The Issues Paper proposed two options:
- superannuation funds be required to hold annual general meetings (AGMs) (along the lines of the provisions in section 250N of the Corporations Act); or
- superannuation fund members be given the right to request a meeting at any time (as registered managed investment schemes are required to do).
The Government welcomes comments on these options, including the extent of powers that members could have (for example, voting powers to remove trustees or fund managers, or whether members could only seek, through a meeting, more detailed information and explanations from trustees and managers).
Views from the consultation process
Industry submissions indicated almost universal opposition to the proposal to hold AGMs. The concerns raised related to compliance costs, that would be passed on to members, and implementation practicalities. These included the difficulty in determining voting rights, the potential for AGM resolutions to conflict with trust law requirements (for example, trustees cannot be subject to member direction, and they must ensure that their duties and powers are performed and exercised in the best interests of the beneficiaries), and the lack of support by members for such proposals previously.
However, some submissions noted that the objective of the proposal of improving member activism could still be achieved through other means, such as provision of information to members and member education. The Australian Industry Group supported 'the paramount need for suitable communications and consultative mediums between trustees and fund members.' The Trustee Corporations Association of Australia suggested that an independent compliance body could act as 'member champion' if directed by the regulator or members.
Participants at the focus group sessions did not oppose the SWG's draft recommendation, that the proposals to require superannuation funds to hold AGMs or that members be given the right to request a meeting at any time not be proceeded with. However, one participant did suggest that there would be benefits in providing members with an opportunity to voice concerns to a collective body of members.
Consideration of the proposal
The purpose of this proposal was to give members the opportunity to hold trustees to account more directly - effectively bringing superannuation into line with other similar types of investments (for example, managed investment schemes). It was seen as an opportunity to increase member activism and for members to have a greater say over their retirement benefits. It could also facilitate greater member scrutiny of fund activity.
As noted above, submissions were not supportive of the proposals and a number of concerns were raised, including:
- the interaction with the trust structure for superannuation funds and the established trust relationships including fiduciary obligations;
- establishing appropriate allocation of voting rights;
- other implementation difficulties, including how members might be able to get time off work to attend meetings; and
- compliance costs.
In many employer-sponsored funds, the equal representation rules provide an avenue for members to become involved in the operation of their fund. There are also a number of other mechanisms for members to voice dissatisfaction with their fund, including via internal dispute resolution arrangements and through the Superannuation Complaints Tribunal.
This proposal was aimed at facilitating better member scrutiny of trustee performance. Other recommendations of the SWG, in particular those relating to licensing and increased disclosure, will also assist in achieving this objective.
The SWG agrees that there would be benefits in providing members with an opportunity to voice concerns to a collective body of members. However, the SWG considers that it would be inappropriate to mandate this requirement in legislation, and encourages trustees to provide such opportunities to members.
Accordingly, the SWG considers that:
- the protections already in place offer better opportunities for fund members to communicate with the trustee and to query various decisions than either of the proposals put forward; and
- the concerns underlying the proposals for member meetings could be dealt with more effectively by better disclosure and a greater compliance focus.
The SWG recommends that the proposals contained in the Issues Paper, to require superannuation funds to hold AGMs or that members be given the right to request a meeting at any time, not be proceeded with.