Nick Xenophon (SA, Independent) Share this | Hansard source

I indicate that I do support the second reading of the Superannuation Legislation Amendment (Trustee Governance) Bill 2015, but I still have significant reservations about a number of the clauses in this bill, and I reserve my position in respect of the third reading. I have just had a very useful and short private discussion with the Minister for Finance, Senator Cormann—I hope he does not mind me saying that. Because this has been brought on, perhaps, unexpectedly—and I suppose in this place you need to expect the unexpected—there are some issues that need to be dealt with substantively in terms of proposed amendments and concerns that I and, no doubt, others, including a number of my crossbench colleagues, have in respect of this bill.

The Assistant Treasurer, Kelly O'Dwyer, has been incredibly helpful and consultative in respect of this. I was due to meet her last night but because of other commitments I could not. I am due to see the minister again today at midday—high noon. I understand the government may be putting a number of proposals forward. I am not sure what they may be, but I think it is important that my crossbench colleagues and I, including the Australian Greens and, of course, the opposition need to have an opportunity to see whether the government have any different proposals or any changes in terms of what they are proposing, as they are entitled to do.

To put it in context, I would urge the minister to not go into the committee stage of this bill. It would be too premature. Amendments are being drafted. We are doing our level best to deal with this matter. If the government is of a mind to do that, as I hope they will—and I think the minister has indicated that they will be doing so—that is welcome. This is a big deal. We are talking about trillions of dollars worth of Australians' retirement incomes in superannuation funds. I think it is in the order of about $2 trillion. It will be trillions more in years to come. As the superannuation guarantee increases, it will be more and more and exponentially increase. That is a good thing.

A great legacy of Paul Keating, even though he called us in here the 'unrepresentative swill'—I am not sure what that hand gesture is, Acting Deputy President Sterle—he did do the right thing in terms of superannuation, in terms of Australians having a solid source of retirement income so that they can have a comfortable retirement. We are still short of that goal, particularly for those who have been in super for 10 or 15 years. If you do not have the benefit of a defined benefit scheme, for instance, you are behind the eight ball, if you have only been contributing to your super scheme in the last 15 or 20 years and you are on the cusp of retirement. I welcome this debate. I welcome this bill in terms of superannuation governance because it raises a whole range of issues that I think do need to be looked at and some do need to be reformed.

I want to touch on four specific issues. I know that Senator Edwards, on behalf of the coalition, gave a good summary of the coalition's point of view and I commend him for that. If I could outline areas of interest. The key issue for the government appears to be having one-third independent directors. That is something that I have been sympathetic to in the past. A number of arguments have been put to me expressing concerns about that, whether that gives the best outcome for members of superannuation funds. And it relates to issues of transparency as well.

I think it is desirable that there be an independent chair of a superannuation fund, independent of the employers, independent of the employees through their union. I think that is absolutely critical. I do not think there should be any argument in respect of having an independent chair as, for instance, a number of unions have, such as the SDA. I saw Mr de Bruyn, a legend in the SDA, recently where he said that the SDA does have an independent chair and it has been a good governance arrangement in respect of that.

On the issue of having one-third independent directors, there have been previous reports and independent reviews carried out where there has been a suggestion that there ought to be at least half independent directors. The government has come up with what it considers to be a compromise position of one-third independent, one-third employer representatives and one-third employee representatives. The question that has been raised, and I think it is a legitimate one, is how you define a person who is independent. In the context of directors of a superannuation fund, that is fraught with some difficulty in the current drafting and is something that needs to be explored in the committee stage.

What I will be suggesting for consideration by the Senate, and I will have a draft in writing and in a form that can be considered by the Senate, is to have a requirement for a superannuation fund to set out why it has not reached a target of one-third independent directors, to explain to its members why it has not done so and the reasons for that; not to mandate it—perhaps that may be a bridge too far. But, of course, I am open to discussions with the government in respect of this. Going down that path may be, perhaps, a halfway house, but it puts it firmly on the agenda and it may lead to more superannuation funds reaching that target of one-third, one-third, one-third.

In the same way—and this is an issue that I am not giving up on—on the issue of gender equity I think it is desirable to mirror a bill that I introduced with a number of my colleagues to ensure that, if a board does not have 40 per cent women and 40 per cent men, it needs to provide a report. It is not a quota and is not mandating it; it is to set out very quickly why they have not reached that target. I think with the SDA, for instance—and this is not a criticism of them—their board representation is way, way below 40 per cent women, and I think that a majority of their members would in fact be women. So I think that being part of that cultural shift to have that gender equity and to have more women on boards—or more men on boards, for that matter, if it is a union where for some reason 70 or 80 per cent of that board are women—is a reasonable goal, but again it is not mandated. I raise now, in a preliminary way, that a similar approach to the one in respect of independent directors may be an alternative approach to this. It is not the desired approach of the government, and I understand that, but I think it ought to be looked at.

There is another issue that I wish to raise that I am very passionate about, and that relates to the issue of having an annual general meeting type arrangement. I say 'type arrangement' because it would not be an annual general meeting strictly in accordance with the requirements of corporations law, where resolutions can be passed and where the requirements of the corporations law for a shareholders general meeting would apply, but it would be an annual general meeting in this sense: members of a superannuation fund can attend a meeting where the chairman and the board of directors will be present at least once a year, and members will be able to put reasonable questions to that board as to how their fund is performing and ask them to justify their decisions.

For instance, Mr Acting Deputy President, you are aware that I hold a few hundred dollars worth of shares in Qantas, so I can go along to Qantas annual general meetings on behalf of my many constituents who are Qantas employees and who want me to ask questions on their behalf about the performance of Qantas. My shares are now probably worth in the order of $1,000. I can ask the chairman, the CEO and the directors of Qantas as many questions as I reasonably can about how they perform. If I have $100,000 or $200,000 or half a million dollars in a superannuation fund, I do not have that right, even though my retirement savings and the income upon which I can live from those savings are at stake. I do not have that right, and I think you should.

It is an issue that I have raised publicly. I have raised it with the former minister, Mr Frydenberg, and with the current minister, Ms O'Dwyer. I think it is an important transparency measure. If you are a member of a retail or industry super fund, you ought to be able to go along to what is styled as an annual general meeting and ask questions, and the board should be able to answer those questions as to what the fund is doing, why they have made the investment decisions they have, why they have such and such a composition of directors, their governance, and all those sorts of issues. It might make some boards uncomfortable, but so be it. We are talking about the retirement savings and the retirement incomes of millions of Australians.

What I am proposing is that as long as there is an electronic notice given—in other words, the compliance and administrative burden is minimal—and there is a prominent notice on the website of the superannuation fund advising of the meeting, I am sure that it will be adequately disseminated. That is an amendment that is currently being drafted so that it can be circulated for consideration by the Senate, and I hope that it is not looked at through a partisan prism. I think that it is something that needs to be dealt with in a way that I think will improve transparency and governance of superannuation funds. I would welcome bipartisan and crossbench support for that.

The issue of related party transactions is something that industry super funds have raised with me, and retail funds may have their own issues with transparency, which I am happy to listen to. There is an issue as to the transparency of related party transactions. It is something that should apply to all super funds—retail and industry super funds—that they must set out details of related party transactions to ensure that the transaction was at arm's length and was on commercial terms. I do not think that retail or industry super funds would have any difficulty in complying with that if they are doing the right thing—if the transactions are defensible and genuinely at arm's length. Related party transactions must be done on a commercial basis so that no favours are seen to have been done. I think that is important for transparency.

Again, these are matters that are being drafted. I understand the opposition may be considering an amendment along those lines in any event. This is a big deal. It is important. I think the government and the previous government have looked at the issue of superannuation governance. I believe there is scope for improvement. I understand what the key battlegrounds will be, but I would like to think that at the end of this process, by the time we get to the third reading stage of this bill, we will have a package of measures that will advance transparency, in a way that is not seen to be counterproductive in terms of some of the other measures proposed, and that we will at the very least ensure that anyone who is a member of a superannuation fund will have the right to attend an annual general meeting and ask the questions that need to be asked, particularly if that person has their lifetime of savings in that superannuation fund.

So they are the issues. I propose to go into much more detail should this matter go into the committee stage, as I hope it will. I think it ought to go into the committee stage. The second reading of this bill ought to be passed, because I think the government deserves to have these significant amendments debated and appropriately considered in the committee stage of this bill.