Ross Greenwood speaks shareholder adviser, CGI Glass Lewis Daniel Smith, after AMP has avoided a second strike by shareholders as they decided to stick with the current board and structure.
Ross Greenwood: I didn’t tell you about the AMP meeting today where the directors and the board avoided a second strike by shareholders at this AGM. This meant that the big shareholders effectively the largest superannuation funds in Australia decided for stability’s sake to stick with the current board and the current structure. Now one of those who would have been giving advice to some of those big superannuation funds is Daniel Smith, who is with the shareholder advocacy firm CGI Glass Lewis, he’s on the line right now. Daniel, many thanks for your time.
Interview with: Daniel Smith, MD, CGI Glass Lewis
Daniel Smith: Glad to be here, Ross, thank you.
Ross Greenwood: In regards to the AMP was that what you imagined it was all about? The stability of that business, which after the Royal Commission, and after the chairman, chief executive, the chief legal counsel and others have resigned, probably desperately need stability more than anything else?
Daniel Smith: That’s right, Ross, it’s been a shocker of a year for AMP, its board, its executives, its shareholders, its customers, and today’s results are not necessarily an endorsement of the current strategy, but rather an acknowledgment that further instability was most likely going to be value-destructive.
Ross Greenwood: Okay, what are the things that some of the dissident shareholders were wanting to object to was the sale of the life insurance business, if you like the legacy business of the AMP. They claim that the sale of that business for a little over $3 billion was simply the sale of the century, that it was sold too cheaply. Now, I’ve spoken with David Murray, the Chairman, on this program before who says that subsequent sales really did show that it was, in hindsight, a pretty good price that they got for that business, but given the fact that also the legacy business, there’s no doubt that a lot of shareholders today were really wanting to talk about that transaction because it was the key to many of those shareholders and what they perceived to be the value in the business.
Daniel Smith: Sure, and there is not just a little sentimentality around that business. That was something that in our advice to our clients, you recognize the frustration of selling that business. Now, luckily, the crown jewels in the empty capital business still remain within the company, and certainly trucking away. That said, the board appears to be committed to the sale and shareholders need to go along for the ride. The big question though is, how are they going to fill their earnings hole going forward?
Ross Greenwood: That’s the big issue here because the shareholders today very much wanted to know about the future of this business, and given the fact that $1.8 billion has disappeared out of its funds, people withdrawing money from the AMP over the past three months, this follows $1.6 billion in the previous three month period. It really does say plenty about confidence and this is clearly what the board and the management right now have got to shore up very quickly.
Daniel Smith: Very much so. The board led by Mr. Murray and the executive team led by Mr. Ferrari are eyes wide open on what they need to do to get the house in order. Ultimately, I say this a bit jokingly, but they do need to figure out how to generate returns for shareholders without knifing their customers in the meantime.
Ross Greenwood: It’s going to be interesting to watch exactly how they do that. Daniel Smith, with the shareholder advocacy group, CGI Glass Lewis, making the recommendations for some of those big shareholders at the annual meetings of our public companies. Daniel, always glad to talk to you here on Money News.
Daniel Smith: Thanks again, Ross. Take care.
Image source: 2GB