Magellan alter wayward course

Magellan has pulled a controversial motion to alter termination benefits for CEO Hamish Douglass.

Hamish Douglass, chief executive officer at Magellan Financial Group. (Hollie Adams/The Australian)

Magellan Financial Group has finally seen the light and withdrawn an extraordinary motion from tomorrow’s annual general meeting which could have given chief Hamish Douglass’ family up to $10 million on his death or illness.

This form of self-insurance from shareholders must be close to a first in corporate Australia and must also make you wonder what is happening in the minds of the fund’s managers.

All its talk about value investing seems to have gone when it applies to Douglass’ own pay packet as shown by this year’s move to increase his pay to 1.5 per cent of operating profits.

The last guy to pull that stunt was Wal King during his Leighton reign.

This means in the 2017 year, Douglass’ fixed pay will increase from $1.2m to $2.7m and under the proposed self-insurance policy his family would have received an insurance payout of $5.5m, being 200 per cent of fixed pay, in the event of his illness or death.

Suffice it to say the proxy groups hit the roof on reading this news and shareholder complaints have now led Douglass to voluntarily withdraw the motion, even though proxies indicated 70 per cent shareholder support. This shows, that while making a mistake initially, Douglass has now fixed it.

Not content with lining his own pocket, Douglass has also decided that shareholder funds should be spent on his own think tank.

In his annual report note, Douglass confided he was hiring three people to form a public policy institute which would be based in Australia and no doubt work closely with the great man.

At the outset, it should be said public policy institutes are to be welcomed and anything Douglass wants to add to an intelligent public debate is welcome indeed. The issue is over shareholders funding the effort.

Shareholders, of course, are highly supportive of the company which has been one of the stellar performers on the Australian bourse, growing revenues from $35.8m to $333.8m over the last five years and profits from $13.6m to $198.4m over the same period.

It has been an absolute cracker.

Douglass owns 11.1 million ordinary shares worth around $470m and which pay out dividends worth $9.9m a year.

His 10.2 million class-two shares will convert shortly giving him another $9m in dividends.

All of which makes you wonder why he wanted to have shareholders approve a special exist policy.

Shareholders want Douglass around for as long as possible but within reason. They would also be wondering just whether all the success he has delivered is starting to affect his good judgment.