Macquarie Bank has gone to extraordinary lengths to defend its long-standing pay policies but in the cold light of day after yesterday’s shareholder revolt, things are going to have to change.

No top 20 company has suffered a protest like yesterday’s when 21.44% of votes cast rejected the remuneration report – up from just 6.43% last year.

Despite continuing stellar performance through profits and a rising share price, shareholders have made an emphatic statement about the components of the pay packets, not the overall size.

The dominance of short term cash bonuses will have to be adjusted. Managing director Allan Moss currently owns about $35 million in ordinary shares, yet he’s pocketed about $100 million in cash over the past decade.

If things turn down and Macquarie makes a shock loss, his care factor is significantly reduced by the truckloads of cash that have previously gone out the door.

To put the protest in perspective, the against vote rocketed by 350% from 8.677 million shares last year to 30.6 million yesterday, whilst the for vote fell from 126 million to 112 million.

The bank is acutely sensitive to this issue. While most companies have a press conference after AGMs, Macquarie did theirs before the meeting when journalists did not know the size of the protest.

Similarly, chairman David Clarke refused repeated requests to reveal the proxies to the meeting. We should have spent four hours debating the implications of the protest and what changes should be made, instead we were left in the dark and simply faced board defiance.

The rule of thumb on these things is that proxies are withheld when they embarrass the chair. When Rupert Murdoch had more than 90% in favour of News Corp’s move to America, he declared this within minutes of the meeting starting.

Yesterday, we got the proxies at 2pm as the meeting closed – even though the bank knew it was in trouble when proxy voting closed at 10.30am on Tuesday. Shareholders were treated like mushrooms, but it simply served to highlight the issue to the press which went for the jugular today.

Clarke was pleased with the result after the meeting, but he won’t have liked today’s media coverage, especially from The Australian which is enjoying a bit of payback for the crazy defamation action the Millionaire Factory continues to prosecute against the paper.

The big question now is just which shareholders revolted. Axa, Capital and Barclays hold 44 million shares between them so one of them presumably defied the campaign waged by the bank to discredit proxy advisory firm ISS.

ISS Australian boss Dean Paatsch is a savvy and well-connected player in both media management and the broader funds management industry. He’s chalked up another significant victory.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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