9.2 Evidence

9.2.1Director tenureAustralianSuper

In 2007, AustralianSuper amended its constitution to include term limits for its directors. As amended, the constitution provides that directors are appointed for three years. At the end of one three year term, they may be re-appointed for another three year term. In June 2017, AustralianSuper revised its Board Renewal Policy to introduce a maximum tenure of 12 years (four threeyear terms).

The amendment to the constitution operates only prospectivelythat is, it only applies to directors who were appointed after December 2007.[1] As a result, the 12-year maximum in the Board Renewal Policy also operates prospectively. Because four of the board’s current directors were appointed before 2007, their appointments are not subject to any tenure limitation.[2] For those four directors, there is no policy in place at AustralianSuper that provides for their maximum tenure.[3]

At the time of Mr Silk’s evidence, the shareholders were considering whether tenure limits should apply to those four directors. The board, including the four directors, had unanimously asked the shareholders to do this.[4] This was because to apply those limits, the shareholders would need to agree to a constitutional change. AustralianSuper cannot enforce a tenure limit without their agreement. The shareholders had not made a decision when Mr Silk gave his evidence.

9.2.2Number of directorsCbus

Cbus is a large superannuation fund with over 755,000 members and $39 billion in funds under management.[5] Cbus’s shareholder organisations are Master Builders Australia, the Australian Council of Trade Unions (ACTU) and three unions.[6] Cbus’s board ordinarily has 16 directors. Seven directors are appointed by Master Builders Australia and seven by the union shareholders.[7] There is one independent director, and the chair is appointed by the ACTU after consultations between the stakeholders.[8]

Since 2013, the board’s self-assessments have identified that some directors think the board is too big, and that this affects its functioning. Other directors disagree.[9] In 2015, an independent consultant considered the effectiveness of the board.[10] It held interviews with all board members and senior management, and compared Cbus’s arrangements against best practice. The consultant recommended that it reduce its board to 12 directors, and said that this was a high priority.[11] In 2016, APRA did a prudential review of Cbus. APRA said it was concerned that the size of the board limited the effectiveness of the board’s decisionmaking.[12]

Mr Bracks said that Cbus does not think that the size of the board is a problem.[13] But since 2015 the Chair and CEO have spoken to shareholders about the issue.[14] In 2017, the Master Builders Association suggested both it and the CFMEU give up a board seat. They suggested that one of their nominated directors, who had been recommended by Cbus’s investment team, should move to the independent director position.[15] However, the shareholders could not agree.[16] Cbus has not changed its board size.

In recent years, both employer and union shareholders have nominated directors based on their skills or experience.[17] But Cbus cannot force them to do this. As a result, some directors are still appointed based on their links to shareholder organisations.[18]

9.2.3Appointment and dismissal of directors Sunsuper

The Sunsuper Superannuation Fund is a large profit-for-member fund, with $55 billion in funds under management and more than 1.3 million members. The shareholders of Sunsuper are the Chamber of Commerce and Industry Queensland (CCIQ), an employer organisation, as well as the Queensland Council of Unions and the Australian Workers Union of Employees, Queensland Branch (AWUEQ).[19] Sunsuper’s board has an equal representation structure, with three directors appointed by CCIQ, three appointed by the union bodies, and three independent directors.[20] In early 2016, the three directors appointed by CCIQ were not affiliated with that organisation.

In April 2016, CCIQ announced that it would remove all three of its appointed directors and replace them with the President, Vice President and CEO of CCIQ. The first change would take place immediately, with the remaining changes to be complete by September 2016.[21] One of the existing directors had announced his retirement, but the other two had been appointed in 2014 and 2015.[22] CCIQ had not told Sunsuper about this plan before announcing it.[23]

The Chair of Sunsuper told CCIQ that he was very concerned about CCIQ’s actions. In particular, he was worried that it could damage Sunsuper’s reputation and derail tender negotiations that were at a delicate stage. He said that he was also concerned that APRA might intervene, with potentially serious reputational and commercial effects.[24] After getting this letter, CCIQ decided not to remove one of the three directors, but said that it still planned to replace the other two.[25]

Various correspondence, meetings and other communications followed. Sunsuper continued to press CCIQ to reconsider its decision.[26] The three independent directors on the board, and the AWUEQ, also sent separate letters asking CCIQ to reconsider.[27] APRA wrote to Sunsuper saying it had serious concerns that the board changes would materially impact the stability and continuity of the Board.[28] It met with Sunsuper’s directors and shareholders, as well as separately with CCIQ.[29] The tendering party also told Sunsuper it was very concerned about the events.[30] Ultimately, in July 2016, CCIQ replaced two of its nominated directors with its President and Vice President.

There was no doubt that under the Sunsuper constitution, CCIQ was entitled to act as it did.[31] Although Sunsuper, the independent directors, and other shareholders sought to persuade it to act differently, there was nothing preventing CCIQ summarily replacing one third of the board. There was no limit on its powers of appointment and dismissal (except that the new directors would need to be fit and proper).

In 2017, an independent consultant did a governance review of Sunsuper.[32] Because of the events that had happened and the recommendations made as a result of the review, Sunsuper introduced a number of governance changes, including a consultation process for selecting directors and minimum notice periods before a shareholder can remove a nominated director.[33]

The Chair of Sunsuper considered that what had happened was not best practice. However, he said that he thought it had led to some positive governance changes.[34]


[1] Transcript, Ian Silk, 9 August 2018, 4523.

[2] Transcript, Ian Silk, 9 August 2018, 45234.

[3] Cf APRA, Prudential Standard SPS 510, 31 October 2016, par 23(b).

[4] Transcript, Ian Silk, 9 August 2018, 4524.

[5] Exhibit 5.336, Witness statement of Stephen Bracks, 25 July 2018, 6 [14].

[6] Exhibit 5.336, Witness statement of Stephen Bracks, 25 July 2018, 4 [11].

[7] Exhibit 5.336, Witness statement of Stephen Bracks, 25 July 2018, 4 [11].

[8] Exhibit 5.336, Witness statement of Stephen Bracks, 25 July 2018, 12 [32]–[35].

[9] Exhibit 5.336, Witness statement of Stephen Bracks, 25 July 2018, Exhibit SPB-1 (Tab 24) [CBUS.0001.0023.0071].

[10] Exhibit 5.336, Witness statement of Stephen Bracks, 25 July 2018, Exhibit SPB-1 (Tab 27) [CBUS.0001.0023.0211].

[11] Exhibit 5.336, Witness statement of Stephen Bracks, 25 July 2018, Exhibit SPB-1 (Tab 27) [CBUS.0001.0023.0211 at .0238].

[12] Exhibit 5.302, Witness statement of Stephen Glenfield, 14 August 2018, Exhibit SG-194 [APRA.0007.0002.2728].

[13] Exhibit 5.337, Witness statement of Stephen Bracks, 3 August 2018, 8 [27].

[14] Exhibit 5.337, Witness statement of Stephen Bracks, 3 August 2018, 8 [32].

[15] Exhibit 5.337, Witness statement of Stephen Bracks, 3 August 2018, 9 [35].

[16] Exhibit 5.337, Witness statement of Stephen Bracks, 3 August 2018, 9 [35].

[17] Exhibit 5.336, Witness statement of Stephen Bracks, 25 July 2018, Exhibit SPB-1 (Tab 21) [CBUS.0002.0001.0352 at .0352]; Exhibit 5.336, Witness statement of Stephen Bracks, 25 July 2018, Exhibit SPB-1 (Tab 27) [CBUS.0001.0023.0211 at .0221].

[18] See, eg, Exhibit 5.348, 11 August 2017, Letter from D Perkins (President, Master Builders Australia) to Stephen Bracks (Chair, United Super P/L).

[19] Exhibit 5.331, Witness statement of Andrew Fraser, 30 July 2018, 16 [65].

[20] Exhibit 5.332, Witness statement of Andrew Fraser, 4 August 2018, 44 [155].

[21] Exhibit 5.332, Witness statement of Andrew Fraser, 4 August 2018, Exhibit APF-177 [SSU.2001.0001.0628].

[22] Exhibit 5.332, Witness statement of Andrew Fraser, 4 August 2018, 56 [210].

[23] Exhibit 5.332, Witness statement of Andrew Fraser, 4 August 2018, 55 [201].

[24] Exhibit 5.332, Witness statement of Andrew Fraser, 4 August 2018, Exhibit APF-179 [SSU.2001.0001.0743].

[25] Exhibit 5.332, Witness statement of Andrew Fraser, 4 August 2018, Exhibit APF-180 [SSU.2001.0001.0749].

[26] Exhibit 5.332, Witness statement of Andrew Fraser, 4 August 2018, 56–64 [214]–[265].

[27] Exhibit 5.332, Witness statement of Andrew Fraser, 4 August 2018, Exhibit APF-182 [SSU.2001.0001.0752]; Exhibit 5.332, Witness statement of Andrew Fraser, 4 August 2018, Exhibit APF-200 [SSU.2001.0001.0612].

[28] Exhibit 5.332, Witness statement of Andrew Fraser, 4 August 2018, Exhibit APF-186 [SSU.2001.0001.0541].

[29] Exhibit 5.332, Witness statement of Andrew Fraser, 4 August 2018, 60 [237]; Exhibit 5.332, Witness statement of Andrew Fraser, 4 August 2018, Exhibit APF-203 [SSU.2001.0001.0615]; Exhibit 5.332, Witness statement of Andrew Fraser, 4 August 2018, Exhibit APF-211 [SSU.2001.0001.0880].

[30] Exhibit 5.332, Witness statement of Andrew Fraser, 4 August 2018, 61 [245].

[31] Exhibit 5.332, Witness statement of Andrew Fraser, 4 August 2018, 56 [207].

[32] Exhibit 5.331, Witness statement of Andrew Fraser, 30 July 2018, Exhibit APF-33 [SSU.1003.0001.0176].

[33] Exhibit 5.332, Witness statement of Andrew Fraser, 4 August 2018, 69 [308].

[34] Exhibit 5.332, Witness statement of Andrew Fraser, 4 August 2018, 56 [207].