As the landscape of prudential regulation continues to evolve, APRA’s March 2025 Governance Review Discussion Paper marks a significant step forward in strengthening governance standards across Australia’s banks, insurers, and superannuation entities. The paper’s eight proposals are designed to address perceived weaknesses in board skills, independence, performance, and – most controversially – director tenure.

APRA’s review is grounded in the recognition that effective governance is not just a compliance exercise, but a critical driver of organisational resilience and public trust. The proposals range from raising the bar on board skills and fitness (Proposals 1 & 2), to increasing board independence (Proposal 4), to clarifying the roles of boards, chairs, and committees (Proposals 6 & 7). Importantly, APRA is also seeking to reduce unnecessary regulatory burden, particularly for smaller entities, by embedding proportionality and flexibility where appropriate.

While these recommendations are specifically targeted at the banks, insurers, and superannuation entities within APRA’s regulatory remit, the principles outlined in their Governance Review Discussion Paper offer valuable guidance for all Australian companies. The focus on board renewal, director independence, and board skills and fitness reflects contemporary best practices in governance, and can help organisations across sectors strengthen their leadership, manage risk more effectively, and build greater stakeholder trust.

Proposal 8: a Ten-Year Limit for NEDs?

Proposal 8 stands out as both bold and contentious: a lifetime default tenure limit of 10 years for non-executive directors at regulated entities, with the possibility of a two-year extension at APRA’s discretion in exceptional cases. This proposal is more prescriptive than international standards, which typically use tenure as a factor in assessing independence rather than as a hard cap.

Regular board renewal and turnover ensures fresh perspectives, reduces the risk of groupthink, and helps boards remain agile in the face of emerging risks. Overly long tenure can erode a director’s capacity to challenge management and maintain objectivity, and a clear limit could help safeguard against complacency and entrenched interests. Proposal 8 is also in line with generally accepted best practice, which normally recommends a 9-12 year maximum for independent directors.

But requiring a long-serving director to retire from a board simply due to their tenure clock expiring brings several challenges. Many long-serving directors bring deep institutional knowledge and valuable continuity; a hard limit risks losing this expertise, especially in sectors where quality director recruitment may already be challenging. If Proposal 8 is implemented by APRA without an appropriate transition period, smaller entities may face difficulties in sourcing suitably skilled replacements in time; and the proposal could lead to a wave of board departures, impacting stability and succession planning if not carefully managed.

What Does This Mean for Early-Career Governance Professionals?

For those at the start of their governance careers, Proposal 8 represents a significant opportunity. As boards are compelled to refresh their composition more regularly, the demand for new directors – particularly those with contemporary skills in risk, technology, and stakeholder engagement – will increase. This opens the door for emerging professionals to step up, provided they invest in building the right capabilities and networks.

However, it also raises the bar for entry. With a finite window to make an impact, early-career directors will need to demonstrate value quickly and commit to ongoing professional development. The focus on strong succession planning and skills matrices (Proposals 1 & 8) means that aspiring directors must be proactive in aligning their experience with the evolving needs of boards. For early-career governance professionals, the message is clear: the future belongs to those who are prepared, adaptable, and ready to contribute to high-performing boards.