David Murray’s AMP board balancing act

How many women should David Murray recruit to the AMP board to replace the four who have gone or are going?

Incoming AMP chairman David Murray faces some tough decisions. (Picture Mike Batterham)

The number of its female directors is, in my view, the least interesting about AMP’s future, but some people have made it a big deal, as if its four women out of nine directors were in some way responsible for the company’s distress.

If anything, it was more likely to be the reverse. At a guess I’d say that most, if not close to all, corporate collapses have been overseen by men, but it’s perhaps worth dwelling on the notion of merit for a minute, especially as it applies to AMP.

Merit in what? The practice of financial services in Australia? Well, the royal commission’s finding so far suggest that this is not an especially meritorious business.

Or merit in using common sense to uncover and prevent shiftiness and corruption, as applied by Rowena Orr QC, special counsel to the royal commissioner, Kenneth Hayne, (neither of whom, by the way, are experts in financial services)?

Who on the board argued what when the matters that have brought AMP undone came up? We don’t know, but the proposition that the men were the pillars of rectitude and expertise, trying and failing to hold back the gung-ho, inexpert, silly women is plainly ridiculous.

June 26, 2014

Royal Commission timeline

The Senate economics committee calls for a royal commission following a lengthy inquiry into ASIC’s performance that focused on financial planning scandals at the CBA.

April 21, 2016

Royal Commission timeline

In an attempt to stave off continuing calls for a royal commission, the Australian Bankers Association announces former senior public servant Ian McPhee will oversee an overhaul of industry standards and practices.

November 30, 2017

Royal Commission timeline

After years of denying a royal commission is needed, the banks write to Prime Minister Malcolm Turnbull asking for one. He obliges.

February 12, 2018

Royal Commission timeline

Commissioner Kenneth Hayne formally opens the inquiry and sets the tone by laying into the big banks for failing to provide all the information he wanted in time.

March 13, 2018

Royal Commission timeline

The commission’s first full public hearings hear about consumer credit issues including a home loan fraud ring among NAB bankers in Western Sydney and out-of-control mortgage brokers at CBA subsidiary Aussie Home Loans.

April 16, 2018

Royal Commission timeline

Second round of hearings kicks off with a focus on one of the industry’s most scandal-prone sectors, financial planning.

Experience suggests it would more likely have been the other way around.

Certainly there is no evidence that merit lines up on the basis of gender, or that deciding to have a certain number of one gender or the other leads to a lack of merit.

Whenever I see a board with no women, or just one, I think the chairman is either a dill or lazy, or both. An all-male board is a dispiriting sight for the women who work for the company and sets up dangerous group think among the men. At least two women are an absolutely essential part of any board, in my view.

So how many women should David Murray recruit to the AMP board to replace the four who have gone or are going?

Four? Now that would be a powerful statement by Murray, and a big moment for board diversity and fairness. One or two would be an equally powerful statement the other way.

It must be three out of nine, at least, and in fact it would be self-destructive of Murray to do otherwise because many institutions refuse to invest in companies with fewer than 30 per cent women on their boards, and AMP needs all the friends it can get. So Murray has a quota of 30 per cent, in my view.

What about the CEO, Murray’s most important appointment? Well, the victory of Mahathir Mohammed, 92, in last week’s Malaysian elections brings to mind Andrew Mohl, AMP’s previous leader and still only 62.

But more important than any of the recruiting that David Murray must now do is the development of a new strategy for the business, for there must be one, and although the chairman won’t be doing that alone, he will lead the process.

The fundamental question is: can AMP continue to be both wealth manager and wealth adviser? Can it continue to charge fees for advice and then fees for fund management on top?

Or should it divest its advice operations and make its 2,692 advisers fully independent? Can it even do that given the “buyer of last resort” arrangements that are in place?

If AMP under David Murray decides to keep its vertically integrated model, there will still have to be a clear response to the issues uncovered by the royal commission. What that might be, short of breaking the business up, is hard to imagine, but perhaps it’s best to wait till Hayne brings down his final report.

But by slicing the share price 32 per cent, the sharemarket is telling Murray that the problems are not superficial.

Alan Kohler is Publisher of The Constant Investor