AICD's update on superannuation and external conduct standards

Governance issues in super emerging from the banking Royal Commission, external conduct standards, and the Centre for the Fourth Industrial Revolution are front of mind for AICD this month.

Superannuation governance in spotlight

The AICD has lodged a submission on the policy questions raised by Counsel Assisting in relation to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry Round 5 hearings on superannuation.

While superannuation has been a pillar of our retirement income system and contributed significantly to investment in the Australian economy, it is critical that robust governance practices that support sound decision-making in the best interest of members are in place and operating effectively across the sector. This is particularly the case given the compulsory nature of superannuation.

The AICD submission supports:

• A stronger focus on board composition, particularly in relation to directors’ knowledge, skills and experience
• The application of civil liability to breaches of the duty to act in the best interests of members, as well as targeted measures to address conflicts of interest in the industry
• Strong, effective, and proactive enforcement of existing laws by all regulators.

Close regulatory oversight is particularly important in the context of superannuation. To this end, we support a clearer articulation of the roles of the Australian Securities and Investments Commission (ASIC) and Australian Prudential Regulation Authority (APRA) so as to clarify respective mandates and eliminate any unnecessary overlap (including identifying one regulator as the primary “conduct” regulator), periodic independent assessment of the performance of the regulators, and increased funding to ensure the appropriate action can be taken.

External Conduct Standards

The AICD provided a submission to the public consultation on the External Conduct Standards (ECS) in September. The ECS are a principles-based set of minimum standards of conduct, governance and behaviour which apply to charities that operate or send money to foreign jurisdictions, or collaborate with others to do so. Their purpose is to provide public confidence that charities engaged in this work have appropriate governance to manage the risk associated with it.

It is important that charities take the appropriate steps to ensure their extraterritorial affairs are appropriately managed, particularly regarding preventing fraud, corruption and other forms of financial crime, and protecting vulnerable people.

The AICD has supported the introduction of the ECS, but has made several suggestions about how they can be improved. The most significant recommendation concerns the way that risk is treated in the draft ECS, which focuses on “minimising risk”. This implies that risk should be avoided, most likely by not undertaking the activities that pose the risk.

It would be an adverse policy outcome if charities withdrew from their international activities because the ECS required them to minimise risk. Instead, the AICD has recommended that the ECS focus on encouraging charities to take appropriate risk and maintain reasonable risk management systems.

More information here. 

Centre for the Fourth Industrial Revolution

The AICD has become a member of the World Economic Forum Centre for the Fourth Industrial Revolution (C4IR). Based in San Francisco, C4IR brings together governments, business, not-for-profits and experts from around the world to co-design and pilot innovative approaches to the policy and governance of new technologies. C4IR will develop, implement and scale agile and human-centred pilot projects that can be adopted by policymakers, legislators and regulators worldwide to address challenges related to emerging technologies. The AICD will share insights gained from its participation with the C4IR with members.

Australian Women CEOs Speak

A new report, conducted by Korn Ferry with the support of the AICD, has provided insight to the experiences of women in leadership positions and the roadblocks for women who are advancing to the CEO’s office.

Australian Women CEOs Speak: How female leaders rise and how organisations can help examines the careers of women currently or recently in CEO or equivalent roles to highlight common success factors on their journey. Designed to inform future development programs for women, the research will also help CEOs and boards understand the motivations and drivers of women leaders and how to better attract women to the leadership pipeline.

The study revealed the importance of exposure to the board for women on the path to the top job. Involvement on boards, corporate and non-profit, and a relationship with their own board, contributed to the women’s breadth of expertise and confidence before becoming CEOs.

Five recommendations for organisations:

1. Recalibrate talent identification: if women aren’t on the talent radar, the radar needs to be updated
2. Reframe executive leadership to appeal to more women: promote the positives
3. Identify potential leaders: let people know they’re on track to senior leadership
4. Mitigate mobility issues: understand and accommodate the impact of international transfers
5. Focus on the CEO feeder pool: scrutinise gender ratios, specifically in line management.

More information here.