The prudential regulator has signalled it will enforce a new super fund law in a stringent way that could diminish union influence in the sector.
Australian Prudential Regulation Authority member Helen Rowell told the Australian Financial Review that industry super funds would need a “compelling” reason to justify not appointing a majority of independent (non-union) directors.
Earlier this year, the Abbott government passed a law that will require one-third of super fund directors to be independent by July 2017, while also requiring boards to give a valid reason if they did not appoint a majority of independent directors by July 2019.
Ms Rowell claimed APRA was having “slightly firmer conversations” with funds about the governance changes, describing it as a “significant step change in governance of the industry”.
Her comments seemed to indicate the watchdog would enforce the law strictly.The AFR interpreted this as increasing the likelihood that many industry fund boards would become majority independent, and thus non-aligned with unions.
“We will expect them to articulate a reasonable and sensible process for doing or not doing [a majority of independents],” Ms Rowell told the AFR.
“I understand the attitudes out there for maintaining the equal representation model for the remaining two thirds of directors.
“But from APRA’s perspective we want to see a little more to the reasoning funds give for maintaining that than ‘we’ve always been equal rep’.”
The peak industry super body criticised the development.
“The evidence of persistent outperformance of industry super and other representative trustee funds should caution against radical change,” Industry Super Australia CEO David Whiteley told the AFR.
“While proposals to change the face of industry super funds may suit the bank-owned super funds, it will risk members’ super savings.”
As part of its response to the Murray Inquiry, the Turnbull government also promised this week to increase competition for default fund status, which is currently dominated by union-aligned industry funds.