Proxy adviser CGI Glass Lewis backs embattled AMP on pay

CGI Glass Lewis is urging AMP shareholders to vote in favour of director elections and its pay report.

AMP’s annual general meeting is scheduled for May 2. Picture: Hollie Adams

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 a board spill, following last year’s mammoth strike against the company. The influential CGI report, revealed online 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’s delivered a 61 per cent strike against AMP’s 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 about AMP’s sale of its life insurance unit to Resolution, including that directors that signed off on the deal had not yet been elected by the board.

“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 … 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.”

Other proxy advisers ISS and Ownership Matters are due to release their AMP reports in coming days.

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 re-election of the three AMP directors: Holly Kramer, Vanessa Wallace and Andrew Harmos.

The investor furore eventually led to the exit of then chairman Catherine Brenner and several directors, following the departure of chief executive Craig Meller. The moves stemmed from AMP’s royal commission woes and allegations it misled the regulator on several occasions.

The company had started a portfolio review of the capital-intensive life division well ahead of the royal commission controversy. But several AMP shareholders have been highly 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 because the divestment contributed less than 50 per cent of metrics including revenue, profit and assets.

In contrast, in November fund manager Allan Gray calculated the divestments made up 83 per cent of profit while Merlon Capital Partners calculated 73 per cent.

CGI’s report objects to the fact that the David Murray-led AMP board didn’t take steps to mitigate shareholder concerns, noting that “the intention of the listing rules may have been circumvented”.

“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.

“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.”

For the 2019 AGM, CGI notes shareholders should consider whether concerns about the life deal “are enough” to remove board directors.

AMP has seen a clean-out of many of the prior regime. Banking veteran Mr Murray took the reins as AMP chairman around the middle of 2018 while Francesco De Ferrari started as CEO in December.

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

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

CGI takes a different view on board tenure and stability after AMP’s turbulent 2018. “Currently, the average tenure on the board for NEDs (non-executive directors) is one-year and that the management team has been significantly refreshed,” 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 “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.”

Mr Murray and three other new directors are up for election at the AMP AGM. Director Trevor Matthews has flagged his departure on completion of the life insurance deal, leaving two directors — Andrew Harmos and Mike Wilkins — who oversaw AMP prior to the royal commission.