Reforming Governance Structure and Accountabilities: The Experience of QSuper
John Carpendale
QSuper has responded to changing needs in the pension system by adopting governance best practices In 2009, QSuper entered into a fully regulated environment, which included much more rigorous requirements for investment governance. In addition, QSuper’s board has sought to improve and strengthen its governance over the fund’s investment, despite the fact that QSuper had developed a strong reputation for achieving high-quality pension fund outcomes in the preceding years: it was, for example, the recipient of a platinum (highest-level) award by SuperRatings, an Australian pension industry ratings agency, in 2007, 2008, and 2009. At the QSuper strategic planning workshop in 2008, the board determined that it was time for it to assume full control and accountability for the fund’s investment governance. In considering the governance model to be adopted, the board examined global best practices and, where practical, adopted such practices. In particular, the board took account of recent research work undertaken in Europe and North America. In a landmark study, a Watson Wyatt Worldwide (2007) study identified characteristics of the world’s best-governed institutional investors. The study examined the defining features of 10 investors that had consistently outperformed their peers. Results of this work are identified in six core best-practice factors and six exceptional best-practice factors (table 3.2). In developing its reformed governance model, QSuper adopted these best-practice factors as benchmarks. In another paper, Ambachtsheer, Capelle, and Lum (2007) analyzed the findings of a survey on pension fund governance from an international group of 88 pension fund executives. The study concluded that there are five opportunities to improve pension fund governance: Redesign pension deals to eliminate the “competing financial interests” problem. Develop templates for ideal boards of governors composition, and integrate these templates into actual selection processes. Initiate board effectiveness self-evaluation processes. Achieve clarity between the respective roles of boards and management. Adopt high-performance cultures with competitive compensation policies. QSuper’s board adopted these recommendations alongside the Watson Wyatt Worldwide recommendations to guide the redesign of its investment governance model. 51