The events that have unfolded at AMP over recent weeks prove company directors today need to be as worried about good corporate governance as delivering a strong bottom line.
The resignation of the chair of AMP, David Murray, on Monday and the demotion of one of its senior executives over the company’s response to a sexual harassment complaint, is a clear indicator to boards that environmental, social and governance issues are now regarded by shareholders as inextricably linked to a company’s value as an investment.
Shareholders are willing to use their voting power to insist on higher standards.
Since 1 July, AMP has been facing a growing shareholder revolt over its decision to promote the man at the centre of sexual harassment allegations, Boe Pahari, to the head of one of its most important corporate divisions, AMP Capital.
The company had been given a deadline of this Friday to respond to shareholders’ demands for action to be taken over Pahari’s appointment and to give more details on how it handled the sexual harassment complaint.
Groups such as the Australian Council of Superannuation Investors (ACSI), representing major super funds, called for a public explanation of the company’s decision to promote a man who had been sanctioned with a $500,000 penalty, while his victim, Julia Szlakowski, had left the company, saying her decision to report him had made her career at AMP untenable.
Some institutional investors were agitating for an extraordinary general meeting, which could potentially have led to board members being removed and further engulfed the insurer in controversy.
A week ago Szlakowski outed herself, saying that was the only way to defend herself against what she saw as AMP’s trivialising of the events of 2017.
In 2016, Szlakowski was named institutional director, unlisted, Americas and put in charge of North American distribution for AMP Capital’s infrastructure debt and equity strategies. She reported to Pahari, who then held the role of global head and managing partner, infrastructure equity, north-west region.
Szlakowski was AMP Capital’s first US hire for AMP’s unlisted business, as well as the only woman on the North American distribution team, she says.
Just six months into her new position, however, Szlakowski lodged a seven-page complaint with AMP, detailing a pattern of sexual harassment, which she says began in December 2016 and culminated in May 2017.
“The conduct Ms Szlakowski alleged did not constitute an isolated incident of poor judgment, nor simple ‘comments’ that could be brushed aside as merely ‘uncomfortable’, as AMP and Mr Pahari had described in their public statement,” Szlakowski’s Australian lawyer, Maurice Blackburn principal Josh Bornstein, said in a statement on Monday.
“The sexual harassment perpetrated against Ms Szlakowski was serious, persistent and wide-ranging.”
Some details of her seven-page complaint have found their way into the media, including that Pahari referred to his “limp dick” when she turned down his offer to use his credit card to buy clothes, called another employee “a fag”, and asked her about the “oldest man she dated” in front of her colleagues.
Pahari said in a statement earlier this year: “I genuinely regret that my comments made a colleague feel uncomfortable. It was never my intention, but I accept that they had an impact and I apologised and accepted the consequences. I have learned from the matter.”
But Szlakowski says she wants the entire investigation report and her complaint made public by AMP.
AMP on Monday released the conclusion of the 2017 internal report by Andrew Burns QC.
“I find that there was poor judgment exercised by [Pahari] during this evening and one moderate and two minor incidents which overall added up to a relatively modest breach of the AMP workplace behaviour and equal opportunity policy,” he wrote.
“However, this involved a senior manager who ought to have been observing a high standard of equality and diversity practice and who ought to have had a much better understanding of how his actions might be perceived by and may affect a junior colleague.”
The issue for AMP is whether it has fully appreciated the seriousness of sexual harassment in the workplace, dealt with it appropriately and made the necessary adjustments to its corporate culture.
Szlakowski said she was forced to engage private lawyers to get action, and the reporting has come at a high cost of her career at AMP. In contrast, Pahari was promoted.
When the Australian Financial Review approached AMP about the promotion in July, AMP put out a statement saying: “The external investigation identified lower level breaches of AMP’s code of conduct for which Mr Pahari had appropriate consequences imposed, including a financial penalty and counselling for his conduct.”
AMP said it had considered the matter prior to the appointment and the consequences applied to Pahari “were both significant and appropriate”.
But that has not placated Szlakowski, who says AMP’s statement downplayed the impact on her.
“There is nothing in AMP’s public statements that acknowledge that Ms Szlakowski was [allegedly] sexually harassed and traumatised and that her career with the company was prematurely finished as a result of what happened,” Bornstein said.
Exactly what occurred at board level is not clear. Murray and John Fraser, a senior executive and the former head of treasury, have resigned.
“These changes respond to feedback expressed by some major shareholders regarding the appointment of Mr Pahari as AMP Capital CEO on 1 July 2020,” the AMP board said in a statement to the ASX.
Murray, however, in his public comments attached to the same statement, made it clear he considered the board should have stuck by its decision to promote Pahari, which he noted had been unanimous in July.
“The board has made it clear that it has always treated the complaint against Mr Pahari seriously. 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.”
Murray said his 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”.
Murray has been a long-time critic of attempts by the ASX and shareholder bodies to extend guidelines on good corporate governance to include corporate social responsibility principles.
When Murray took over at AMP he told the AFR the ASX governance principles had led to directors being swamped by hundreds of pages of board papers and not having enough time to debate important strategic issues.
“We will not be guided by the ASX corporate governance principles where they either weaken accountability or distract the company to less important issues,” he said.
But that is a view increasingly not shared by the shareholders.
“Today’s announcements are an acknowledgement by the company that significant change needs to occur. This is an important step in addressing concerns raised by investors’ and resetting company culture,” ACSI chief executive Louise Davidson said on Monday.
“The company must now get on with the job of rebuilding public confidence, and in particular, the trust of their staff.”
The activist group Australasian Centre of Corporate Responsibility said there should be no place in boardrooms for people such as Murray.
“ACCR has always questioned the suitability of David Murray for chair of a modern ASX50 company,” the centre’s director, Brynn O’Brien, said.
“Murray is a well-known climate sceptic. He waged a war against the ASX’s inclusion of ‘social licence’ in its corporate governance principles. It is quite ironic that AMP’s catastrophic social licence issues ultimately brought him down.”