Battered AMP facing shareholder revolt over Murray, exec pay

Embattled wealth group AMP faces growing investor resentment at its upcoming annual general meeting.

AMP chairman David Murray. Picture: Adam Yip

Embattled wealth group AMP faces growing investor resentment, including a potential protest vote against the election of chairman David Murray and a second strike against its pay report, at its upcoming annual general meeting.

The Australian understands at least two institutional investors plan to vote against Mr Murray’s election to the AMP board. Shareholders representing about a further 15.5 per cent of the register are said to be weighing their positions, but remain open to voting against his election unless board renewal and governance are improved.

A date for AMP’s AGM is yet to be set, although it is typically held in May.

A shareholder vote of 50 per cent is required to block the election of a director. However, AMP also faces the risk of a second strike against its remuneration report in 2019, which could prompt a board spill.

In 2018, amid ongoing turmoil and the departure of its chief executive Craig Meller and chairman Catherine Brenner, AMP attracted a vote of more than 61 per cent against its remuneration ­report.

That followed the Hayne royal commission’s exposure of a spate of questionable dealings within AMP’s financial advice business, including allegations the company misled the corporate regulator.

Merlon Capital Partners principal Hamish Carlisle — a vocal critic of AMP’s decision to sell its life insurance unit — intends to vote against the election of Mr Murray and fellow non-executive director John O’Sullivan.

“It would be difficult for any shareholder to support David Murray and by implication difficult to support John O’Sullivan,” he said.

“Stability (on the board) is good but the principle matters as well. The capital allocation and governance track record is so poor that it is a straightforward decision for us.

“For us the big issues are around the value destruction and the fact it (life insurance divestment) didn’t go to a vote. He (Mr Murray) was there for this (sale) decision.”

Another institutional investor, who declined to be named, said they would vote against the election of Mr Murray.

“I don’t think they did shareholders a service by selling it (the life insurance unit) for the amount they sold it for,” he said. “It warranted them (the board) seeking shareholder approval.”

AMP agreed to sell its life insurance business to Resolution Life for $3.3 billion, a decision that at the time saw the company shed almost a quarter of its market value. After investor unrest, AMP subsequently highlighted ASX rules that didn’t require the company to put the transaction to investors.

An AMP spokeswoman yesterday said: “As we’ve stated previously, there is a clear strategic rationale for the Resolution Life deal in a challenging local market for life insurance. The deal substantially simplifies our portfolio, delivers certainty and frees up capital.

“The process of board renewal is continuing and we look forward to making additional appointments to bring the right mix of skills needed to rebuild AMP and restore trust in the organisation.”

Mr Murray — who steered the landmark Financial System Inquiry and was the former chief executive of the Commonwealth Bank — was announced as AMP chairman just before last year’s AGM in May and started in June. That meant shareholders didn’t vote on his election to the board.

Mr O’Sullivan was appointed to the AMP board in June. He was formerly the CBA’s legal counsel and also overlapped with Mr Murray at Credit Suisse, where the latter was a senior adviser until last year.

Former treasury secretary John Fraser also took up a post on AMP’s board last year.

A shake-up of AMP’s board through 2018, has seen it transition from one with market-leading gender diversity to now having no female directors, following the December retirement of Patty Akopiantz.

The board composition will have an impact on the AGM voting intentions of many investors, who seek to comply with ASX corporate governance principles.

Australian Council of Superannuation Investors CEO Louise Davidson wouldn’t comment directly on how the group would vote, but said AMP had been “on notice” for some time on board gender diversity.

“It would be disappointing to think that the company hadn’t given serious consideration to resolving this issue before its AGM in May,” she said.

“Clearly a lot of change is required at AMP. The royal commission exposed significant underlying governance, remuneration and culture issues at the company. Investors want reassurance that these issues have been dealt with.”

Investors will also be closely assessing the notice of meeting for any planned changes to new AMP chief executive Francesco De Ferrari’s remuneration arrangements.

Mr Murray is said to have engaged with several investors in 2018 and those meetings are expected to step up ahead of the AGM.

In further fallout from the royal commission, Australian funds run by Scottish investment group Aberdeen Asset Management, which has more than £310 billion under management, have dumped their AMP and IOOF shares.

The $63m Aberdeen Standard Ex-20 Australian Equities Fund exited IOOF in December while the $54m Aberdeen Standard Australian Equities Fund got rid of its holdings in both IOOF and AMP the same month.

IOOF was a drag on the performance of both funds “after regulator APRA announced disqualification proceedings against both the management and its board”, Aberdeen said in factsheets on its website.

The fund manager said it “exited AMP amid ongoing regulatory scrutiny”.

“We think its new management is likely to reset market expectations and following the royal commission’s final recommendations, the industry structure may be materially different, to the detriment of vertically integrated players. We also sold IOOF after it was reprimanded by regulator APRA. This disqualifies it as a holding, based on our long-term quality process.”

Australian Ethical has also divested its IOOF holding in recent weeks.

IOOF chief Chris Kelaher and chairman George Venardos are on leave after the Australian Prudential Regulation Authority launched Federal Court action seeking to have them and other company executives barred from the superannuation industry.

The executives deny the allegations and the case is set down for a July hearing.