Independence and the Governance of Superannuation Funds

35 Pages Posted: 15 Mar 2016

See all articles by M. Scott Donald

M. Scott Donald

UNSW Law

Suzanne M. Le Mire

University of Adelaide - School of Law

Date Written: March 15, 2016

Abstract

The failure of the Federal government’s Superannuation Legislation Amendment (Trustee Governance) Bill 2015 to pass through the Senate in November 2015 means that the political spotlight has for the time being shifted away from the issue of independence on superannuation fund boards. This creates a valuable opportunity for further reflection on precisely what board member independence might offer the superannuation system.

This paper aims to contribute to that deliberation. It introduces a variety of seminal concepts drawn from independence theory, reviews the growing literature on pension fund governance and maps the ways in which the regulatory regime currently aims to promote cognitive independence on the part of superannuation fund board members. It uses that as a foundation for deriving a more sophisticated, nuanced and ultimately more compelling rationale for the imposition of structural independence on superannuation fund boards. That rationale encompasses both a desire for improved decision-making by superannuation fund boards and a recognition of the valuable role that structural independence can play in inspiring confidence in the system. This confidence, in turn, can contribute to the legitimacy of a system in which participation, as a result of the Superannuation Guarantee, is almost compulsory. A second, complementary paper will evaluate the practical issues associated with using structural regulation specifically to achieve cognitive independence on superannuation fund boards.

Keywords: Superannuation, Fund Management

Suggested Citation

Donald, M. Scott and Le Mire, Suzanne M., Independence and the Governance of Superannuation Funds (March 15, 2016). CIFR Paper No. 097/2016. Available at SSRN: https://ssrn.com/abstract=2747780 or http://dx.doi.org/10.2139/ssrn.2747780

M. Scott Donald

UNSW Law ( email )

Kensington, New South Wales 2052
Australia

Suzanne M. Le Mire (Contact Author)

University of Adelaide - School of Law ( email )

Ligertwood Building
Adelaide 5005, South Australia SA 5005
Australia

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