AUSTRALIA - Government proposals to create the position of ‘trustee director' have been dismissed by the Association of Superannuation Funds of Australia (ASFA) as doing little to increase accountability.
In its submission to the Federal Government, ASFA said the recommendation to increase a director's accountability to members remained a concern, despite the Treasury showing signs of not supporting it.
Under the proposals, directors would have a fiduciary duty directly to fund members, which ASFA believes "contradicts the basic principle that a director's primary obligation is to the company".
It said: "ASFA supports the policy objective of increasing the accountability of superannuation trustees and the directors of corporate trustees. However, we are not convinced that increased accountability will be achieved in any meaningful sense by creating a distinct new office of ‘trustee director'.
"Instead, ASFA suggests that efforts to increase accountability would be better served by focusing attention on the effective enforcement of existing legal duties."
It added at present, super trustee directors are potentially personally liable in six ways, including duty of care, financial services misconduct and trust law proscriptions. It felt it was "highly questionable whether adding a seventh way in which a director could be personally liable to members will increase accountability in any meaningful sense".
It also warned the proposed regime may lead to directors being reluctant to take the risks necessary to achieve above average returns. Ineffective decision making could lead to a downturn in returns as a result. There might also be increased litigation for individual member complaints, making it more difficult to attract talented directors as they will be more likely to take up positions in banks and life companies without personal liability.
The Association added: "A requirement to act ‘solely' for the benefit of members is, ASFA submits, unworkable in practice and has the potential to put many directors, such as those who are paid directors' fees and those who take into account the long-term impact of their decisions on ‘the community' (being something they would all be required to do), in breach from day one."
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