Shareholders launch first strike at AMP

At AMP’s annual meeting on Friday, chief executive Francesco De Ferrari confirmed the $235 million of buyer of last resort (BOLR) requests invoked “in the pipeline”, as indicated in the full-year results, related to around 260 practices. He did not advise how many clients were affected.

“We are accompanying the advice network through this challenging industry disruption,” he said.

“As part of our strategy we’re setting funds aside to support this reshaping including meeting our buyer of last resort obligations.

“It is a clear focus for us to make sure the clients of these practices are appropriately transitioned either to another adviser or service by use as an institution.”

Around 440 advisers had departed AMP in 2019, following the group’s decision to lower the multiple of existing BOLR arrangements with advisers to 2.5 times revenue, from its previous four times revenue.

AMP’s remuneration report saw 67.25 per cent of ‘against’ votes the annual meeting, with only 32.75 per cent of shareholders voting in favour of it.

As a result, shareholders had launched a first strike against AMP, with the board facing a spill motion if more than 25 per cent of shareholders choose to vote against its remuneration report at its next AGM.

AMP chairman David Murray acknowledged investors had questioned the rationale of the group’s approach to salaries against the backdrop of its $2.5 billion loss in 2019.

Alongside the result, the board had scrapped the yearly dividend, although it had raised the maximum short-term-incentive for Mr De Ferrari to 200 per cent of his fixed base salary, from its previous maximum of 120 per cent.

At the annual meeting, both Mr Murray and Mr De Ferrari faced the ire of shareholders feeling the absence of their payouts, despite the chairman defending the chief’s salary.

“When we reach item three [remuneration], we expect a significant vote against the remuneration report,” Mr Murray said in his opening address.

“Naturally we are disappointed.”

Speaking on the two-strike rule, Mr Murray commented the two-year cycle could be inconsistent with the long-term horizon for a company and shareholders could use their remuneration vote for issues unrelated to pay.

“It does lead to shareholders and proxy advisers looking for a direct relationship between profit one year and dividends one year, to remuneration outcomes in that year. This makes it very difficult for companies in a position that we are in, to invest in a future which we strongly believe that we have,” he said.

“The other issues that arise with these reports are that sometimes, particularly when circumstances are poor in the community or in the financial sector, such as the global financial crisis, or from the royal commission outcomes, or even from COVID-19; [are] that people feel they need to react unfavourably because circumstances have changed. This makes it harder for boards to align with the longer term.”

The chairman declared there will be no further adjustment to CEO recovery incentive hurdles and there will be no further long-term incentive awards in 2020 for key management personnel.

Overall spend on board fees had been reduced in 2019 by 8 per cent from the year before.

The board had previously approved a 22 per cent reduction for the chairman’s fee from the beginning of 2020, in anticipation of Life being sold, board renewal and a refined strategy – but when January came, it was decided there should be no changes to his fee, as the business had not yet completed the terms.

Mr Murray was said to push for a fee reduction and it was consequentially dropped from $850,000 to $660,000 from March.

There is expected to be a further reduction in board fees following the sale of AMP Life, with a more streamlined board along with potentially another cut in chairman fees.

The number of executives has been decreased from 11 to eight since Mr De Ferrari commenced as CEO, with one more to be docked with the sale of Life.

AMP is still on track to complete the sale of its life insurance business in June.

But the group told the market on Friday it would be scrapping plans to sell its New Zealand wealth management business, deciding to keep and develop the segment instead.