Super Members Council Chair Ann Sherry on good governance

The point of good governance is to deliver the best business results for your members or customers.

Having sat on boards with diverse governance models in finance, education, banking and tourism – both in Australia and overseas – the key is having a model that brings diverse voices and experience to the table to ensure management and executives have the appropriate challenge and accountability.

The equal representative governance model of profit-to-member super funds puts member interests at the very heart of its purpose and board decision making.

Equal representative governance means both employer and union representatives nominate candidates in equal numbers to serve as trustee board directors. Importantly, this model has flexibility to appoint directors with the specific skills and experience needed. Many funds appoint additional independent directors and chairs. 

As Super Members Council Chair, I have seen first-hand how this governance model gives super fund members a clear voice at the board table and gives boards direct access to their members. This embeds a unique protection of member interests and improves member-centred decision making.

In Australia, there can be a narrow view on what constitutes a good governance model, with the ASX model sometimes held up as the only option.

Yet representative governance is a common model overseas – and I have sat on the board of a major company in Europe that had staff representatives – and it bought a different voice to the decisions. For the world’s leading pension funds – which are different to listed companies as they are accountable to their members rather than shareholders – representative governance is the norm. The profit-to-member fund governance model is global pension fund best practice – not an outlier.

As a University Chancellor, too, I see the benefits of diverse board representation. University councils, for instance, include elected staff and students, government appointees, and other directors. This model ensures crucial insights.

As stewards of over $2 trillion in Australians’ retirement savings, the profit to member super sector continuously strives to further strengthen a fundamentally strong model – its success is supported by equal representation in governance.

Last week’s report into Cbus Fit and Proper processes is a case in point. Profit -to-member funds and their trustees have been closely examining the report to apply its insights.

Importantly, the independent Deloitte report dispels assertions that the model is a barrier to funds getting the skills and expertise they need to govern these large financial institutions.

Indeed, after interviewing directors who have served under the model and reviewing mountains of published material on fund governance – Deloitte says those critiques do not reflect the “robust governance mechanism” funds have in place to fill and maintain board positions “nor recognise the unique protection of member and employer interests by bringing those voices directly to a board meeting room”.

This is backed up by the Banking Royal Commission examination of the equal representative model finding no concerns. Commissioner Hayne found super fund boards must collectively possess relevant skills and experience to oversee the fund and grow members’ savings.

Where there can be no argument is that funds with the equal representation model have delivered significantly more for their members.

Over the past 20 years, profit-to-member super funds outperformed retail funds by 1.6% on average annually. That performance edge means $190,000 more at retirement for the average Australian.

The top 10 performing super funds over the decade to 30 June 2024 were all profit-to-member funds with representative governance models – that’s not a coincidence, it’s a reflection of the performance of the governance model and its member-centred purpose.

Member and asset growth coupled with stronger merger activity means profit to member funds are bigger, with the average fund size nearly four times that of others in the APRA-regulated sector.

This scale means the funds are lower cost – operating expenses average 0.24% of assets, less than half that borne by members in other funds.

The key to continue to deliver for members as funds grow and the system matures with more members in retirement, is continually ensuring boards have the right mix of skills and experience.

Getting a strong mix of skills is a conversation for all sectors. What the equal representation model does is bring people with fresh capability and experience to Australia’s non-executive director pool.

Boards must always strive to deliver the high standards of service members rightly expect. When those standards are not met, it’s unacceptable. When I speak to directors about this, they are determined to meet this expectation.

As Australian super funds continue to grow and evolve, a member-centred composition and diverse mix of skills and experiences on their boards is crucial to navigate future challenges and deliver the best retirements for their members. The equal representation model puts members at the very centre of its purpose – and delivers more money for members as a result.

Ann Sherry AO is Chair of the Super Members Council. She is also a NAB Director, Queensland Airports Limited Chair, Queensland University of Technology Chancelor and UNICEF Australia Chair.