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 Code, which consists of 8 principles and 21 requirements, aims to promote continuous improvement in governance practice, improve accountability and transparency, and protect and improve outcomes for members.

As part of the implementation of the Code, AIST appointed a three-member independent Governance Code Monitoring Panel responsible for monitoring, engagement, reporting, and other Code-related activities.

Key milestones

The Code became mandatory for AIST member on 1 July 2018 and fiscal year

2021 was the third full year of reporting by member funds.

The Panel’s assessment of fiscal year 2021 reporting is available here. The report analyses 37 AIST member compliance reports submitted to the Governance Code Monitoring Panel. It finds that the funds have continued to improve their level of compliance. The Panel identified four requirements where governance practice and reporting can improve:

2.2 Maintain a matrix showing skills, experience and diversity which acknowledges gaps the board will fill to fulfil its strategic plan; disclose a representation of the matrix;
1.4 Demonstrate a written diversity policy setting out measurable objectives with annual reporting to ensure broadest talent pool is tapped;
1.5 Annually evaluate performance of collective board and individual trustees; disclose the process and confirm annual implementation;
1.6 Have a documented process for evaluating senior management and disclose that the process was undertaken.

The Panel’s assessment of reporting for previous years are available:

Fiscal Year 2020

Fiscal Year 2019

Fiscal year 2022 is the fourth year in which funds will report and there is a requirement to have their boards sign off on the reports and submit them to AIST by 30 September 2022.

Revised Governance Code

In 2022 AIST held an extensive consultation with stakeholders and a revised Code was approved by the Board in July 2022. Funds will be required to report against the 2022 Code on 30 September 2023. The core content of the 2022 Governance Code is available here.

Governance Code resources

The Code Guidance provides legal and regulatory context and commentary on each requirement.

FAQs includes a range of information and special guidance for public sector funds.

Governance Code tools are the in process of being updated for 2020 reporting and will include revisions of the following:

2022 Governance Code Reporting Template provides a structured report designed for use by governance personnel responsible for preparing and submitting a fund’s compliance report for approval of their Board. It also assists the Panel to analyse the profit to member sector’s governance practices.

2020 Governance Code Helpful Hints for Reporting includes models for satisfactory explanations of compliance as well as leading practice examples for each of the 21 requirements.

Further information on the Code and/or reporting processes is available by contacting Holly Lindsay, AIST Senior Manager, Governance on +61 3 8677 3855 or by emailing hlindsay@aist.asn.au

The three-member monitoring panel is responsible for monitoring, engagement, reporting and other related activities in relation to AIST’s Governance Code. The Terms of Reference detail the Panel’s responsibilities and obligations.

The Panel Secretary is Holly Lindsay who can be contacted on hlindsay@aist.asn.au. Queries can also be sent to: govcode@aist.asn.au

Panel Members

Greg Brunner (Chair) – Greg has more than 20 years’ experience working for the World Bank and the Australian Prudential Regulation Authority (APRA). Mr Brunner was the chair of APRA’s Superannuation Industry Working Group from 2011-2016, and helped develop governance prudential standards and guidance.

Maree O’Halloran – Maree is a past employer-representative director of several profit -to-member funds, including her most recent role at HESTA for 5 years, which concluded in 2015. Ms O’Halloran is a former recipient of AIST’s Trustee of the Year award.

Michelle Wright – Michelle has nearly a decade of experience as a non-executive director across a range of financial service organisations and has experience serving on ethical standards boards in the healthcare sector.

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:

Merger Toolkit

Governance

Risk Management

Investment Governance

Outsourcing

Investment Language

Conflict Management Framework

Fit and Proper

checklists in editable word format