008.