CGI Glass Lewis to back AMP at AGM despite concern over life unit sale

David Murray’s embattled board finally finds support ahead of next month’s AGM.

AMP chairman David Murray. Hollie Adams/The Australian

High-profile proxy adviser CGI Glass Lewis is urging shareholders of embattled AMP to vote in favour of director elections and its pay report, despite making damning observations on the $3.3 billion sale of its life unit.

CGI tells investors to vote in favour of AMP’s 2018 pay report and avoid the possibility of board spill, following last year’s mammoth strike against the company. The influential CGI report, obtained by The Australian, said AMP had “taken steps to attempt to address the impact of the findings of the royal commission” including revamping its board and management.

AMP’s annual general meeting is scheduled for May 2, and will be closely watched given last year delivered AMP a 61 per cent strike against its remuneration report. A second vote against the pay report could lead to a spill of the board.

AMP awarded no bonuses last year in light of the damaging royal commission revelations against the company, bar one executive.

CGI’s report noted, however, numerous concerns on AMP’s sale of its life insurance unit to Resolution.

“We remain concerned that the sale of AMP Life was not executed in such a way as to best realise value for shareholders,” the proxy adviser said.

“We find it reasonable that some shareholders have concerns the exit of AMP Life was rushed through by a significantly new board and management (at that time NED Mike Wilkins was acting MD/CEO) to clear the company of a challenging segment in advance of a new CEO inheriting the business, and that in this rush shareholder value may have been destroyed.”

But last year CGI backflipped on its AMP position following a groundswell of investor anger at the wealth group. Just 15 days ahead of AMP’s AGM in 2018 CGI altered its position and advised investors to vote against the reelection of the three AMP directors Holly Kramer, Vanessa Wallace and Andrew Harmos.

That decision came in the wake of AMP’s royal commission woes and allegations it misled the regulator on several occasions.

Several AMP shareholders have been critical about the life transaction and the fact it wasn’t put to a shareholder vote, given its size. AMP has said ASX rules didn’t require a vote.

CGI’s report takes umbrage, though, that the David Murray-led board didn’t take steps to mitigate shareholder concerns.

“We also believe it reasonable that the board who approved the deal … would have been aware that shareholders would have such concerns given the significance of AMP Life to the Company by revenue, EBITDA and other metrics.

“Our principle issue is therefore that the board did not take steps to mitigate these concerns, either by way of the appointment of an independent expert to review the deal, engaging shareholders prior to finalising the deal, taking the matter to shareholder vote, or any other method.

“We do not believe the board has justified why it did not take such steps and so concerns around the boards’ judgment on the matter remains.”

CGI notes that for the 2019 AGM, shareholders need to consider whether these concerns about the deal “are enough” to remove directors from the board.

Last week, Allan Gray’s managing director Simon Mawhinney, an AMP shareholder, said while his firm intended to back the remuneration report, it would vote against Mr Murray’s election to the board.

Merlon Capital Partners, a critic of AMP’s governance and decision to sell its life unit, has also said the firm would vote against the election of Mr Murray and fellow non-executive director John O’Sullivan. Merlon is also urging its clients to do so.

CGI highlighted board tenure and stability after a turbulent 2018 as important.

“We highlight that currently, the average tenure on the board for NEDs is one-year and that the management team has been significantly refreshed under the MD/CEO,” the report said.

“We view these personnel changes as being a key first step in recovering from the reputation blow the company has suffered. We also view these personnel changes as positive from an accountability standpoint, with the resignation of multiple directors and executives.”

But CGI also warned that it believed “certain individuals” on the board may be culpable for matters arising from the royal commission, “by way of inaction or otherwise”.

“However we note that none of the directors currently up for election at the 2019 AGM fall into this category,” the report said. “Each of the nominee’s at this years AGM were appointed to the board in either 2018 or 2019, after the period of accepted and alleged misconduct.”