Patricia: Catherine Brenner, the chairman of financial giant AMP, resigned today, following damning evidence presented to the Banking Royal Commission. The Royal Commission heard AMP charged customers without providing any service and misled the regulator about the practice. AMP's annual general meeting is next week and there is talk of a shareholder revolt to remove the entire board. Angus Armour is the CEO of the Australian Institute of Company Directors. Welcome to RN Drive.
Angus Armour: Thanks, Patricia.
P: Fair call? Was she right to step down?
AA: Well, obviously she formed that judgement after conversations with her colleagues. The very public events leading up to that decision probably justify her decision, but again it is her decision as an individual director.
P: AMP directors will take a 25% pay cut for the remainder of 2018. Is that them saying sorry or admitting they're on the wrong side of this?
AA: Well, I think in one sense it must, because it reflects their response to their shareholders, their investors and the community generally. We prefer not to comment on individual companies, particularly when they're in the middle of a process, but I think it's fair to say they're trying to show that they're responding to what the community is saying, and appropriately so.
P: Is that good enough? 25% pay cut?
AA: Ultimately, it will be the community and the investment community who decide whether that's sufficient or not.
P: Opposition leader Bill Shorten says that executives shouldn't walk away with a golden handshake. It's hard to argue with that, isn't it? If we look at community expectations, people don't expect that kind of outcome.
AA: I'm not conscious of any conversation around departures at this point in terms of a golden handshake, but certainly you understand why the community is concerned when, in the context of accountability, there's the appearance that people benefited from it. So in our world, at least, or how we frame our thinking, the recent decision by the government to increase penalties for misconduct under civil and criminal legislation is the right way to go. We're trying to create an environment where people see the need to prevent and deter that sort of activity, not benefit from it.
P: AMP's legal council has also left the company. He says he only learnt of his sacking in the company's public announcement about Brenner. Is that unusual?
AA: I have to admit, I read about it in the press, too. So, I'm not sure what the substance is behind that. Certainly, you would expect conversations to take place in most corporations when there's an issue of accountability. It's normally a conversation, but I can't comment on whether conversations took place or not.
P: Chief Executive Craig Miller has also left. The board has taken a pay cut, and we have the departure of the chair and the group legal council today. Is that enough to fix the damage done to the AMP brand?
AA: Well, they will get feedback from the investor community at their AGM in a few weeks and I think that will determine whether the board has re-established confidence in the community, whether they can take the organisation forward and start to rebuild the brand.
P: AMP has the AGM next week. How likely is a shareholder revolt?
AA: Well, it's certainly being reported, but I can't comment from any sort of private knowledge as to how extensive that feeling is. It’s certainly obviously reported – and you can see that the Major Shareholders Association is quite focused on the AGM.
P: AMP's stock prices have fallen 20% since the Royal Commission was announced. How much will that contribute to the way in which shareholders are likely to act next week?
AA: Well, it would certainly play into their thinking. You would have to believe that they'll be upset about this. So, it's a balance between the need to hold people accountable for the place they're in now and to start to repair both the organisation and the brand. They'll need to make sure they've got the right people in place to do that.
P: On a broader level, how responsible is the board of a big company when it comes to setting the right culture? Because this culture stunk, didn't it?
AA: Some of the behaviours that emerged from the testimony were certainly indefensible. But coming back to your general question, it's our belief and the belief of our members, frankly, that the boards are ultimately absolutely responsible for the culture in their organisations. It's certainly something that we teach as an institution. It's something that, when we poll our members, comes back very clearly in the results. Over 90% of them are absolutely focused on culture at this point.
P: Finally, on another company in the news today – I just spoke with Josh Frydenberg, the Energy and Environment Minister about this company. This is AGL. They're under pressure to sell their Liddell Power Station, from the Federal Government. In your experience, how often is this kind of political pressure exerted on independent companies like this? I mean, Josh Frydenberg just again confirmed that he had been in contact with [AGL’s] board members to try and, I suppose, persuade them that this was a good idea.
AA: So, your question is how frequently does that happen? I'm frankly not sure how often that would happen. Obviously, in the context of the government trying to resolve the energy policy to date (and we strongly support a bipartisan solution to energy policy as quickly as we can get to it), they're looking at their options now. I don't think it's a situation of moral suasion. I think if AGL's being asked to contemplate an option, that should be transparent and on market terms, and if the government's approaching it that way, then that's something for the management and board of that organisation to contemplate.