Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Hansard source

Yes, union dominated super funds. And I can see that Minister Conroy, like Minister Shorten, is right on song. The government should withdraw this provision and then embark on a proper consultation process with all participants in the superannuation industry, not just with—and here you can interject, Senator Conroy—one segment of the financial services market, to achieve a more appropriate, a more balanced, a more competitively neutral and a more workable outcome than the current flawed proposal. With MySuper not due to commence until 1 July 2013, there is sufficient time for the government to go back to the drawing board and get this important provision right.

Proposed section 52, on the personal liability of directors, of the Superannuation Industry Supervision Act 1993 imposes a series of statutory obligations and covenants on trustees of regulated superannuation funds. These covenants or obligations are exercised by the board of directors of the trustees acting collectively. The bill replaces the existing section 52 with a new section containing enhanced statutory covenants that will be imposed on all regulated super fund trustees including MySuper trustees. The bill also includes proposed section 52A, which extends the covenants to individual directors of super funds. There is no equivalent provision in the current SIS Act. Proposed section 52A would make individual directors personally liable for any breach of the covenants by deeming them to be parties to the governing rules of the fund. The coalition strongly support enhancing and clarifying the law relating to the obligations of super fund trustees and directors. We also support introducing provisions that clearly deal with conflicts of interest of directors of super funds and which ensure that at all times directors of super funds put the interests of fund members ahead of any other interest including their own personal interest. But we have some strong concerns about the mechanism that the government has used in an attempt to achieve these aims.

The bill tries to introduce covenants that are imported into the governing rules of every single super fund and then tries to bind directors to those covenants by deeming each director to be a party to the governing rules of the super fund. The provisions of section 52A appear to reverse the longstanding convention that boards of directors are jointly or collectively liable for decisions made by the board, including a trustee board, and that directors are only personally liable if they breach their directors' duties, including their duty to act with reasonable care and diligence at all times. The provisions are so broadly drafted that they may not provide certainty for directors who are trying to faithfully execute their duties so that they are complying with the law. The coalition is concerned that if implemented these provisions may discourage otherwise suitably qualified directors from accepting a role as directors of super boards. If high-quality inexperienced directors are discouraged from serving on superannuation boards by these provisions, it would have a severe impact on the quality of corporate governance of funds and on the performance of funds. This could result in lower investment returns and lower retirement savings for consumers because the best people to manage their investments have not chosen to be directors of those funds.

Again, the Cooper review made a series of sensible recommendations for reform of corporate governance and the duties of directors that have not been implemented by the government. The Cooper review noted the difficulty for trustees and directors in understanding what is expected of them under existing laws but it did not make any recommendation to extend the application of the SIS Act covenants for trustees to individual directors or for deemed directors of super funds to be parties to the funds' governing rules. They provisions of section 52A are confusing and they make the new laws even more unclear for directors especially given that proposed section 54A allows the government to introduce new covenants at any time in the future by regulation rather than by legislation. The coalition will closely monitor the impact of these proposed obligations on directors of superannuation funds when they come into force and will act in government to address any issues that may arise in the future.

The Cooper review did recommend, as I said at the outset, a number of changes which the government has outright opposed or chosen to ignore or only unenthusiastically embraced. There is a lot of unfinished business in superannuation, the most obvious of which is the need to ensure as a matter of absolute urgency that default funds under modern awards are selected through a more open, more transparent and more competitive process than is currently the case. The current arrangement by which default funds are selected under modern awards by Fair Work Australia is an absolute national disgrace. It is a closed shop, anticompetitive arrangement that is designed to favour the interests of union dominated industry super funds at the expense of Australians with superannuation. All Australians with superannuation should be able to benefit from genuine competition in the default fund market so that investment returns and the value of their retirement savings are ultimately maximised.

These are all areas in which a future coalition government will act. We will ensure that we have the most efficient, most transparent and most competitive superannuation system possible in place so that all Australians can have full confidence that their retirement savings over their working life will be maximised.