Australia’s prudential regulator has long-serving board directors in its sights with a proposal to limit their terms to 10 years.
The Australian Prudential Regulation Authority’s suggestion was one of several in a discussion paper released Thursday aimed at bolstering governance of the finance, insurance and pension industries. The long tenure of non-executive members can impede the independence of boards, APRA chair John Lonsdale told a media briefing.
“We’ve got 150 directors in this country with a tenure greater than 12 years and 30 directors with a tenure greater than 20 years,” Lonsdale said. “We think that’s too long.”
The regulator also proposed raising the requirements to join a board, as well as lift the minimum standards that assess the fitness of company boards, the chair and senior management. APRA will seek feedback from stakeholders including banks, insurers and pension funds over the next three months.
Lonsdale said he wasn’t aware of any other jurisdiction that had a “hard tenure limit, but we think that that is necessary to make sure that we’ve got the independence that we need on the boards.”
Corporate Australia has been hit by a string of governance scandals in the past 12 months. Lonsdale said the discussion paper wasn’t in response to any specific incident, but that around 80% of the 1,500 entities that APRA regulates “have governance issues at the core.”
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“And that’s far too many,” he said.
APRA intends to release updated prudential standards and guidance for formal consultation in the first half of next year. The regulator will then publish the updated framework by the beginning of 2027 ahead of it commencing the following year.
