The Super Shake-up Dilemma

The Federal Government’s recently introduced Bill aimed at changing the governance landscape at non-profit superannuation funds, key among them that one-third of the directors are independents, as is the chairman, is to me a bit like the curate’s egg.

It’s good in parts, which probably explains the raft of opinions on the subject.

Banks like the model, unions don’t. But then powerful people like former Australian Workers Union boss and Australian Super director turned KPMG consultant Paul Howes likes it too, as does retiring SunSuper chief investment officer David Hartley.

On the other side of the ledger you’ll find organisations like the Australian Institute of Superannuation Trustees and the Industry Super Australia. They see it as a bad thing, arguing that over a long period, returns made by not-for-profit industry super funds have traditionally done better than corporates – and if it ain’t broke, don’t fix it.

There’s more than a grain of merit to this line of reasoning: after all, it’s an indisputable fact that those non-profit super boards with a 50:50 split between employer and employee representatives have generally outperformed the ‘for-profits’, so why should they rush to adopt an inferior model?

Of course, we need to ask why industry super funds have performed better. Is it because of the composition of the board or are there other reasons?

Certainly, the fact that these organisations have been set up by members for members, as opposed to those set up by commercials to make a profit, is a contributing factor. As they don’t pay dividends they can keep fees and charges lower – and their very ethos is about looking after members.

But then there’s the other part of the curate’s egg.

History tells us these boards have tended to be a little thin on key investment skills and a tad corpulent on the industrial relations angst gauge. The first is self-explanatory, the second has seen union members sitting on one side of the table and generally congregating at tea and lunch breaks, the employer folk doing likewise…and this in a boardroom setting can’t be helpful.

I believe these boards have managed to perform despite their limitations precisely because of the inherent culture and values within the organisations.

In short, where an organisation’s culture and values are less about profit generation and more about genuine concern for the welfare of its members, a by-product of looking after members is that the organisation tends to perform better.

The dilemma, then, is how do you retain, protect and nurture the culture and values but attract and acquire the necessary skills.

I believe I have a wholly attainable and valid compromise solution which I’ll share with you next week.

But you give it some thought in the meantime!

Until next time,

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