AMP suffers protest vote, boss apologises to shareholders over adviser scandal

AMP hit with a “first strike” pay protest by shareholders at its AGM, as a director escaped sanction for an adviser scandal.

Interim executive chairman Mike Wilkins faces shareholders at today’s meeting. Pic: AAP

Embattled wealth manager AMP has suffered a massive “first strike” pay protest by shareholders at its annual meeting, as a director held on to his seat in the wake of the fee-for-no-service scandal.

AMP’s board was put on notice as more than 61 per cent of shareholder votes went against the company’s remuneration report with 38.5 per cent voting to endorse the company’s executive pay. This one of the biggest “first strike” votes against an ASX100 company since the “two strikes” rules were introduced in 2011. A 2014 protest vote against Harvey Norman’s remuneration report attracted more than 75 per cent of eligible votes, although Gerry Harvey was precluded from voting his 30 per cent stake in the company due to related party rules.

The vote sets up a board spill if another vote of 25 per cent or more against the pay report is recorded next year.

“The vote on this measure is advisory in nature only,” AMP interim chief executive Mike Wilkins told shareholders.

“AMP has received a first strike on the report,” Mr Wilkins added. “We acknowledge your concerns and certainly consider all of your feedback.”

It came as director Andrew Harmos was re-elected to the embattled wealth manager’s board despite shareholder opposition in the wake of royal commission revelations.

Mr Harmos was re-elected with the support of 63 per cent of shareholders, with 37 per cent against.

Today’s Melbourne meeting was a contentious affair, with AMP’s board grilled by shareholders over misconduct in its financial business, and accused of merely apologising while continuing to hide important information.

The meeting had begun with an apology by stand-in boss Mr Wilkins, who said the giant’s conduct had been unacceptable but that rebuilding its reputation wouldn’t occur overnight.

“We let you down,” Mr Wilkins told shareholders.

Earlier this week, three female directors quit the board amid the ongoing outcry over the company’s admission it charged customers fees for financial advice that was never delivered, and repeatedly lied to ASIC about its behaviour.

Mr Harmos, the only board director facing re-election who decided not to resign, defended his decision to hang on today.

“You have every right to feel angry and upset,” Mr Harmos said. “I have received sufficient indications of support to not resign,” he said.

“Individuals, business and society can only do well over time if everyone has the opportunity to do well. AMP’s values are fully aligned with that philosophy.

“AMP cannot afford any more instability.”

Mr Harmos said he would keep his tenure under continual review and would take guidance from his colleagues on his tenure.

The Australian Shareholders Association had recommended voting against Mr Harmos, who joined the AMP board in June last year but has been on the boards of subsidiaries, AMP Life and the National Mutual Life Association of Australasia since 2013.

Mr Wilkins resisted pressure to show shareholders the proxy votes as Mr Harmos faced questioning.

“Once again, you are choosing not to do the open transparent approach,” activist shareholder Stephen Mayne said. “The majority of people here would say please show us the proxies.”

Board members face shareholders at the Grand Hyatt. Pic: AAP

‘We let you down’

Earlier Mr Wilkins opened the troubled financial services company’s annual general meeting with an immediate apology to shareholders for the mounting scandals at the group, but warned its “rebuild won’t happen overnight”.

“We let you down,’’ Mr Wilkins said in his opening address to shareholders.

“We have heard loud and clear you want change.”

AMP was resigned to having a first strike recorded against its remuneration report, as the company faced shareholders for the first time since revelations of misconduct at the banking royal commission.

Mr Wilkins told shareholders the behaviour of some individuals at the AMP advice business was unacceptable and in breach of AMP’s policies, and that many executives and directors had left the company in the wake of the “fees-for-no-service’’ scandal.

Mr Wilkins said 50 per cent of the board was leaving or would leave, including its chairman Catherine Brenner, but he added it was “regrettable and unintentional” that all of its female directors would be gone. However more women would likely be hired.

He said AMP would have preferred that directors Holly Kramer and Vanessa Wallace, who had been up for re-election today but quit this week amid shareholder pressure, had stayed on the board for longer.

Speaking at the start of the meeting, Mr Wilkins said AMP expected to earn a “first strike’’ from shareholders when they voted on the remuneration report.

Meanwhile Mr Wilkins said he would take a proposal to incoming chairman David Murray to put all board directors up for re-election next year.

AMP’s constitution has a quirk where directors only face re-election once every three years, as opposed to other companies which have a third of their boards up for re-election every year. While about half the board has resigned from AMP, none of the remaining directors who were present on the board during its recent turmoil are due to face re-election at next year’s shareholder meeting.

Activitist shareholder Stephen Mayne asked Mr Wilkins: “Can you give a commitment that all of the board will put themselves up for re-election next year.”

Mr Wilkins said there would be further renewal of the board in the near future. “The constitution of the board will look very, very different compared to how it looks today,” he said before telling Mr Mayne: “I will take your proposal to the chairman elect.”

Shareholders “want answers”

Mr Wilkins said earlier the board understood the anger of shareholders and their reasons for voting in protest over executives’ pay.

He said AMP would work on rebuilding the trust of AMP among its stakeholders.

Mr Wilkins said “the AMP of the future would be different to the AMP of today”, with major changes needed at the group, as the banking royal commission changed the industry.

Mr Wilkins said the scandals at the advice business were “absolutely unacceptable”.

“We have let our customers down. And, we have let the wider community down. We understand you want change. And we understand you want answers.’’

#AMP AGM opens the floor to questions from shareholders with a request from Interim Chair Mike Wilkins to help maintain the decorum of the meeting and be mindful of language

— Annelise Nielsen (@annelisenews) May 10, 2018

Mr Wilkins said he had been “repeatedly” asked why scandalous conduct, including the charging of fees for no service, was not revealed by AMP before it was exposed at the banking royal commission in April.

Mr Wilkins said disclosing any facts could have prejudiced an ongoing ASIC investigation.

He attempted to explain how the scandal over fees-for-no-service was allowed to happen, and the misleading of ASIC, but said ultimately AMP must restore the trust of the community and its customers.

“At AMP a small number of individuals in our advice business made the decision not to follow policy, and inappropriately charged fees to customers where no service was provided.

“The situation was compounded through a series of communications that misrepresented the issue to - and therefore served to mislead - our regulator on several occasions.

“Let me be clear: from my perspective the number of misrepresentations is not what matters. In my view, one misleading statement is one too many.”

But Mr Wilkins said the board had taken “decisive action” on learning about the breaches.

Best shareholder comment from the floor so far at #AMP AGM “Being compliant is like being pregnant. You either are or you aren’t” #corgov #compliance #ausbiz #bankingRC

— Katie Wilko (@ginganinjawilko) May 10, 2018

Mr Wilkins said AMP had wanted a more measured renewal of its board.

“It would not have been our preference to see Holly Kramer and Vanessa Wallace to go today,” he told shareholders.

“We were looking for a measured renewal of the board” and “stability” but shareholders had indicated they wanted quicker board renewal, Mr Wilkins said.

“They have bowed to the pressures of shareholders and have resigned.

“The board has not shied away from the fact that we have a collective accountability of the organisation,” Mr Wilkins said. “The fact that half the board has resigned shows were are taking that accountability and responsibility.”

AMP accused of “hiding” chairman’s pay

Ms Wilkins came under fire at the AGM for refusing to disclose incoming chairman David Murray’s remuneration.

Mr Wilkins also revealed he took up the CEO role from ousted boss Craig Meller for no extra pay.

Shareholder activist Stephen Mayne, appearing in an individual capacity, asked what Mr Wilkins and chairman elect Mr Murray were being paid.

“David’s information will be disclosed with the remuneration report next year. It has been benchmarked against similar organisations of similar size,” Mr Wilkins said.

Mr Mayne asked Mr Wilkins to reconsider the decision not to disclose Mr Murray’s pay for another year. “Hiding the chairman’s salary….is more duck and weave when you need to be more transparent. Take the high ground on transparency and disclosure from now on.”

Mr Wilkins said what AMP was doing was within the bounds of normal industry practice.

He said he took the role of acting CEO without bothering to ask immediately for extra remuneration.

“In terms of what the company is paying me at the moment. Nothing. Seriously. It was not an issue that was in my mind when I took up the role. There will be some remuneration coming my way but I haven’t had a discussion (yet),” he said.

He said he will be paid “in the form of a monthly payment that will not include any incentives or long or short term incentives” until a new chief executive is found.

Mr Mayne asked why Mr Wilkins didn’t want to be the chairman.

“It was important to be seen that the organisation wanted to change,” Mr Wilkins said. “It was appropriate that we had someone new to lead us to that future. We are very pleased to see David chose to step into do that.”

Mr Mayne asked whether it was true that 60 per cent of proxy votes were lodged against directors Ms Wallace and Ms Kramer, who resigned before the vote was public.

“Both Holly and Vanessa bowed to the wishes of shareholders,” Mr Wilkins said. “They have bowed to the wishes of shareholders.”

Holly Kramer quit the board ahead of today’s AGM.

Director defends role

Remaining board director Geoff Roberts defended his dual role as permanent full-time chief financial officer at ASX-listed group SEEK and his position on the AMP board.

Mr Mayne demanded to know how Mr Roberts was able to keep “juggling” his responsibilities with AMP and the globally active SEEK company.

“I’ve had 30 years’ experience in this industry. I also have a lot of knowledge at seek and a very strong finance team at Seek,” Mr Roberts told shareholders. “Leaving the last couple of weeks aside… that have been very demanding….I have been able to balance my responsibilities,” he said.

Geoff Roberts defended his place on the board. Pic: AAP

Mr Wilkins said as part of the board renewal process, more women will likely be hired.

Although only 50 per cent of the board has resigned in the wake of the royal commission hearings, all those who resigned were women.

“It is unfortunate that we are losing all our female board members and it is important that we get diversity back on the board,” Mr Wilkins said.

Patty Akopiantz, an independent director who has announced her resignation this week despite not facing re-election this year, said she made the decision to quit to take more collective responsibility for the board.

“I offered my resignation as a way to take further collective responsibility of the board. I’m not sure I can add much more,” Ms Akopiantz said.

Patty Akopiantz, left, said resigning was her own decision. AAP

Anger at AMP fuels class actions

The annual meeting began hours after the besieged wealth management giant said it had been forced to put plans to sell its life insurance division on the backburner, as it faces a second class action.

Law firm Phi Finney McDonald, backed by funding from Australia’s largest litigation funder IMF Bentham, today said it had launched a class-action suit against AMP in the Federal Court of Australia.

It was more unwanted news for AMP after rival law firm Quinn Emanuel filed its own class action yesterday, just ahead of the company’s annual general meeting today.

“AMP intends to vigorously defend the proceedings,” a spokeswoman for AMP said.

Law firms Shine Lawyers and Slater and Gordon have also said they are investigating their own respective class actions.

Slater and Gordon head of class actions Ben Hardwick, whose firm is also investigating a legal suit against AMP but is yet to file in court, said: “The anger surrounding today’s AGM reflects the anger that we’ve been hearing from AMP shareholders.

“Hundreds of mum and dad investors and dozens of institutions have now contacted Slater and Gordon - this is some of the fastest uptake we’ve seen with regard to class actions of this type, which shows the magnitude and pervasiveness of shareholders’ losses.

“Mike Wilkins’ unreserved apology today is an important first step, but there is a long way to go to ensure shareholders receive meaningful restitution.”

The scandals uncovered during the royal commission have forced chairman Ms Brenner, AMP chief executive Craig Meller, and group general counsel and company secretary Brian Salter to step down as the company tries to rebuild trust with customers.

Meanwhile, the company announced the departure of three directors — Ms Kramer, Ms Wallace and Patty Akopiantz — ahead of the impending shareholder backlash at today’s AGM.

Both gone - former Ceo Craig Meller and former chairman Catherine Brenner at last year’s annual meeting. Pic: John Feder

In an update before today’s shareholder meeting, AMP flagged higher customer remediation costs and said it was reviewing its services following damaging revelations of misconduct heard at the banking royal commission.

In the update, AMP posted a two per cent fall in assets under management, blaming weaker investment markets, and revealed a much-anticipated update on the strategic review of its life insurance division was far from complete.

All options were on the table for the problematic division, which could have resulted in an all-out sale of the life insurance unit. In February, Mr Meller said plans for the potential ditching of the life unit were “well progressed”.

However, Mr Wilkins today said the sale process had to be put on hold as the company was preoccupied.

“We continue to progress the portfolio review, however we are currently prioritising the performance of the business, board renewal and the appointment of a new CEO,” he said.

The life unit booked earnings of $110m for the 2017 calendar year, well above the previous year’s $415m loss.

“The past month has been exceptionally difficult for our customers, shareholders, employees and advisers. We recognise there is a lot to be done to restore the public’s confidence in the company, which is a priority for the board,” Mr Wilkins said.

“AMP stands behind its advice business, and the value it creates for customers. However, we have been very disappointed that, in some instances, our customers have not received appropriate levels of service for the fees they have paid. We are working hard to accelerate the remediation for our customers.”

AMP’s shares fell to a six-year low following its testimony at the royal commission — knocking more than $2 billion off its market value.

Quinn Emanuel partner Damian Scattini said the deceit of AMP and its board was “reprehensible”.

“They must be held financially accountable,” Mr Scattini said. “These revelations show irrefutably the contempt and disregard that AMP has for both its shareholders and customers.”

In today’s update, AMP said assets under management in the first quarter of 2018 were $128.3 billion, down two per cent from the fourth quarter of 2017.

It said cashflows were subdued in Australian wealth management but it reported continued strength in AMP Capital and AMP Bank.

“AMP is a well-capitalised company with areas of our business delivering strong growth,” said Mr Wilkins

“AMP Capital saw strong external fund net flows particularly in real assets and AMP Bank continued its loan growth, despite a tighter market. Australian wealth management experienced cashflows in line with Q1 in 2017, as well as a small reduction in AUM following weaker investment markets.”

With AAP