‘I understand and appreciate your anger’: Magellan board face hostility from some shareholders over pay

The board of embattled funds manager Magellan has faced hostile questions from shareholders over its bid to increase fees for non-executive directors by $1 million after a year of poor performance and its plunging share price.

At a meeting at the firm’s Sydney offices on Wednesday afternoon, the board sought the approval of shareholders to increase the cap on the pay of non-executive directors from $750,000 to $1.75 million as it works to renew and expand the board after a horror 12 months.

Magellan chair Hamish McLennan. Credit: Peter Rae

Despite some pointed questions from shareholders, who asked why they should support the increase given Magellan’s share price has tumbled 65 per cent in the past 12 months, the vote was comfortably passed with almost 95 per cent voting in favour of the resolution.

Magellan aims to appoint two new non-executive directors to the board and wants to increase the fees of current directors Robert Fraser, Colette Garnsey, John Eales and chair Hamish McLennan.

The group is trying to recover from a troubled year during which it shed more than $60 billion in funds under management as senior management, including high-profile stock picker and founder Hamish Douglass, left.

Douglass split from his wife at the end of last year, and several months later announced he was taking medical leave after “intense focus” on his personal and professional life. The fund manager has since announced Douglass will return as a consultant, not an employee.

On Wednesday, one shareholder at the meeting said $1.75 million was a huge amount of money that most people in the room would hardly earn in their careers.

“Can you give us some concrete examples of how the existing non-executive directors have added value in the last two or three years?” the shareholder asked.

McLennan said that before Douglass departed, the share price and growth of the company had been strong.

“I understand and appreciate your anger. I think for the directors who are sitting here in front of you, we’ve stayed with the company. But the fee bracket that we’ve been working to is under all of the benchmarks, and actually with a lot of the discussions that we’ve had with the proxy advisers, they concur, the fact that we’re very much below all the norms and standards. So more pointedly, the board has dealt with an extraordinary situation where the founder of the company had to take medical leave of absence... ”

McLennan was then interrupted by the shareholder, who asked him again how the current board had added value.

“Can you let me finish?” said McLennan. “I think there is a deep pool of people who work here who made the company a great company. But what you’ve seen are a lot of outflows that have been caused by the instability of Hamish’s departure. And there were a lot of institutional relationships that were tied to Hamish that, no matter what anyone could have said or done, I think was a difficult situation for the board to get their heads around.

“I think the board directors have acted very honourably over many years. You obviously disagree. We’re very disappointed with the way for company’s so positioned at the moment, but we’re coming back to shareholders because we feel that it’s important that we bring new talent in.”

Another shareholder asked why they should support an increase to director pay in the face of the tanking share price.

“This is an important question and a matter to the board considered in depth before putting this resolution to shareholders,” McLennan said.

He said that Magellan needed to increase the cap so it could attract the best talent as it works to renew the board. He said they needed people who had the right skills to lead the company into the “next chapter”.

An independent adviser had informed them that the current fees paid to Magellan non-executive directors are significantly below its market and industry peers, McLennan added, which was also the feedback they had received during the recruitment process.

The major proxy advisers recommended voting in favour of the resolution, and the full results of the vote will be posted to the ASX on Wednesday night.

New chief executive David George emphasised on Wednesday that the company was working to win back clients’ trust and stem the outflows that have plagued the business for months.

He told investors that Magellan was focusing on “keeping it simple” and returning to its roots as a conventional funds manager, with the aim of returning funds under management to $100 billion in five years.

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