MENU

AMP Limited chair resigns amid Royal Commission storm

Credit: Domiriel

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.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Tommaso Autorino has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.