Members of not-for-profit superannuation funds should have the right to vote trustee directors in or out, the Governance Institute of Australia has told the Fraser Review of governance arrangements in the sector.

Governance Institute chief executive Steven Burrell said good fund governance starts with the basic principle that members must have a voice, yet currently, members of most funds have no say in who represents their interests.

“There’s been a great deal of controversy around how many independent directors should be on the board of a NFP super fund and what constitutes ‘independence’, but that debate could be resolved if members were simply granted the right to elect directors of their choice,” Burrell said.

“There can then be no dispute about ‘independence’ because the members themselves have chosen the directors they believe will represent their best interests.”

Burrell said that “with Australian superannuation now comprising the fourth largest pool of savings in the world and rising, members have a significant financial interest in their funds and every reason to be engaged in their investment”.

“If, as the announcement of the Fraser Review rightly points out, a key distinguishing feature of NFP funds is ‘the over-riding primacy of members’ interests’, there can be no basis for continuing to deny fund members the right to vote directly for directors they believe will act in their best interests,” Burrell said.

The organisation also told the Review that the governance code it is seeking to develop should encompass broad governance issues.

“Board composition and independence comprise only one element of the governance ‘big picture’. A comprehensive governance framework encompasses the entire system by which the fund is controlled and its governing body held to account and promotes integrity, transparency, accountability and proper stewardship,” Burrell said.

“Given this, we think the Fraser Review should consider not only adopting a wide-ranging fund governance code similar to the ASX Corporate Governance Council’s principles and recommendations applying to listed entities, but also ensure that there is a disclosure obligation to members about how their super funds track against the code’s recommendations.”