Independence and the governance of Australian superannuation funds

Abstract

Australia’s largest superannuation funds administer close to $1.25 trillion on behalf of over 14 million Australians. The government’s proposal to require that the boards of these funds contain a minimum of one-third of independent directors extends a meme of independence propagating through a wide range of corporate and public spheres. This article reviews the arguments advanced for imposing structural independence on the boards of superannuation funds, as well as the empirical evidence that such measures contribute positively to funds’ investment performance. It finds little empirical evidence to support the measures but derives a more compelling case for structural independence based on a desire to enhance both the actual decision-making on boards and the legitimacy of the delegation of authority from member to trustee implied by the trust structure employed in the system. The article argues that this latter attraction gains additional weight from the compulsory nature of participation in the superannuation system.