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The NZ Superannuation Fund has made half-a-dozen fresh investments over the previous few months across an eclectic range of strategies including US timber, a quant trend-follower and a life science specialist.
Where super funds can learn from ASX on governance
(Pictured: Catherine Nance)
Super funds are stronger than ASX-listed companies in “a couple of areas of governance”, according to PwC partner Catherine Nance, but differences between the two areas reflect a “misalignment” of regulation of the overlapping investment pools.
Nance was the main speaker during a session on the governance of super funds, ‘Lessons from the Corporate Sector’, during the annual Australian Superannuation and Investment conference, organized by AIST last week in Alice Springs.
Two of the areas where super funds had stronger governance were in their conflicts policies and in having an enhanced role for the “prudent trustee”, she said. The “bests interests” policy of funds was similar to the “act ethically and responsibly” provision of companies, but super funds tended to use the policy too liberally, using it to justify almost any action.
An important distinction between the two systems of governance was that super funds’ governance rules were mandated, while the ASX adopted a policy of requiring companies to explain if they did not adopt any of their eight principles – the “if not, why not” system.
Key areas where the ASX principles differed included:
> ASX principles had a diversity (mainly focused on gender) policy. Nance said ASX was aware of other important areas of diversity, too, such as ethnicity.
> ASX looked for a board skills matrix, with induction ongoing PD training. There was a requirement that each director needed a clear understanding of financial statements.
> ASX encouraged an independent chair and a majority of independents on the board.
> ASX does not believe that tenure of individual directors, of itself, is an issue for boards. APRA encouraged funds to document their thoughts on tenure for directors.
The tenure issue attracted wider interest during the session, with panelist Michelle Blicavs, a trustee of NSW Local Government Super, saying she believed “12 years is enough, perhaps 10”. She said a trustee needed at least five years to get comfortable with the fund but there was a need to bring fresh decision making and discussions onto boards.
Tracy Matthews, trustee of Tasplan, said every board should look at individual skills of trustees, “although I don’t think everyone needs to be an accountant”.
Nance was not in favour of “black and white” rules on tenure, as long as trustees were adding value. The problem was, according to another comment, “how do you move them on when they are no longer adding value?”
Some super funds have trustee directors who have been on their boards for more than 20 years, which is a rarity in the corporate world except where they have significant stakes in the company.
