APRA has written to Registrable Superannuation Entities (RSE) Licensees setting out proposed amendments to the superannuation governance rules in Prudential Standard SPS 510 Governance and Prudential Practice Guide SPG 510 Governance.
These amendments cover governance frameworks, the nomination, appointment and removal of directors, board renewal and tenure limits, and board size. They will not cover the independent director requirements in the proposed Superannuation Fund Governance Bill.
APRA intends to include the requirements for a governance framework in SPS 510. Where a RSE licensee forms the view that its governance framework would be enhanced by going beyond the minimum requirements specified in SPS 510, APRA encourages the RSE licensee to do so.
Processes for appointing, nominating and removing directors
A RSE licensee will be required to establish and implement policies and processes for the nomination, appointment and removal of directors that address, inter alia, management of vacancies, assessing the suitability of candidates, reappointment processes, processes for resolving disputes about director appointments, when and how a director will be removed from the board and policies on voting rights and procedures regarding director appointments.
In addition to the existing requirement for a renewal policy, SPS 510 will set out a new requirement for an RSE licensee to have in place a policy on director tenure which addresses maximum tenure periods.
APRA intends to update SPG 510 to reflect both that boards are expected to consider director’s tenure at the end of each term served, and that APRA expects that there would be limited circumstances in which maximum tenure limits exceeding 12 years would be appropriate.
APRA intends to amend SPS 510 to require that a RSE licensee’s governance framework include the board’s policy on board size.
APRA agrees with submissions that a RSE licensee board is best placed to determine the target size for its board, taking into account the mix of skills and experience needed to manage the size, business mix and complexity of the RSE licensee’s business operations, and intends to confirm this view in SPG 510. Nonetheless, it remains APRA’s view that, excepting temporary or transitional considerations, there are likely to be limited circumstances where a board of more than 12 directors is required to maintain appropriate skills and experience.