AMP facing strike vote call from ISS

Influential proxy advisory house ISS has urged investors to vote against AMP's annual pay report

AMP CEO Francesco De Ferrari and chairman David Murray at the company’s AGM in 2019. Picture: Britta Campion

Influential proxy advisory house ISS has urged investors to vote against AMP's annual pay report, citing “grossly excessive” long-term bonuses and a misalignment of executive remuneration with shareholder interests.

In a report issued to investors, and obtained by The Australian, ISS says a vote against AMP’s pay report “is warranted”.

“The company has reintroduced STI (short-term incentive) and LTI (long-term incentive) plans to mark the return to a market-accepted incentive structure following the attempted implementation of a misaligned combined incentive plan which removed longer term performance measures,” the report said, noting several aspects and practices that “misaligned with shareholder interests, the company's performance and accepted market practice”.

ISS used the report to take a swipe at the pay of AMP chief executive Francesco De Ferrari, after the wealth group’s annual report noted an increase the maximum potential short-term bonus he can earn. That is now up to 200 per cent of his $2.2m base salary from 120 per cent — which AMP said was to align with a policy “intended to apply” to senior executives.

“While recognising the company has negotiated a high-level CEO to join the business, base pay at $2.2m is well above median and the replacement recovery incentive allows targets to be re-tested,” ISS said.

“The STI plan is based solely on strategic hurdles, with no disclosure of any specific or quantified targets.”

In February AMP booked a $2.5bn statutory 2019 loss , due in part to impairment charges and massive fund outflows.

Mr De Ferrari’s pay package was a bumper $13.43m last year, buoyed by share rights, options and restricted shares, and the AGM notice asks investors to sign off on a revised 2019 “recovery incentive” to offset shares and pay from prior employer Credit Suisse.

The board, led by chairman David Murray, has backed Mr De Ferrari and his turnaround plan to improve performance over three years.

But the ISS report expressed dissatisfaction with AMP’s short-term bonus payments and long-term incentives, noting the latter were “grossly excessive” compared to other ASX companies.

“Executives (excluding the CEO of AMP Capital who has a profit share plan) received bonuses between $470,000 and $820,000, which are excessive and fundamentally misaligned with the company's financial performance in FY19,” it said.

“Executives (aside from the group CEO) received LTI awards between $1.5m to $4.9m (or 3 times to 5 times their fixed remuneration). These grants are grossly excessive compared to market.”

“The CEOs of large ASX 100 companies including Caltex Australia, Insurance Australia Group and QBE Insurance received LTI awards of $1m, $2.6m and $4.2m, respectively, demonstrating the excessive nature of AMP's grants to non-CEO staff (even where AMP's material underperformance is ignored).”

An AMP spokesman said its 2019 pay approach was focused “on incentivising executives to drive the transformation of AMP’s business and ultimately, deliver for shareholders”.

“The approach seeks to balance attracting and retaining the right talent to deliver a challenging and ambitious strategy, with the views of shareholders.”

ISS was also critical of the AMP board’s remuneration, noting non-executive director pay continued to be "materially above" that of comparable listed companies.

AMP’s annual general meeting is scheduled for May 8. It follows Mr De Ferrari last month withdrawing guidance for 2020 underlying profit to be “broadly flat” on last year, joining a flood of companies withdrawing expectations in light of the COVID-19 economic impact.

AMP last year avoided a second strike against pay as more than 89 per cent of investors voted in favour of the remuneration report.

ISS is voting in favour of all other AMP AGM resolutions, including the re-election of Trevor Matthews and the election of Debra Hazelton, Rahoul Chowdry and Michael Sammells as non-executive directors.

The wealth group is scheduled to provide a quarterly update on Thursday, which will show how it’s faring amid a challenging period in financial markets. AMP posted a 32 per cent slump in 2019 underlying profit.