AIST influences policy to make Australia’s
super system fair & sustainable for everyone.

Leading practice governance

AIST is committed to promoting leading practice governance in Australia’s profit-to-member superannuation sector. Fundamental to this is supporting the unique representative board structure that is the defining feature of profit-to-member super funds. AIST supports leading practice governance through our Governance Code and specialised programs including AIST’s Trustee Director Course, year-round trustee training and education, toolkits and the Trustee of the Year Award.

Representative Model

The profit-to-member superannuation fund sector is unique in Australia as it operates under a governance model with equal numbers of employer and employee representatives appointed or elected to the trustee board.

The model has an unrivalled track record, delivering out-performance through a members-first culture, in-built diversity of thought and real-world experience on the board. Direct representation of super fund members on the board promotes decisions aligned to members’ interests. Representative boards include leaders from the industries where their members work. These are key reasons why profit-to-member funds avoid the systemic conflicts observed in bank-owned super funds and other parts of the super sector. By making decisions in the interests of super fund members, funds with representative boards have consistently outperformed funds with different, non-representative governance models over the short, medium and long-term. Evidence of the outperformance of funds with representative boards has been found by the Productivity Commission.

In addition to representative directors, some profit-to-member funds appoint ‘non-representative’ or independent directors. AIST’s Governance Code gives the flexibility to funds to appoint up to one third independent directors.

Good governance leads to better decisions and within a superannuation environment it can enable:

Prioritisation of a long-term investment strategy which maximises return to members;
Lower fees and costs;
Enhanced engagement and communication leading to better members services;
Stronger compliance with regulatory requirements reducing need for regulatory intervention;
More effective risk management; and
Stronger accountability of decision making and transparency of how decisions are made.

The 2018 Financial Services Royal Commission highlighted that the relationship between trustees and members is not immune to profit conflicts. Many examples were identified in the retail sector funds where representative boards are not used.

AIST’s Actions to Advance Leading Practice Governance

AIST is committed to continuous improvement of our successful governance model. This is undertaken in a range of ways:

Implementation of the Governance Code : Our principles-based Code goes beyond current regulatory requirements, creating a new standard of leading practice in Australia.
Director training and education.
Guidance in the following areas: board structure, recruitment and succession planning, management of conflicts of interest, board committees, relationships with nominating bodies and service providers, remuneration policy and disclosure, governance charters and codes of conduct, assessment and monitoring of the fitness and propriety standards, and disclosure and transparency matters.

AIST's Governance Code is a principles-based framework which goes beyond current regulatory requirements, cementing a high benchmark of practice in Australia. The 2022 Code is the second edition of the Code. It consists of 8 principles and 22 requirements and aims to promote continuous improvement in governance practice, improve accountability and transparency, and protect and improve outcomes for members.

Governance Code reporting

In the fiscal year 2022/23 funds will not be required to submit reports to AIST against either the 2022 or the 2017 version of the Code. Funds are still encouraged to review their practices against the 2022 version of the Code to ensure that they meet or exceed the requirements.

The next code reporting period will be 2023/24 fiscal year against the 2022 version of the code.

Governance Code resources

Governance Code Leading Practice Examples 2023 includes models leading practice examples for a selection of the 22 requirements based on the 2017 version of the Code.

Further information on the Code and/or reporting processes is available by emailing govcode@aist.asn.au or Holly Lindsay, AIST Senior Manager, Governance.

Key milestones

The original (2017) Governance Code became mandatory for AIST member on 1 July 2018 and fiscal year 2022 was the fourth full year of reporting by member funds.

The independent assessment of fiscal year 2022 reporting is available here . The report analyses 31 AIST member compliance reports against the 2017 version of the Code <pls put a link in to the ‘old’ code>. It finds that the funds have continued to improve their level of compliance. Five areas where governance practice and reporting were identified:

Diversity: Demonstrate a written diversity policy setting out measurable objectives with annual reporting to the Board and members to ensure the broadest talent pool is tapped (Requirement 1.4).

Board Evaluation: Annually evaluate performance of the collective board and individual trustees; disclose the process and annual implementation (Requirement 1.5).

Evaluation of Senior Management: The Board of a profit-to-member superannuation fund must have a documented process for evaluating the performance of the senior management. The fund should disclose whether such a performance evaluation was undertaken during the reporting period (Requirement 1.6).

Skills Matrix: Maintain a matrix showing skills, experience and diversity which acknowledges gaps the board will fill to fulfill its strategic plan; disclose a representation of the matrix (Requirement 2.2); and

Chair Skills and Experience: The Chair of a profit-to-member superannuation fund Board must be appointed by the Board and must satisfy all the requirements of skill and experience identified in the fund’s skills matrix for the role of Chair (Requirement 2.5).

Assessment of reporting against the 2017 version of the Code for previous years are available:

Fiscal Year 2021

Fiscal Year 2020

Fiscal Year 2019

AIST is committed to helping its members maintain strong governance practices that benefit the members of profit-to-member superannuation funds. For this reason, AIST has developed a series of tools for its members.

Governance & Operational Toolkits provide practical tools to assist with the development and implementation of prudential requirements, and other fund operational matters.They include tools such as checklists, flowcharts, diagrams and decision trees to assist trustees with understanding and applying their obligations.

Governance Toolkits are currently available on the following topics:

Conflict Management Framework

Fit and Proper

checklists in editable word format