Australian Shareholders’ Association CEO Judith Fox MAICD on the events of the Financial Services Royal Commission and the treatment of women in the fallout.
One of the many disturbing features of the commentary on the corporate governance deficiencies exhibited at AMP in the weeks leading up to its 2018 AGM was the way in which those failings were portrayed as the result of having appointed a woman—Catherine Brenner — to the role of chairman.
In a dispiriting twist, the serious questions raised about the quality of oversight that AMP’s directors were exercising in relation to its businesses, reputation and the corporate culture canvassed publicly at the Royal Commission were framed by sections of the media and the business community as evidence that women were insufficiently capable of serving on boards.
The focus shifted from analysis of AMP’s board’s incapacity to maintain sound corporate governance to an attack on the competence and qualification of women to hold directorships.
The Australian Shareholders’ Association (ASA) called for the resignation of Catherine Brenner prior to the AGM or for her to step aside until such time as an independent investigation had concluded. Our call for her resignation was entirely unrelated to her gender.
The evidence presented at the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was that, during Catherine Brenner’s tenure as chairman, AMP misled ASIC on 20 occasions about a deliberate practice of charging fees to customers who were no longer receiving financial advice. Questions had also arisen as to her alleged involvement in a report labelled as independent and prepared by law firm Clayton Utz. At best her involvement showed a lack of judgement in directing that the role of the CEO be clarified, rather than questioning why the report was silent on this issue. At worst, her involvement tainted the claim of independence.
Once these matters became public at the royal commission, the AMP board announced that a comprehensive external review of AMP’s regulatory reporting and governance processes was to take place immediately. ASA welcomed the move but confirmed that, from the perspective of investors, it had come much too late. Such a review should have been announced a year earlier, when the breaches first came to light. The lack of urgency shown by the board in responding to AMP’s breaches of the law and their investigation by ASIC was an insupportable failure of oversight.
At the same time that the board announced the external review of AMP’s regulatory reporting and governance processes, the CEO Craig Meller resigned with immediate effect and AMP’s Group General Counsel Brian Salter was asked to take leave while the investigation was conducted. For ASA, the termination of the CEO by the AMP board was insufficient recognition of its deficient stewardship — shared board accountability was required.
This gave rise to ASA’s decision to vote against the two female directors, Holly Kramer and Vanessa Wallace, who were standing for re-election at the AGM and the third director, Andrew Harmos, who was standing for election for the first time. While ASA was originally of the view that it would support Andrew Harmos, due to his having only recently joined the board, this changed as new information came to light.
Holly Kramer was appointed to the AMP Board in October 2015 and joined its Audit Committee the following month. Vanessa Wallace was appointed to the AMP Board and the People and Remuneration Committee in March 2016. During their tenure, the delay in reporting to ASIC and the alleged interference with the independent report took place and the board decided that the breaches that occurred in the wealth division did not necessitate a comprehensive external review. The failure by the board to act in a timely matter goes to the heart of AMP’s unsatisfactory corporate governance. ASA saw no evidence of steps taken by either Holly Kramer or Vanessa Wallace in their role as independent directors and board committee members to eliminate the unethical practice of ‘fees for no service’, despite such information being known to the board.
Andrew Harmos was appointed to the main AMP Board in June 2017. His recent tenure at first suggested that he may not have been in the position to take steps to eradicate the unethical practices evidenced at the royal commission. However, he had been appointed a director of the important subsidiaries AMP Life Limited and the National Mutual Life Association of Australasia Limited in August 2013. He had served as a member of the Audit Committees of both life company boards since August 2013 and was appointed as a member of the Risk Committees of both life company boards in November 2014. As events unfolded, it became clear that Andrew Harmos had been in a position to address the systemic issues in the company’s risk culture and hold management to account, yet had failed to do so.
ASA’s voting at the AGM, therefore, was in agreement with the phrase in AMP’s 30 April release describing the board as having “collective governance accountability”. We were disappointed in the absence of the required urgency and determination to address the issues. ASA voted against all three directors standing for re-election or election — as the only directors facing election, they were the only board members against whom investors could take action.
To claim AMP’s corporate governance failure as gender-specific shows an almost wilful lack of understanding of an essential element of corporate governance — that all board decisions are made collectively and all board members share equal responsibility for board resolutions.
ASA is of the view that using AMP as an argument against gender diversity is more than an incapacity to recognise collective board responsibility. To claim AMP’s corporate governance failure as gender-specific shows an almost wilful lack of understanding of an essential element of corporate governance — that all board decisions are made collectively and all board members share equal responsibility for board resolutions.
Research has shown, in particular, that better gender balance on boards and in senior management is associated with better financial performance. In 2017, ASA introduced a call for 30 per cent women on the boards of ASX 200 companies. We reconfirmed our commitment to board diversity this year — our 2018 Voting & Engagement Guidelines specify that: “At least 30% of the board should consist of female directors, and at least 30% male directors.” All this means is that board selection is now aimed at 100 per cent of the population, instead of 50 per cent. And all AMP shows is that even this bigger pool of candidates is no guarantee that corporate governance failures will not occur.
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