Submission – Proposed changes to governance
Strong governance is the foundation for protecting and growing members’ retirement savings, sustaining trust in the super system and ensuring trustee boards retain their strong focus on members’ best financial interests. Effective governance supports sound decision-making, clear accountability, prudent risk management, and a laser-like long-term focus on delivering retirement security for working Australians.
SMC supports considered reforms to the prudential standards including proposed evolutions to deliver clearer board accountability, improved succession planning, and a clearer delineation between board oversight and management implementation. Certain elements of the draft CPS 510 Governance (CPS 510) move in that direction and will support trustee boards as they continue to focus on what matters most – governing strong and effectively in members’ best financial interests. The overall effectiveness of the final standard is dependent on maintaining an appropriate balance between principles and prescription.
APRA’s consultation frames the review as a principles-based reform that seeks to set clear, contemporary expectations while respecting different business models and reducing unnecessary regulatory burden. SMC supports that objective. As currently drafted, however, several of APRA’s proposals risk moving CPS 510 toward a more prescriptive compliance model. This includes elements of the proposals on director tenure limits, expanded annual and triennial review obligations, more detailed conflicts management requirements, changes to fit and proper assessments, board delegation settings, and new management information expectations. Trustee boards are responsible for the governance, oversight and stewardship of their funds – and they are ultimately accountable for the effectiveness of those arrangements. APRA’s role is to establish clear prudential expectations and supervise compliance with those expectations. The final standard should strengthen governance while preserving this clear delineation of responsibilities. To achieve that, some further refinements to CPS 510 are needed so that the standard strengthens governance without substituting regulatory prescription for board responsibility. To support a clear, workable and genuinely principles-based final standard, SMC makes 13 recommendations for APRA’s consideration.
