AMP investors revolt over executive bonuses, weak share price

AMP investors have revolted over the bonuses paid to top executives, as chair Debra Hazelton said the wealth manager was making progress on rebuilding after the 2018 Hayne royal commission almost threatened its very existence.

Almost half of all shareholder votes opposed AMP’s remuneration report on Friday, as investors and experts raised concerns about how the company set its executive bonuses, and recent share price weakness.

AMP chair Debra Hazelton said the company’s share price plunge during February was “extremely disappointing”.Credit: Renee Nowytarger

The rebuke comes amid ongoing frustration from long-term AMP shareholders, after the company spent the past few years trying to turn itself around following a fall from grace at the 2018 royal commission into financial misconduct.

AMP’s share price has fallen about 75 per cent in the past five years, as the company has sold businesses in life insurance and asset management to focus on wealth management and banking.

In an annual meeting lasting more than three-and-half hours, Hazelton acknowledged the pain of long-suffering AMP investors. She said she was “extremely disappointed” that the share price had dropped 16 per cent after February’s profit results, notwithstanding a better share price performance in 2022.

Despite AMP’s challenges, she highlighted efforts to simplify the business and flagged action to curb costs, saying a “structural shift is required to right-size AMP’s cost base”. Hazelton also stressed the company had been forced to confront enormous changes due the 2018 royal commission.

‘That royal commission totally upended AMP’s business model ... It had an enormous effect on AMP, almost existential.’

Debra Hazelton, AMP chair

The 2018 inquiry exposed deep-seated problems in the wealth management and superannuation industries, and helped kill off the “vertical integration” model whereby financial businesses sold and recommended products “manufactured” by the same institution.

“What I’d like to say is that royal commission totally upended AMP’s business model. It meant that the vertical integration business model was totally upended. It had an enormous effect on AMP, almost existential,” Hazelton said in response to a shareholder question.

The hefty protest vote against AMP’s remuneration report means the company has incurred a first “strike”. If AMP receives a no vote of more than 25 per cent next year – therefore incurring a second “strike” – it would trigger a vote on whether to spill the board.

Hazelton acknowledged the first strike, and said investors had raised concerns about the board’s use of discretion to pay larger bonuses, particularly amid a sharp fall in its share price in February. She said some had also objected to a lack of disclosure of its short-term bonus targets.

“We will continue to work on enhancing our remuneration approach and address concerns that have been raised,” she said.

Chief investment officer at Allan Gray, Simon Mawhinney, said the fund had voted against AMP’s remuneration report because the metrics used for pay were not sufficiently focused on financial targets.

“We want the business right-sized, and quickly, and we want management to be remunerated on getting the costs out and the profits up,” said Mawhinney, whose fund holds a substantial stake in AMP.

Proxy advisers ISS and CGI Glass Lewis had both recommended shareholders vote against the company’s remuneration report, criticising the board’s decision to use its discretion to pay bigger bonuses.

CGI said AMP’s board had used its discretion to increase the bonus pool for executive from 68 per cent of target to 85 per cent of target, citing higher returns over 2022.

But it pointed out AMP shares plunged 16 per cent on the day of its full-year results in February, and said the “results were a clear disappointment to the market, which suggests that the board may have misread shareholders’ expectations”.

ISS said the short-term incentive bonus appeared to be based “mainly on discretionary or non-financial/strategic initiatives”, rather than financial targets.

AMP shares fell 2.1 per cent to $1.06.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.