The Macquarie Group Ltd (ASX: MQG) share price might be in for a wild ride after the Australian Shareholders' Association (ASA) announced it intends to vote against re-electing the company's chair.
Right now, the Macquarie share price is $154.12, 0.27% higher than its previous close.
Peter Warne has been Macquarie's chair since April 2016. Since then, the Macquarie share price has increased 139%. For comparison, the S&P/ASX 200 Index (ASX: XJO) has gained 46% in the same time frame.
Unfortunately, Macquarie's performance on the ASX hasn't swayed ASA's stance on Warne's future.
ASA is also asking questions on the banking, investment, and fund management company's employee remuneration structure. Particularly, as the company earned an unanticipated $300 million from a freak storm in Texas this year.
Additionally, ASA pointed out a number of recent events that have supposedly damaged Macquarie's reputation. These include the disastrous press surrounding former Macquarie-controlled Nuix Ltd, a long-running civil case against Macquarie being argued out in German courts, and the Australian Prudential Regulatory Authority (APRA) finding Macquarie had breached regulations.
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Will Warne be sent packing?
ASA intends to put forward a number of changes to Macquarie's board. The most noteworthy is its suggestion that chair Peter Warne must go.
Despite ASA's bombshell, the Macquarie share price has been gaining this morning.
ASA's chair and Macquarie Bank monitor, Allan Goldin, said:
Mr Warne has performed his role as chairman well, however one of the key functions as chairman is ensuring that there is a successor at the table.
Right now there's not a clear successor. The ASA said: "…not having a successor in place is not a good reason for him
to be on the board for 16 years and as chairman for six so we will be voting our undirected proxies against his re-election."
According to ASA, the Macquarie board wishes for Warne to continue on as chair for another year. The body says an abundance of change is the motivation behind the board's preservation of Warne's position. Over the last 12 months, Macquarie's board has seen 3 members retire and another 2 members appointed.
However, ASA states the board is behind the times. It points to the fact no board members have backgrounds in anything other than finance, economics, consulting, and law.
ASA's release stated:
In today's global financial world, that is experiencing daily disruption from innovative uses of new technology changing the way the world operates, it would have been thought that a new director would be appointed that brings expertise of this game changing world to the board. But no.
Macquarie shareholders will have the chance to vote for the composition of the company's board on 29 July.
Macquarie hasn't responded to The Motley Fool Australia's request for comment.
Review of employee remuneration scheme
Another potential weight on the Macquarie share price is ASA's intention to vote in favour of a proposed Remuneration Report.
The report will determine if paying a share of Macquarie's profits to its employees is fair if said profits came from natural disasters or unethical dealings.
According to ASA, Macquarie's unique among ASX 200 companies as it pays a relatively low fixed annual salary. Instead, it incentivises its employees by allowing them a share of Macquarie's profits.
Macquarie reportedly earned an unexpected $300 million this year as a result of a freak storm in Texas. The storm saw demand for the company's oil and gas resources boom. Additionally, it's said to have earned $524 million from Nuix's Initial Public Offering (IPO), which is now being investigated by the Australian Securities and Investment Commission (ASIC).
ASA's release stated:
Modern companies realise that they have a responsibility to incentivise employees to not just make a profit but to ensure that they do so in a socially responsible manner… although profit share is paid out over a number of years, if you had a major item such as Nuix that contributed materially to the overall profit, which was then found to have occurred because of questionable dealings, how do you claw that amount back from the entire company's profit share?
Additionally, ASA is concerned Macquarie's CEO's remuneration package isn't made public. It said:
Macquarie spends a great deal of space, quite rightly, explaining in the Annual Report how their remuneration is fair and proper and relates to the company's performance. So why not go the full transparency route and tell shareholders how much the CEO actually takes home?
Macquarie share price snapshot
The Macquarie share price has gained 9.7% year to date. It is also 23.2% higher than it was this time last year.
The ASX 200 staple has a market capitalisation of around $57 billion, with approximately 368 million shares outstanding.
