AMP (ASX: AMP) has reached the inevitable end point of its sexual harassment scandal with the departure of chairman David Murray and the removal of AMP Capital chief executive Boe Pahari.
Mr Pahari will now return to his previous role within AMP Capital’s infrastructure equity business after the controversial decision to make him AMP Capital chief executive.
That decision came after the company penalised him $500,000 – a quarter of his annual bonus – as part of the settlement of a sexual harassment complaint made by former AMP colleague Julia Szlakowski in 2018.
AMP chief executive Francesco De Ferrari will now replace Mr Pahari as AMP Capital chief executive on an interim basis.
Non-executive director Debra Hazelton will immediately replace Mr Murray as chair and former Treasury secretary John Fraser has voluntarily resigned as a non-executive director.
Decision to make report public led to unrest
The significant reshuffle at the wealth giant follow a lot of investor unrest and mark the failure of AMP’s extraordinary decision to make public the investigation report into Mr Pahari’s behaviour.
Such reports are normally kept strictly confidential – not even the now departed AMP victim Julia Szlakowski has seen it – so investors and even senior politicians were particularly uneasy with such a public airing of the investigation.
Once it became clear that Ms Szlakowski and her legal team would not agree to the release of the documents under the strict terms that AMP had set for her to view the report with limited legal representation, it was clear that AMP’s high wire negotiation strategy had failed.
Maurice Blackburn principal Josh Bornstein – who acts for Ms Szlakowski – said AMP’s behaviour was unprecedented and asked for more documents, which left the negotiations at a stalemate and a longer period of uncertainty to come.
With many AMP investors deeply unhappy with the AMP board’s decision to financially penalise Mr Pahari and later promote him in the wake of the sexual harassment issue, the major reshuffle at the top of the company was the only option left so the company was free to move on with its transformation program under Mr De Ferarri.
However, it is possible that Mr Pahari’s continued presence at AMP could remain controversial, with Labor Senator Deborah O’Neill saying his demotion was “window dressing for change” and that his continuing senior role at AMP “still speaks volumes to the problems at AMP.”
Transformation to continue “without distractions”
David Murray said the transformation process could now continue with the support and confidence of investors, institutional clients, employees, partners and clients “without distractions”.
“The board has made it clear that it has always treated the complaint against Mr Pahari seriously,’’ said Mr Murray.
“My view remains that it was dealt with appropriately in 2017 and Mr Pahari was penalised accordingly. However, it is clear to me that although there is considerable support for our strategy, some shareholders did not consider Mr Pahari’s promotion to AMP Capital CEO to be appropriate.
“Although the board’s decision on the appointment was unanimous, my decision to leave reflects my role and accountability as chairman of the board and the need to protect continuity of management, the strategy and, to the extent possible, the board,” Mr Murray said.
In a statement to the ASX, AMP said the “changes respond to feedback expressed by some major shareholders regarding the appointment of Mr Pahari as AMP Capital CEO on 1 July, 2020.’’
Hazelton vows to restore value and trust
New AMP chair Ms Hazelton acknowledged Mr Murray’s leadership and thanked him for “professionalism, dedication and commitment” to AMP.
“Under my leadership, the board will focus on working with Francesco and his leadership team to deliver long-term value for our shareholders and clients by executing the transformation strategy.
“I am determined to restore the trust and confidence of our clients, shareholders and employees,” she said.
AMP shares have been stuck in a long-term downtrend since they crested above $10 each back in 2007.
The company hit a lot of hurdles following the Hayne Royal Commission, which highlighted AMP’s fees-for-no-service scandal and multiple instances of deliberately misleading the corporate regulator.
Many customers left AMP retail superannuation funds in favour of industry funds after the royal commission report, reducing its funds under management by billions of dollars.
AMP shares were trading fractionally higher at $1.44 after the management changes at the wealth manager were announced.