Macquarie Group cops historic backlash on executive pay

Macquarie Group shareholders have handed the investment giant a stinging rebuke over executive pay, with more than a quarter of votes opposing the bank’s remuneration report, amid criticism of the board’s response to alleged compliance failings.

Chairman Glenn Stevens on Thursday vowed the board would reflect on shareholder concerns about executive pay, conceding a “significant minority” of investors felt it had not done enough to adjust pay after regulatory action against the bank.

Macquarie chairman Glenn Stevens and chief executive Shemara Wikramanayake.Credit: AFR

“There are some people who feel that we should have done more, and we have to hear that feedback and consider it and take that on board as we move forward,” Stevens said.

Macquarie suffered a historic “first strike” on Thursday, with 25.4 per cent of votes lodged by investors landing against its remuneration report.

In a quarterly update published on Thursday, before the meeting, Stevens and Macquarie chief executive Shemara Wikramanayake also announced that company chief financial officer Alex Harvey was stepping down after a 28-year career at Macquarie.

The company also said that its profits were down in its first quarter. But investors have been more interested in Macquarie’s executive pay and its record on compliance, which has been in the spotlight after the Australian Securities and Investments Commission (ASIC) launched legal action against the bank in May, alleging “repeated and systemic” misleading conduct over a failure to report short sales.

It was the watchdog’s fourth regulatory action against Macquarie in just over a year. Earlier in May, ASIC slapped additional licence conditions on Macquarie Bank, citing several compliance failures relating to futures dealing and over-the-counter derivatives.

Stevens said on Thursday that the ASIC matter on short selling was before the courts so he was limited in what he could say, but that any remuneration effects from the case would be reflected in the coming financial year. He also vowed to take on the concerns of shareholders regarding pay. “The board hears your message and will reflect carefully on addressing those concerns,” he said.

Macquarie shares were 4.9 per cent lower in afternoon trade.

Macquarie’s remuneration report, published earlier this year, said it had taken into account “risk and regulatory matters”, particularly ASIC’s licence conditions, and this had been reflected in the profit share awarded to Wikramanayake and the chief of Macquarie Bank Limited, Stuart Green.

Macquarie CFO Alex Harvey and CEO Shemara Wikramanayake before the Macquarie annual meeting in Sydney on Thursday.Credit: Louise Kennerley

Wikramanayake’s pay for the full year fell to $24 million, from $25.3 million the previous year, as the profit share awarded to the chief executive fell 5 per cent. Despite the lower profit share for Green, his overall pay edged up, from $5.1 million to $5.2 million.

A vote of more than 25 per cent against a remuneration report is called a “first strike”. If a company incurs a further “no” vote of 25 per cent or more against the remuneration report in the following year, it triggers a vote on whether to spill the board.

One major proxy firm, CGI, recommended investors vote against the remuneration report. CGI said Macquarie had not disclosed the scale of the reduction in profit share for relevant executives, which meant investors could not “assess whether the consequences applied to executives are proportionate to the seriousness of the issues faced by the company”.

“We remain unconvinced that the remuneration consequences applied to executives in light of recent regulatory action are sufficient – particularly in relation to the profit share scheme, which represents the largest component of the executive pay package,” it said.

The Australian Financial Review reported that another firm, Ownership Matters, recommended a “no” vote.

In contrast, rival firm ISS recommended investors support the remuneration report, albeit with qualifications.

“The board appears to have responded to governance concerns relating to the ASIC matters,” the ISS note said. “However, some shareholders may question the sufficiency of the board’s response given the reported seriousness and historical nature of the issues, which are reported to date back to as far as 2009.”

Macquarie Bank customers and shareholders, together with a coalition of environment and civil society organisations, protest outside 1 Elizabeth Street, Sydney, before Macquarie’s AGM.Credit: Louise Kennerley

Separately, 35 per cent of Macquarie investors voted in favour of a push from activist group Market Forces for increased disclosure of the group’s exposure to fossil fuel companies and its progress on assessing fossil fuel firms’ alignment with “net zero” goals.

Will van de Pol, chief executive of Market Forces, said: “Shareholders and community members have delivered a resounding reprimand to Macquarie’s shameful backsliding on its climate commitments.”

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