Wendy Wedge has taken a keen interest in AMP’s director shareholdings although it should be pointed out that there are other companies with worse records and AMP actually requires its directors own at least 2000 shares in the company.
For instance: consider this choice:
You can either buy a swag of shares at $18.69 each with a dividend yield of 2.73 and a PE of 30.1
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You can pocket an annual six figure sum in fees.
Now Wendy’s attitude to PE’s with any number other than 1 in front of them is a bit like her attitude to backbenchers who tell you how they will go against the trend and reverse the general swing.
It’s possible that you’ll do well but the odds are agin you.
That’s presumably why the AMP Directors seem to have generally favored the second choice.
Indeed, perusing the AMP 2001 annual review Wendy was struck by two columns of figures: the remuneration of directors and their shareholdings.
Given the $18.69 price you don’t need a lot of shares to end up with a tidy sum but it’s striking that most of the directors (with the obvious exception of one P.J. Batchelor and P A Cross) tend to own less in shares than they take out in fees each year.
Chair, S.D.M.Wallis, had 11,000 at 27 February 2002 giving him a nice $200,000 plus commitment to enhancing shareholder value. But the $200,000 is less than half the $425,450 Stan gets in fees and other payments.
Other directors get: Sir Malcolm Bates $349,931; P.A.Cross $108,000; R J Grellman $134,423; Lord Killearn $223,703, P K Mazoudier $129,563; and I A Renard some $108,000.
Their respective shareholdings are Bates 5,000; Cross 10,000; Grellman 5,000; Killearn 12,623; Mazoudier 2600; and Renard 5,085 (plus some 50 AMP Income Securities).
The disparity is not that great in some cases and tax would be a bugger. Moreover, there is an ongoing debate about how and, at what level, directors should be remunerated.
But the fact remains one S D M Wallis, if he remains Chair for three years, will pocket some $1.3 million in fees. A shareholder with the same number of shares as Stan has will pocket some $17K in dividends over the same period and will need to rely on significant earnings growth to generate a higher share price.
Wendy thinks she’d rather be a Director than the shareholder she is.
Now, let’s check out a few recent exchanges in our sealed sections about AMP:
AMP’S DODGY ACCOUNTING THE LAMENTABLE STAN WALLIS
Sealed Section from April 4
The AMP is meant to be the doyen of conservative investment in Australia so it comes as quite a surprise to see in their latest annual report they have somehow managed to write up the value of goodwill by $715 million after a “restructure” at GIO as part of the sale of this troubled business to Suncorp-Metway.
Crikey can well recall being summonsed to see chairman Stan Wallis at Coles Myer’s Battlestar Gallactica head office last year for some quiet counselling about how AMP might have written off $1 billion in GIO but that value was being rebuilt over time. Yeah right Stan, that’s why the business was sold for the written down value a few months later.
The last company which wrote up the value of goodwill on a dodgy insurance acquisition was good old HIH which somehow managed to find an additional $300 million of goodwill on the FAI acquisition in the 2000 accounts. Boy, are Arthur Andersen going to regret signing off on those accounts.
After watching AMP overpay its executives, appoint insiders to its board, selectively brief and then decide that Stan Wallis was an appropriate chairman when he was an integral player in selecting George Trumbull as CEO and that Paul Batchelor was the perfect replacement for George when he’d been a driver of the GIO fiasco, we just lost faith completely with Australia’s biggest institution.
Now we have this very ordinary accounting and AMP continue to be one of the biggest land clearers in the world whilst offering so-called ethical investment funds.
AMP’s shareholders will never do anything about all of this so Crikey is coming to the view that the only language these recalcitrant corporates will talk is money. Xerox have just been fined $US10 million by the SEC in the US so it is about time our regulators started threatening huge fines if these guys don’t get their act together.
If anyone can justify this latest magical effort with the $715 million write-up in goodwill we’d love to hear from you.
And as for Stan Wallis, he’s now a triple whammy dud thanks to Pineapplehead, Coles Myer and AMP. It really is time one of the last great protectors of the Collins Street boys club was put out to pasture for good.
AMP EXPLAINS THE AMP GOODWILL WRITE-UP
Sealed Section April 5
AMP has responded to yesterday’s email which was triggered by the following paragraph in Lachlan Johnston’s Rear Window column in the Fin Review on Wednesday:
“Batchelor certainly has a lot of different issues to get his head around and explain to shareholders. An interesting question at the upcoming annual meeting might be how he was able to write up the company’s goodwill by $715 million, as a result of a “restructure” of a number of its businesses.”
Anyway, this is what AMP spinner Karyn Munsie wrote in response:
Long time no talk….but of course I’m an avid reader.
Now I always enjoy your updates but you did manage to get it very wrong with your suggestions today that AMP “managed to write up the value of goodwill by $715 million after a restructure at GIO as part of the sale of this troubled business to Suncorp-Metway”.
There was no write-up in goodwill by AMP in 2001. In simple terms, there was a transfer from one part of the balance sheet to another. And to pre-empt your next question – we had to transfer it because of the sale of general insurance, it wasn’t a choice we made.
OK, here comes the detailed explanation (and as anyone who has ever dealt with life company accounts will tell you, they are highly complex – this is the simplifed version).
The $715 million goodwill number that you refer to was a transfer from Excess Market Value over Net Assets of Controlled Entities (EMVONA – see note 12 in AMP Annual Report 2001, p. 52) to goodwill (see note 11 in AMP Annual Report 2001, p.51).
Goodwill and EMVONA are essentially one and the same thing. Goodwill is a term used under historical cost accounting while EMVONA is used in a life company/market value environment. With a few exceptions (e.g. goodwill is amortised, EMVONA is not), they are the same concept.
The sale of AMP’s general insurance operations in 2001 required us to restructure some parts of the balance sheet. In the notes to the financial statements in AMP’s 2001 Annual Report, footnote 3 under note 12 clearly states that GIO’s financial services and asset management businesses were restructured and integrated into AMP Financial Services and Henderson Global Investors respectively, which resulted in a transfer of $619 million from EMVONA to goodwill. The remaining $96 million relates to a similar transaction involving GIO Finance and its transfer to AMP Banking.
Similarly, footnote 1 under note 11 states that “during the year $715 million was transferred from EMVONA to goodwill as part of the restructure of a number of GIO businesses”.
So, bottom line: no writeup. No “magical effort”. No dodgy accounting. Not sure where you got this from but seems like what’s dodgy here is your source…..
Now, land clearing. Stanbroke Pastoral Company (AMP-owned) is not one of the biggest landclearers in the world or in Australia. Of course AMP acknowledges that land clearing is a serious issue and that’s why Stanbroke Pastoral has had a moratorium on clearing remnant vegetation in place since early 2001. There is currently an independent environmental audit that is being conducted, at Stanbroke’s initiative, across all the land it manages. Stanbroke’s Land Management Policies and Practices are on their website – www.stanbroke.com.au.
Over to you….
Director Global Media
THE STAN WALLIS PAY PACKET AT AMP
Sealed Section April 9
We’ve got some clarification on Stan Wallis’s pay packet for the chairmanship of AMP.
For 2001 the total was $425,000 (page 94 of annual report) while the total for 2000 was $307,087 (page 90 of 2000 Annual Report).
The difference reflects the fact that in 2000 Stan was a Director (not Chairman) for three months of the year and directors are paid at lower rates.
The Chairman’s fee was increased from $300,000 pa to $350,000 pa in November 2000. This still puts the total pool paid to Directors within the figure approved by shareholders at the AGM in 1999, which was $2.5 million. Fees paid to AMP Directors (including the Chairman) in 2001 were $1.6 million.
The $425,000 paid to Stan in 2001 comprises the Chairman’s fee, superannuation and living away from home costs and is broken down on page 94 of this year’s annual report.