Some super boards deficient on investment skills – | Australian Markets

Some superannuation funds have boards which are poor towards their own expertise matrices akin to investment and risk management, based on the dialogue paper which sits on the Australian Prudential Regulation Authority’s proposed governance adjustments.

What’s more, APRA is proposing to power financial entities to audit their expertise and capabilities of their boards and to show they’re taking lively steps to treatment any gaps.

Simply months after APRA initiated the processes resulting in the Deloitte review of Cbus, the regulator’s dialogue paper has outlined the shortcomings it has already noticed throughout its regulated entities.

Critics of the employer/union equal illustration model common to the trustee boards of industry superannuation funds have usually questioned the credentials of union-nominated administrators.

APRA’s dialogue paper doesn’t straight reference the equal illustration model however it does notice the shortcomings it has noticed as together with:

• adopting a obscure or a slim view of vital expertise and capabilities, together with a failure to specify anticipated expertise, {qualifications} or behavioural capabilities – and failing to think about how these might be measured
• failure to specify minimal expertise and capabilities that particular person administrators need to fulfil their function
• not verifying expertise or capabilities, usually relying closely on self-assessments
• failure to take steps to handle gaps and weaknesses by means of skilled development and succession planning.

“These kinds of deficiencies tend to be most prevalent among small banks and in parts of the superannuation sector. For example, a 2021 cohort-based thematic review of mutual banks found that almost 50 per cent of boards had no directors or only one director with contemporary industry experience,” it stated.

“Some RSE [superannuation fund] licensees have boards that are deficient against their own skills matrices, for example not having directors adequately skilled in key areas such as investment and risk management. However, APRA notes such issues are present in all industry cohorts.”

“Ongoing failure to address skill and capability needs will result in boards that are inadequately prepared to deliver on their organisational strategy or to anticipate and address challenges that arise.”

To deal with this drawback, APRA stated it proposed to “require all regulated entities to, on an ongoing basis, identify and document the skills, capabilities and behavioural attributes that the board needs to deliver its organisational strategy and perform its role”.

“These attributes should be clearly defined and documented in a skills matrix. They should include specific expectations for the chair, chairs of board committees and other individual directors. Skills should be measurable and verifiable, and behavioural attributes should be observable. The targeted skills, capabilities and minimum criteria should be proportionate to an entity’s business needs, size and complexity.”

“APRA proposes to require regulated entities to evaluate the skills and capabilities their boards already have and be able to demonstrate to APRA that they are taking active steps to remedy gaps through professional development, succession planning and new appointments. In considering nominees to the board, APRA expects entities to consider existing skills gaps so that each new appointment makes progress towards addressing them.”