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Monday, 19 October 2015
Page: 11644

Mrs PRENTICE (Ryan) (20:28): I rise to support the Superannuation Legislation Amendment (Trustee Governance) Bill 2015. The bill delivers on an election commitment to improve governance in the superannuation industry. It updates laws enacted at an earlier time in the evolution of Australia's superannuation system, when the industry was far newer and far smaller than it is today.

These days, the superannuation industry has more than $2 trillion in assets under management, a figure equivalent to 120 per cent of Australia's GDP. As the former minister noted in introducing the bill, this figure is expected to grow to $9 trillion by 2040. It is an industry in which most of us have a stake. For many Australians, their superannuation fund is their largest single investment outside the family home. This bill affords the protection of a governance regime that will better safeguard the superannuation accounts of all Australians. In light of the current size and anticipated future growth of the industry, it is both reasonable and necessary to bring governance requirements for all superannuation funds up to best-practice standards and, importantly, in line with those expected of corporate superannuation funds and Australian Stock Exchange listed companies.

This bill does just that. It modernises board requirements to ensure that super fund boards represent the broad range of skill sets required to manage a sophisticated investment vehicle. At present, corporate and industry super funds are required to have equal numbers of employers and employees or member representatives. However, the number of independent directors is currently limited to one in the absence of Australian Prudential Regulation Authority one-off approval. This bill will ease limitations on the number of independent directors and will instead require superannuation trustee boards to have a minimum of one-third independent directors as well as an independent chair. This is not an unreasonable requirement. Indeed, other corporate sectors such as listed companies, banks and general insurers all require, as a minimum, a majority of independent directors with an independent chairman. It is also international best practice in many countries overseas. No one particular sector of the industry is targeted by this bill, as the changes apply equally to all corporate, industry, public sector and retail funds.

The origins of this bill can be traced back several years to the recommendations of the 2010 Cooper review, commissioned by the former government. That review recommended that superannuation trustee boards include a higher number of independent directors. The findings of the Cooper review were reflected in the more recent financial system inquiry, which came to similar conclusions. The superannuation industry has had several years to consider the merits of this proposal.

Positive feedback for the reforms has come from a diverse range of organisations and industry bodies such as Choice, National Seniors Australia, the Association of Financial Advisers, the Association of Superannuation Funds of Australia, the Financial Services Council, the Australian Chamber of Commerce and Industry, the Australian Institute of Company Directors, the Business Council of Australia, chartered accountants, the Council of Small Business Australia and the Governance Institute. Industry players themselves have also been supportive, including BT Financial Group, Qantas Super, First State Super, LGsuper, Mercer, Suncorp, Sunsuper, UniSuper and VicSuper—to name just a few.

It is clear that the proposed reforms have support from a broad cross-section of the industry and from organisations representing interest groups that would be affected by this change to the industry. Indeed, in some respects this bill merely represents government catching up with a position that the industry has already embraced and is moving towards. Industry super funds such as Catholic Super, First State Super, Hostplus, Prime Super, UniSuper and VicSuper are already moving constructively towards incorporating the changes. In doing so, there is broad recognition that improving corporate governance is a goal worth pursuing. Irrespective of performance, independent of any consideration of investor return, super funds are recognising that their board structures need to evolve. They recognise that everyday investors need to have full confidence that the board has their best interests at heart and has the skill and capacity to act in their interests.

I note with interest that other commentators have recognised the need for change. Members opposite may be interested in the comments of former Australian Workers' Union boss Paul Howes, who noted:

Equal representation has been a success but the evolution of the super industry is important and I can't see anything negative in having more independents on boards.

We know from experience that the parliamentary Labor Party has a long record of heeding the words of Mr Howes. In fact, I remember a certain evening back in 2010 when a mere appearance by Mr Howes in a late-night ABC interview was enough to bring down a Labor administration. To those opposite, I urge them to heed his words again. This time, I can assure them they will not live to regret it. Mr Howes's support serves to further highlight the point that unions have nothing to fear from these reforms.

Industry super funds with a commitment to good corporate governance have nothing to fear from these reforms. The reforms contained in this bill protect the interests of everyday Australians with superannuation accounts. They will improve confidence in the corporate governance arrangements of superannuation funds, and they bring Australian superannuation funds in line with national and international best practice. This bill is worthy of the support of all members in this place and I encourage them to get behind it. I commend this bill to the House.