Not before time: embattled wealth manager, AMP has scrapped short-term cash bonuses and cut directors’ fees for a second time in less than a year in an effort to avoid a second shareholder strike on remuneration and possible board spill at the annual meeting in May.
It was really the most obvious decision AMP could make and it is hard to believe that it took so long for the direction to become clear to the company’s board and management
Chairman David Murray revealed the decision in the 2018 annual report which was released yesterday.
In his comment, he said the company accepted last year’s investor revolt – when 61% of shareholders voted against the remuneration report – was a protest against how pay was awarded as well as the company’s well-known misdeeds.
That was the highest strike vote against a company’s remuneration report until the 80% plus whack delivered by National Australia Bank shareholders late last year.
“The board understands that many of our shareholders are disappointed with AMP’s business and financial performance in 2018,” he wrote in something of an understatement in the annual report.
If anything there were strong prospects for an even bigger ‘no’ vote at the May AGM after the AMP suffered a 97% plunge in full-year profit for 2018 as it was forced to set aside hundreds of millions of dollars in customer remediation expenses.
This was on top of the lambasting the company received during the Hayne Royal Commission and in the final report, which possible charges still to be determined by ASIC, the corporate regulator.
Adding to the company’s ‘sales’ campaign’ to shareholders, AMP said also its former CEO Craig Meller and former advice and banking executive Rob Caprioli will forfeit $10.8 million in unvested incentives.
“This reflects their overall accountability for the ‘fee for no service’ issues that AMP had previously disclosed to ASIC and which were addressed during the financial advice hearing block of the royal commission,” AMP said in its annual report.
The only executive to get a short-term cash incentive was AMP Capital chief executive Adam Tindall, whose total $3.31 million package made him AMP’s best-paid executive.
Chief executive Francesco De Ferrari, who started work in December, was paid a total of $1.28 million.
That seems a lot because he hasn’t been there all that long but AMP defended the payment, saying in the report that it had to take account of Mr. De Ferrari’s remuneration package at Credit Suisse, where he was head of Asia Pacific private banking, in order to hire a CEO of the necessary standing.
“These remuneration arrangements are designed to drive the recovery of AMP and recognise the degree of challenge in the task ahead. The incentives were agreed and advised to the market in August 2018 and both the AMP share price and the ASX 100 have declined in the period from that time to Mr. De Ferrari’s start date. No adjustments have been made to reflect these market movements,” Mr. Murray said in the annual report.
“Given the circumstances of the royal commission, at the time it was unlikely we could appoint an executive from within Australia,” he said
AMP in May cut non-executive directors’ fees by 25% with immediate effect and said it reduced them again from January 1 this year.
It cut fees to non-executive directors for serving on the AMP Capital board from $78,900 to $56,300, and for membership of its audit and risk committees from $16,900 to $10,000.
The chairman’s fee will fall from $850,000 to about $660,000 in 2020, with the final amount to be decided in the second half of the current financial year. “With the aim of constraining the cost of governance arrangements from 2020, after separation of the Life and Mature businesses to Resolution Life, the Chairman’s fees will be reduced in 2020,” AMP explained yesterday.
AMP shares eased a cent to end at $2.27, down by more than half over the past year.