Macquarie hit with first strike against remuneration report
The vote against bumper executive pay packets sneaked over the line even as chairman Glenn Stevens pushed aside suggestions of core risk deficiencies at the investment bank.
Macquarie has been hit with a historic first strike against its remuneration report as disgruntled investors vented their frustration over regulatory failures at the investment bank.
The protest vote was just enough to succeed with 25.4 per cent of shareholders voting against its bumper executive pay at the company’s annual meeting on Thursday. A vote above 25 per cent is required to incur a strike; a second strike, if it happens next year, will trigger a vote to spill the board.
Chairman Glenn Stevens anticipated the sizeable protest vote against the remuneration report, telling media that the proxies submitted ahead of the meeting suggested the outcome was “quite close”.
The bank’s shares tumbled 5 per cent to close at $213.84.
In an attempt to soften the hostile mood, Mr Stevens told the meeting the company had heard their concerns regarding regulatory and compliance failures and would reflect on them. But the former Reserve Bank governor pushed aside suggestions of systemic risk deficiencies at Macquarie.
“We’ve had some problems with regulatory matters over the years. The question the board’s asked is, are we sure that we’ve got a culture that wants to confront these things and deal with them? And I think we do have that culture,” Mr Stevens said.
“We’ve seen a huge step up in regulatory engagement, in the way the company deals with regulators, which I think is very good to see. This journey never really ends. It’s something you have to continually be working on, but we have been working on it, and I think we see the fruits of that in the way management deals with problems when they arise,” he added.
Meanwhile, chief financial officer Alex Harvey will retire and be succeeded by his deputy, Frank Kwok, in December. Mr Harvey had been tipped as a potential successor to chief executive Shemara Wikramanayake.
Macquarie’s risk and compliance failures have led to regulators taking numerous action against the business. ASIC sued Macquarie in May after the bank was alleged to have misreported millions of short sale trades over more than a decade.
The Australian Securities & Investments Commission alleged that as many as 1.5 billion trades were wrongly characterised in mandatory disclosures, masking the extent of short-selling activity in the local market.
Short selling is a tool used by hedge funds to bet against the price of a security, such as shares.
ASIC imposed additional licence conditions on the so-called millionaires factory as it slammed the bank for repeatedly showing weak and ineffective compliance and control culture.
“The matters that are the subject of the ASIC action launched in mid May, those problems came to light because of work Macquarie was doing to strengthen all of that reporting,” Mr Stevens said on Thursday. Indeed, some of the shortcomings were self-reported.
“It’s an inherently very complex process, short-selling reporting, and it was as a result of work going on to make that more reliable and less error prone that we uncovered problems in earlier years that have been rectified. Obviously the regulator and the market operator were alerted to all that.
“What that says is there’s a culture of trying to find problems and rectify them, as opposed to not looking for them. The board is confident that we’re on the right cultural path, but things will go wrong from time to time.”
Proxy advisers CGI Glass Lewis and Ownership Matters had recommended shareholders vote against the remuneration report in advice that reflected some of the concerns ASIC surfaced around risk management.
Ms Wikramanayake was paid $24m for the 12 months to March 31, and $25.2m the year before.
On Thursday, as shareholders digested the exit of long-running CFO Mr Harvey, Ms Wikramanayake reflected on speculation she may also be headed for the door.
“What I’d simply say is I’m committed to Macquarie for as long as Macquarie needs me. I think my biggest job is to make sure the organisation is in a great state for its next chapter, having spent nearly four decades here,” Ms Wikramanayake said.
“I have to build the team; there’s many layers to that. Our franchise has many areas it operates in. So whenever you can get comfortable that it’s the best thing for Macquarie, then that’s the priority,” she said.
Mr Kwok, as part of his elevation to CFO, joins the executive committee.
Macquarie also released its first-quarter update showing Macquarie’s net profit contribution for the three months to June 30 was down on the prior corresponding period, with improved performance in banking and financial services and Macquarie Capital, but lower contributions from Macquarie Asset Management and its commodities and global markets division.
Jarden analyst Matthew Wilson said Macquarie is a great business “caught in the midst of both its own transition and global realignment of geopolitical alliances and capital flows”.
“However, how long will the market look through ongoing earnings downgrades?”
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Originally published as Macquarie hit with first strike against remuneration report
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