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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.
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.
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 were representative boards are not used.
AIST is committed to continuous improvement of our successful governance model. This is undertaken in a range of ways:
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.
The Code became mandatory for AIST member on 1 July 2018 and fiscal year 2019 was the first full year of reporting.
The Panel’s assessment of fiscal year 2019 reporting is available here. Funds demonstrated a strong commitment to governance and indicated that they met 84.9% of reporting requirements in fiscal year 2019. Funds reported partially meeting 12.1% and not meeting 3% of reporting requirements.
The Panel’s assessment of the explanations provided by funds for each reporting requirement indicated that 91.8% of all explanations were clearly written. In addition, funds indicated 143 planned improvement activities, suggesting that the Code is achieving its objective of improving governance standards.
Fiscal year 2020 is the second 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 2020.
The Code will be reviewed on a three-yearly basis to ensure that it continues to meet its objectives of improving governance; ensuring that the culture of the profit-to-member sector is fully supported by governance structures; and improving accountability and transparency. The first review of the Code is scheduled to take place in 2021.
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:
2020 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.
2019 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 firstname.lastname@example.org
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 email@example.com. Queries can also be sent to: firstname.lastname@example.org
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:
Business Continuity Management
Conflict Management Framework
Fit and Proper
Insurance Management Framework
Transitioning to the Australian Financial Complaints Authority
checklists in editable word format
In December 2015 the Australian Institute of Superannuation Trustees (AIST) and Industry Super Australia (ISA) asked Bernie Fraser to lead a review of governance arrangements in respect of profit-to-member superannuation funds and to propose a leading practice Governance Code for such funds.
Since that time Mr Fraser has engaged in an extensive consultation process with representatives of the industry superannuation funds and their union and employer sponsoring organisations, regulators, international experts, Senate cross-benchers and other parliamentarians.
On February 16, 2017 Bernie Fraser released his final report.
The review found profit-to-member superfunds’ governance model and member-first ethos is central to their persistent outperformance and avoidance of scandals affecting other parts of the finance sector.
The review also found that the Government has not adequately made the case for a mandatory quota of independent directors and members’ interests will be better served through a focus on directors’ values, skills and expertise.
To this end Mr Fraser has recommended Australia’s profit to member superannuation funds prioritise values, skills and expertise in a mandatory principles-based governance code to commence on 1 July 2017.
Such a code has been developed separately by AIST but in tandem with the Fraser review following a commitment made by AIST and Industry Super Australia to the Australian Senate.
For more information contact AIST on 03 8677 3800 or email@example.com