The biggest issue facing Australia’s superannuation industry is chronic underperformance, according to IFM Investors and Industry Super Australia Chair, the Hon Greg Combet AM.
By Ben McAlary
.
Reflecting on his career as ACTU stalwart and later Labor frontbencher the now Chair of IFM Investors and Industry Super Australia, the Hon Greg Combet, spoke to AFR Chanticleer columnist Tony Boyd at the FSC Summit about his proudest campaign moment.
“I led the negotiation for what was, at that time, the largest asbestos compensation fund for victims of James Hardy in 2004. It still exists today and has paid out over $1 billion.”
“One of the things that I learnt out of the campaign was the importance of values and to appeal to the community about their expectations and the standards they expect out of corporate Australia.”
Combet compared this learning to the terms of reference of the Banking Royal Commission and praised Commissioner Hayne on including community standards in the original letter for submissions.
“I thought this was particularly insightful on his (Hayne’s) part because the focus on shareholder value often times doesn’t take into account broader implications like culture, or standards being set by the leadership of organisations, such as conflicted remuneration models.”
“If a business model doesn’t meet community expectations in how an organisation might conduct itself and drive value for its shareholders, then there are risks involved.”
Changing tack, Boyd went on to question Combet about how industry superannuation funds have been perceived by some as part of the union movement.
“It is a myth that we need to continually dispel. Industry super funds are not union funds, the trustee is not owned by the unions. It is an equal representation model and a partnership between trade unions, who are trustee shareholders, and employer groups, who are also trustee shareholders.”
“(The business model was decided) early on, so that no one would have an unfair influence over decision making and a two-thirds majority was adopted.”
Boyd raised the issue of independent directors and the recent call from Heather Ridout and the Board of Australian Super who are wanting more independent directors on industry super fund boards.
“The real issue is about the skills, governance, performance and experience that is needed, rather than mandated board ratios. Boards also need to be mindful of the longevity of Directors and getting that balance right between corporate memory and ensuring there is an influx of new skills and experience is really important.”
However, the biggest issue Combet believed facing the industry as a whole was what he described as ‘chronic underperformance.’
“Minister Hume is absolutely right to say that a compulsory saving system must be efficient and must serve member interests, there is simply no place for chronic underperformance in superannuation. It is time that the industry starts to understand what chronic underperformance looks like, and what the benchmarks are for addressing it. I believe that rationalising the industry from the bottom up is better than the 10 ‘best in show’ recommendation from the Productivity Commission.”
Responding to the old paradigm of ‘industry versus retail,’ Combet joked with the audience that he was hesitant to come to the FSC Summit as it “wouldn’t be very friendly.”
“I’d like (the retail fund industry) to get to know us better and to try and forge a consensus and develop some common views about what’s important in the sector. Underperformance of super funds, multiple accounts, insurance through super, member outcome tests…are just some of the areas we can come together on.”