Mercedes

A- A A+

What happens if trustees lose it?

27 May 2014  |  Super

Lose itDIY super funds are fiercely independent in spirit. But they are not usually independent in structure. They are run by people who want to be free to make their own investment decisions, but they rarely have an independent trustee whose job it is to scrutinise the investment decisions. What happens, for instance, if the trustees have health issues that harm their judgement?

Mercedes

A report by Towers Watson about corporate governance is a wake up for self managed super trustees. How many of them have boards that come up to these standards?

"It seems clear to most people in the industry that a superannuation trustee board should consist of appropriately qualified people who, collectively, are able to exercise their judgement in the best interests of the beneficiaries, without favouring one class of beneficiary over another. But what does that actually mean for the composition of trustee boards?
There has been a lot of discussion recently on the governance of superannuation fund boards and, in particular, the need for independent directors on their boards. Given the growing significance of superannuation to both the Australian economy (105% of GDP in 2013 and growing1) and to the members it serves, we believe this is an important discussion to have every now and then.
This View explores the key principles of good governance, the expert opinions of David Gonski and Roger Urwin on the topic, the board appointment process, what independence on boards really means and whether independent directors should be mandated.
We conclude that the case has not yet been made for the compulsory appointment of independent directors, but it should be encouraged as best practice especially where it can add value to the overall composition and decision making of the board. In instances where a board believes that it does not need any independent directors, we would suggest they document their reasoning for future reference, and consider communicating it to their members. They would also be very well prepared if the regulator was ever to question the composition of the board.
We also believe there should be more public discussion on an appropriate definition of an independent director in order to obtain more widespread agreement in the industry. In the meantime, if a board chooses to appoint independent directors, then we suggest that they disclose to their members the independence criteria they adopted, and to regularly re-assess their independent directors against those criteria as circumstances may change over time."

There is increasing pressure to ensure there are independent trustees on boards. It castes an interesting light on SMSFs, which rarely even consider such issues:

"We believe the case has not yet been made for the compulsory appointment of independent directors, but it should be encouraged as best practice especially where it can add value to the overall composition and decision making of the board. In instances where a board believes that it does not need any independent directors, we would suggest they document their reasoning for future reference, and consider communicating it to their members. They would also be very well prepared if the regulator was ever to question the composition of the board.
We would also encourage more public discussion on an appropriate definition of an independent director in order to obtain more widespread agreement in the industry. In the meantime, if a board chooses to appoint independent directors then it would be good practice for the board to disclose to
its members the independence criteria they adopted, and to regularly re-assess their independent directors against those criteria as circumstances may change over time."

 

 


Submit a comment

Word Count: 0

Mercedes


Similar articles from Super

Want to pay for financial advice? Buyer beware.

 | 5/26/2014

BewareSuper investors have to assume responsibility for what happens to their own money. There is good financial advice available, but there is also a lot of self interested advice being proffered. It is very much a case of "buyer beware".


Government leaves super alone

 | 5/13/2014

Australian GovernmentSuperannuation has been left untouched in the Budget. Its tax advantages remain intact. The rise in contributions has been put off, however. The treatment of excess contributions will also change.


Non concessional contributions changes

 | 5/13/2014

2014 upwardsAny investor looking to give their super fund balance a boost by making a non-concessional contribution, needs to be aware of some changes to the limits that will soon come into play.


Dodgy doings in industry funds

 | 5/8/2014

DodgyA scandal about the activities of managers in an industry fund underlines the importance of good corporate governance. There are also lessons for self managed super fund trustees about their own conflicts.


Part 1. An introduction to Superannuation

 | 5/4/2014

Info ButtonIf you have been thinking about setting up a SMSF there are some background issues you need to consider.


 

Subscribe

Subscribe to the Personal Super Investor weekly email to keep abreast of developments in SMSF law and investment markets. SMSF investors looking to improve investment returns from shares, property, cash or other specialised investments, will find the PSI weekly newsletter an invaluable resource.

Subscribe now »

Mercedes