Catherine Brenner resigned as chair of AMP Limited (ASX: AMP) on Monday, two weeks after the company confessed before the Royal Commission to having charged its clients fees for no service and lying to the Australian Securities and Investments Commission (ASIC).
The undue fees were the subject of a report by law firm Clayton Utz that was presented to ASIC as independent, despite AMP having played a role in its preparation.
AMP addressed the issue in Monday's release, stating that Brenner, former CEO Craig Meller and the other directors "did not act inappropriately in relation to the preparation of the Clayton Utz report."
AMP's board also declared its disappointment for the interaction of general counsel Brian Salter with Clayton Utz during the preparation of the report, and announced that he would leave the company.
Director Mike Wilkins steps in as interim executive chairman, while AMP searches for a new chair and non-executive director. Mr Wilkins will also lead the selection of the new CEO to replace Craig Meller, who was expected to step down at the end of the year but moved his resignation up to April 20, in a dramatic attempt to preserve the company's reputation.
In recognition of governance accountability for these matters, AMP's board directors will cut their remuneration by 25 per cent for the rest of the year. Consequences for other executives responsible for the company's misconduct will be determined through an external employment review.
At the time of writing, shares in AMP are 0.5% down to $4, after having dropped 25% in the last seven weeks.
What's next?
This is the perfect storm, coming at a crucial time for AMP. At the next AGM on May 10, the company was expected to announce the result of a portfolio review that could have led to a major business restructure. Now the AGM will likely become the stage for a shareholders protest and vote against the remuneration of three other board members.
By the end of the week, AMP will also make a formal submission in response to the harsh closing submission by the Royal Commission's counsel assisting Rowena Orr.
Foolish takeaway
I'm afraid the board reshuffle and pay cut won't be enough to restore AMP's reputation and prevent the recent events from severely impacting a business which had been underperforming long before the royal commission investigation.
That's why I would stay clear of AMP even now that the stock trades at just 12x forward earnings.
