Superannuation fund governance is a sensitive issue. ASFA sees that striving for the best outcome for members is the paramount objective.

At the late August ASFA Board meeting, Directors unanimously adopted a fresh policy on superannuation fund governance. (See Box: ASFA Policy Position on Governance).

The purpose of this article is to set out the new policy and its rationale, as well as to briefly explain the process by which ASFA Policies are reviewed.

ASFA Policy Position on Governance, 2019

The ASFA Board has determined to modify ASFA’s position with respect to superannuation fund governance, in accordance with the findings of the Hayne Royal Commission.

In line with Commissioner Hayne’s findings, ASFA does not consider that Trustee Board (Board) composition or structure should be prescribed or legislated.

ASFA considers that the Board’s collective skill and capability is the primary principle that should guide Board composition.

All directors owe the same duties including to perform their duties and exercise their powers in the best interests of members.

In addition, we support that Board composition and renewal should be guided by the following principles:

  • Appropriate mix of skilled and experienced directors
  • Limit excessive tenure or undue turnover
  • Critically assess board performance, capability and outcomes achieved
  • Avoid or effectively manage actual or perceived conflicts of interest
  • Fully embed a fiduciary mindset across all decision-making

ASFA considers that Board composition is a matter for trustees to determine, in line with these principles. Boards should at all times be constituted by directors who, together, form a skilled and efficient Board.

This aligns with Commissioner Hayne’s findings and APRA’s documented expectations for lifting trustee capability across the superannuation industry.

Commissioner Hayne found that the central issue in relation to proper governance of superannuation funds is the need for the Board to be skilled and efficient in the proper supervision of the fund in the best interests of members.


Ever since 1992, when compulsory superannuation guarantee contributions were legislated, the structure of funds, the role and composition of Boards, and the role of government agencies in regulating the industry, became contested issues debated in the public square. Different models were adopted in different sectors and, indeed, within sectors.

In 2010 the Cooper Review, commissioned by the Rudd government, recommended that no less than one-third of the total number of member and employer representative directors be ‘non-associated’. The then Opposition proposed that at least half the Boards of funds be composed of ‘independents’.

In 2014 ASFA decided that on balance there was merit in the proposition of a third of Directors being independent with an independent Chair. This proved to be a controversial position for ASFA, however, notwithstanding the near universal acceptance that diversity and skills needed to be prime considerations in the appointment of Directors. Additionally, there was debate within the industry and with government on the definition of ‘independent’.

The governance issue came to a head in 2015 when the Turnbull Government introduced the Trustee Governance Bill, 2015. The Bill proposed that the Chair and at least one third of directors be independent, but the draft legislation defined independence narrowly. At the time, the debate surrounding this Bill focused substantially on the role of independent directors, the definition of independence, exceptions to the general rule, the actual performance of particular boards and funds, the ‘ethos’ of boards and particular traditions, and their origin. Many of the industry funds were concerned that their character might be inadvertently changed without appropriate safeguards to preserve the existing equal representation model.

ASFA argued on behalf of members that a too restrictive definition of ‘independent’ would be counter-productive and would narrow the potential sourcing of independent Directors with the ASX-definition of ‘independent’ broadly preferred. ASFA urged the government to modify the Bill. Instead, in December 2015, the Bill was withdrawn.

Since then, the governance question has bubbled along, unresolved.

The 2018 Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, the Hayne Royal Commission, looked in part at superannuation fund governance, and has added to the tenor of the governance debate.

Specifically, Commissioner Hayne found the central governance issue for superannuation funds to be ‘the need for the board of a trustee to be skilled and efficient in the proper supervision of the fund in the best interests of members’. The Final Report also found that prescriptive rules about board numbers or composition distract attention from the primary purpose of having a skilled and efficient board.

This commentary prompted ASFA’s Directors and management to review our existing position.

Hence the ASFA Board determined to modify our policy with respect to superannuation fund governance, in accordance with the findings of the Royal Commission outlined in the Final Report. Whenever ASFA reviews or considers a new policy position, we do so in the context of our long-standing ASFA Policy principles. (See Box: ASFA Policy Principles).

ASFA Policy Principles

  1. ASFA should be an “honest broker”, aiming to inform debate to improve outcomes for members.
  2. The impact on fund members and other stakeholders is understood and is evidence based.
  3. The issue is a priority in ASFA’s strategic plan or is significant in nature, for example because an existing position has become indefensible from the perspective of fund members.
  4. The likely impact of the policy will be to improve equity, efficiency, simplicity and/or adequacy in the system.
  5. The policy will increase sustainability and fund members’ confidence in the system.
  6. A compromise can be reached despite a diverse and valid range of views across ASFA Members.
  7. ASFA is likely to be perceived as credible in advocating a position.

ASFA believes that the new policy properly reflects the diverse views of our members and, importantly, is in the interest of members of superannuation funds.

As a result, ASFA believes that each Board should determine its approach to the policy principles outlined. Indeed, from checking various websites, I see that many Boards are already reporting on their skills matrix, gaps, and how they replenish Board skills.

John Maynard Keynes is reputed to have said, ‘When the facts change I change my mind. What do you do?’ The statement is illustrative of the need to be open to rethinking a position in accordance with new insights, facts, and experience. The Hayne Royal Commission suggestions and recommendations enable a recalibration of what ASFA now considers is best for excellence in superannuation fund governance.