AMP chief Francesco De Ferrari has emerged all powerful from the dramatic shake-up at the wealth manager which will see its chair David Murray walk and its newly-appointed AMP Capital boss Boe Pahari demoted.
Both movies follow the scandal over Pahari’s appointment as AMP Capital boss after surviving a sexual harassment complaint.
The 170-year-old company has suffered a string of external blows from the Hayne royal commission’s attacks on its fees for no service among more recent scandals including the Pahari matter, and this month’s resignation of local boss Alex Wade over conduct issues.
Murray has fallen on his sword to protect his appointed chief executive De Ferrari in a classic old school response to a governance nightmare.
The chair rather than the chief executive walked which is exactly how it should have happened.
Some would argue De Ferrari should also have gone given he was the key player in Pahari’s appointment.
The intervention of influential Allan Gray fund manager Simon Mawhinney was the final blow forcing the AMO departures with his strong protests last week.
Mawhinney had threatened to call an extraordinary general meeting if AMP did not the action it did with the resignations of Murray, Fraser and demotion of Pahari.
He thinks after this decisive action AMP should be left to pursue its stated strategy.
Allan Gray owns seven per cent of the company.
Pahari is staying in a demoted position because he is named the key person on AMP’s closed end funds which means if left AMP could suffer massive withdrawals from the funds, under the terms of the investment contracts.
As the stated key person he is crucial to keeping the money in the fund.
This is a lingering governance disaster for AMP.
New chair Debra Hazelton is a highly regarded financial services executive who steps into an extraordinary period in attempting to prevent an implosion at AMP.
Ironically enough the AMP motto says “a sure friend in uncertain times.”
Hazelton has walked into the middle of a very uncertain time at AMP.
AMP Capital chair John Fraser has also walked in the wake of the scandal.
David Murray had avoided being a big company director after an illustrious career at CBA.
Asked two years ago why he accepted this one he confided “I wanted to join a board of s company which I could have some influence”.
When appointed De Ferrari as chief he said “he is the last best chance to save the AMP.”
Amid the governance disaster that is the AMP Murray at the end has done the best he can to help De Ferrari and it is up to his old Credit Suisse colleague to prove him right.
The concept of an all powerful CEO at this stage of the game for AMP will worry investors.
But Murray’s decisive actions gives it the best start in the circumstances.
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