AMP Chair Murray Quits, Pahari Demoted After Investor Revolt
AMP Chairman Murray Resigns, Pahari Steps Down Amid Scandal
(Bloomberg) -- AMP Ltd. Chairman David Murray resigned and the head of the firm’s investment management arm was demoted as a sexual harassment scandal sparked the second boardroom shakeup in just over two years at the trouble-plagued company.
Boe Pahari, whose recent promotion to chief executive officer of AMP’s A$190 billion ($137 billion) investment management arm sparked the revolt, will return to his previous level with a focus on the infrastructure equity business. Debra Hazelton will replace Murray.
“These changes respond to feedback expressed by some major shareholders regarding the appointment of Mr. Pahari,” Sydney-based AMP said in a statement Monday.
Murray, 71, said that while the board unanimously approved Pahari’s promotion, and the complaint against him was dealt with appropriately in 2017, “my decision to leave reflects my role and accountability as chairman and the need to protect continuity of management.”
It’s an ignominious chapter for finance industry heavyweight Murray, who was appointed chairman just over two years ago to overhaul the 171-year-old firm’s culture and help restore a reputation battered by a fees-for-no-service scandal. Instead he’s faced a barrage of criticism from investors after Pahari’s promotion, while the company hasn’t explained the reason behind the abrupt departure earlier this month of Australia CEO Alex Wade.
Welcome Steps
“We welcome the steps taken by AMP today. However, it’s concerning that it took investors considering the rare step of an extraordinary general meeting for appropriate board accountability and the decision to not proceed with the promotion of Mr. Pahari to be made,” said Debby Blakey, CEO of A$52 billion pension fund Hesta. “The original unanimous decision by the board to promote Mr. Pahari and the subsequent handling of this issue reveals serious governance and cultural issues at the highest levels of the company.”
The departures may give CEO Francesco De Ferrari breathing space to transform the company into a simpler asset and wealth management firm, after selling its life insurance unit for A$3 billion. He used some of the proceeds this month to buy back a 15% stake in AMP Capital from Japan’s Mitsubishi UFJ Trust & Banking Corp.
“Change was needed in creating a safe workplace and sound culture,” said Simon Mawhinney, the chief investment officer at Allan Gray, AMP’s second-largest shareholder. “AMP’s actions on this matter have now been decisive and we would like to give the company the latitude to execute on its stated strategy and cultural journey.”
Murray is the second financial industry titan in less than a year to fall foul of the nation’s big pension funds, which are increasingly flexing their muscles over corporate misbehavior. Westpac Banking Corp.’s former CEO Brian Hartzer resigned in November, succumbing to investor pressure after the lender was engulfed by allegations it committed the biggest violation of money-laundering laws in Australian history.
Murray’s “views on risk and governance frameworks are stuck in the 80s and do not meet shareholder expectations of modern boards,” said Brynn O’Brien, executive director at the Australasian Centre for Corporate Responsibility. “It’s abundantly clear that Murray and those who share his views have no place as directors, much less chairs, of any listed companies.”
Hazelton, who joined the board in June 2019, will now take over the task of steering a cultural overhaul. One focus may be increasing female representation at senior level. She is just one of two women on the now eight-person board, and group executive for people and corporate affairs Helen Livesey is the sole female among AMP’s senior management team.
Rebuilding Trust
Hazelton has had a 30-year career in finance, including stints as the local CEO of Mizuho Bank in Australia and Commonwealth Bank in Japan, AMP said in the statement. At Mizuho, she was responsible for reshaping the bank’s global corporate culture, including its diversity and inclusion policies, according to her LinkedIn profile.
“Clearly AMP’s initial response to community, staff, and shareholder concerns around the appointment of Pahari and the treatment of sexual harassment was inadequate,” said Louise Davidson, CEO of the Australian Council of Superannuation Investors, a governance firm advising Australia’s largest pension funds. “The company must now get on with job of rebuilding public confidence, and in particular, the trust of its staff.”
Pahari’s promotion to CEO of AMP Capital last month sparked a staff outcry after The Australian Financial Review reported he had been financially penalized after settling a sexual harassment complaint brought by a female subordinate.
In a second statement later Monday, AMP released the conclusion of an independent probe into the incident, which said Pahari exercised poor judgment that amounted to a “relatively modest breach” of the firm’s workplace behavior polices.
“I deeply regret the events in 2017, and I apologize to Julia Szlakowski,” Pahari said in the statement. “I also acknowledge the significant impact the matter has had on our clients, our people, and AMP’s shareholders.”
Murray, a former CEO of Commonwealth Bank of Australia, the nation’s largest lender, took over from Catherine Brenner in June 2018. The stock has plunged 60% during his tenure. The shares rose 1.1% in Sydney on Monday, the most in more than a week.
John Fraser, a former chief executive officer of UBS Global Asset Management who went on to head Australia’s treasury department, will also leave the board, AMP said. All the changes are effective immediately.
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