explain in detail how each of the four (4) interventions you have chosen to implement will become part of the day-to-day organisational operations of AMP (ie. How do you make change ‘stick’?).

Refer to Question 3 and explain in detail how each of the four (4) interventions you have chosen to implement will become part of the day-to-day organisational operations of AMP (ie. How do you make change ‘stick’?). (10 marks – 1000 words)

Please type your response below

Case Study: AMP

 

Introduction

In August 2020, media headlines in Australia named and shamed AMP as a corporate bully and warned it is “a company that kills careers”. The vehicle for this reputational crisis is a culture of sexual harassment and sexual discrimination, which has dogged AMP for over 20 years and continues to do so in 2021.

 

The spotlight on AMP’s culture and leadership was red hot in 2020 after a public outcry by staff and shareholders on the appointment of Boe Pahari to the top job of CEO at AMP Capital (AMPC). In 2018, Pahari allegedly sexually harassed a former employee at AMPC, Julia Szlakowski, and was penalised by AMP with a 25 per cent reduction in his annual bonus, which amounted to $500,000 (Khadem, 2020). But despite that transgression, Pahari’s promotion was sanctioned by the AMP Board, which was intent on driving up profits, after the disastrous Royal Commission of 2018. (NB: The Royal Commission found AMP had misled the corporate regulator multiple times over the charging of customers for “no advice” (Gardner, 2018), and the company’s profit/dividends plummeted in 2019).

 

To staff and shareholders the issue around Pahari’s promotion was not money, but morality. Industry analysts savaged the company’s choice stating it was indicative of the way AMP operated: “The company went from being an inward looking mutual that existed for customers, to a profit-hungry beast focused on expanding globally” (Grieve & Knight, 2020). And according to Schmulow (2020) its focus on money over trust is central to the failures and scandals that have trashed its reputation and share price. Schultz (2020) argued that for AMP “cash is key” and its response to the outcry against Pahari revealed the board’s narrow focus. “They were managing the shareholder risk but not the rest of the risks … In their minds, it’s all in the dollars and cents,” said former executive director of the Australian Institute of Employment Rights, Lisa Heap (Schultz, 2020).

 

The problem is not just one of strategy, it is also AMP’s organisational culture. To understand AMP’s systemic cultural problems, Grieve and Knight (2020) provided some context. In 1998, the then CEO, George Trumbull told his top ten male executives at a lunch meeting, that a recent delegation of women executives had nominated sexual harassment and sexual discrimination as the biggest problems in AMP, and “five of the biggest offenders were seated at that table”. And in 2003, as his three-year reign as AMP chairman was drawing to an unceremonious end, a bitter Stan Wallis complained to close associates that “this company destroys people”.

 

 

 

 

 

 

 

 

Company Structure

Founded in 1849, AMP is a wealth management company with a growing retail banking business and an expanding international investment management business. It provides retail clients with financial advice and superannuation, retirement income

and banking and investment products. AMP also provides 1) corporate superannuation products and services for workplace super and self-managed superannuation funds (SMSFs); and 2) institutional clients with investment management services across a range of asset classes, both in Australia and globally.

 

A brief summary of AMP’s divisions is provided below:

AMP Wealth Management (AMPWM)

AMPWM assists clients to save for, and live well in, retirement. It facilitates this through extensive retail and workplace superannuation products, and self- managed superannuation funds services, as well as retirement income solutions and investments for individuals.

AMP Bank (AMPB)

AMPB provides clients with residential and investment property home loans, deposit and transaction accounts and SMSF products. It also provides loans to AMP-aligned financial adviser practices. AMPB clients have access to AMP Bank products via a variety of channels including digital and online, phone, through AMP financial advisers and home loan brokers.

AMP Capital (AMPC)

AMPC is the investment arm of the AMP Group of companies. As part of the AMP Group, it shares a heritage that spans almost 170 years. It has more than 250 investment professionals in 19 locations around the world (with a large presence in Australia) working collaboratively to share the latest insights and discover the best possible investment opportunities for its clients. AMPC’s strength in Australia and New Zealand has facilitated growth internationally, and today it operates in Dubai, China, Hong Kong, Singapore, India, Ireland, Japan, Luxembourg, the United Kingdom and the United States. Working with a network of global investment partners, AMPC leverages shared capabilities to provide greater access to new investment opportunities. It operates across all major asset classes, with a particular focus on real estate and infrastructure. Its asset class specialists, investment strategists and economists manage AUD$189.8 billion in funds under management across a range of single sector and diversified funds.

 

Background

The key players in this case study are as follows:

 

David Murray	AMP Chairman – Appointed 2018, Resigned 2020
Debra Hazelton	Current AMP Chairman (former board director) – Appointed Aug 2020
Francesco De Ferrari	Current AMP Group CEO – Appointed 2018, Resigned Mar 2021
John Fraser	Appointed Non-Executive Director 2018, Resigned 2020
Boe Pahari	Promoted to CEO of AMP Capital 2020, Resigned from this role after two months.
Julia Szlakowski	A former executive who bought a sexual discrimination suit against Pahari.
Alex Wade	Former AMP Australia CEO – Appointed 2019, Resigned 2020

 

The controversies

Pahari

The most recent example of AMP’s poor behaviour centred around the case of former executive Julia Szlakowski, who in 2017 bought a sexual harassment complaint against Pahari who was then AMPC’s Head of Equity and Infrastructure. AMP hired employment law specialist Andrew Burns QC to oversee the matter in 2018, and he concluded Mr Pahari’s conduct constituted a “relatively modest breach” of the company’s code of conduct. The independence of this report was questioned by legal experts as AMP refused to provide key documents before releasing it publicly. Following the investigation, a confidential settlement was reached with Szlakowski (who then left the company) while Pahari was penalised $500,000.

 

Despite an acknowledgement of serious wrongdoing, in 2020 the AMP Board decided to promote Pahari to one of the company’s highest-paid and most strategically important positions as CEO of AMPC (Roddan, 2020a). His promotion signalled AMP’s single-eyed focus on future profits of the business and also recognition that Pahari had generated much of AMP’s fortunes. AMP Group CEO, Francesco De Ferrari, who had been appointed in late 2018, formulated a strategy to halt the deteriorating operations of AMP in response to the structural changes in the wealth management industry because of the decline in the financial advice and superannuation businesses (Roddan, 2020b). However, in the 9 months that followed his appointment, AMP continued to hemorrhage with AMP’s share price losing nearly 70% of its value in 2019 (Letts, 2019).

 

Pahari’s financial acumen paled against the public outrage at his promotion and some commentators labelled his appointment as ‘corporate kryptonite’ because he and the AMP Board neglected to pay attention to cultural change sweeping through corporate Australia in the wake of the #MeToo movement¹ (Hewett, 2020).

 

Media outlets were flooded with commentary from staff, shareholders, industry analysts, and other corporates calling for change while De Ferrari, AMP Group’s CEO, stayed in the background and was conspicuous by his silence on the issue. It was left to AMP Director, John Fraser, to justify Pahari’s promotion but his interview was universally hailed as one of the great train-wreck interviews of Australian corporate history. Fraser declared the AMP board had made a unanimous decision to promote Pahari because he had ‘‘made a lot of money for the company and its employees’’. The comments left corporate Australia aghast. ‘‘They handled it very badly, in talking about how valuable he was,’’ said one highly regarded chairman. ‘‘That’s a shocking message. It suggests there is a trade-off between doing the right thing and making

 

1 According to Gordon (2020), the #MeToo phrase was first coined in 2006 by Tarana Burke, an advocate for women in New York. Burke wanted a way to empower women who had endured sexual violence by letting them know that they were not alone—that other women had suffered the same experience they had. The phrase was reintroduced in 2017 by actress Alyssa Milano as a way to encourage women and men to share their sexual harassment stories across many different social media platforms, accompanied by the hashtag #MeToo.

 

money” (Maley, 2020). On August 24, 2020 both AMP chairman David Murray and fellow Board member John Fraser resigned. Despite the negative publicity Pahari has received over the past two months (which has been like no one else in corporate Australia), he survived the purge and obligingly returned to his previous and lesser role as Head of AMPC’s infrastructure equity business.

There was widespread astonishment in the industry that Murray and Fraser quit the AMP Board. However, a high-profile board member of AMP believes it was telling that the two directors that felt the most commercial pressure to deliver were the ones who departed. Murray’s failure to appreciate why he and the board made a mistake is, arguably, symptomatic of AMP’s management for at least two decades. Simon Mawhinney, managing director of asset manager Allan Gray, which holds almost 7 per cent of AMP, said Mr Pahari would be unable to carry out the role, to which he was promoted on July 1, and hit out at Mr Murray’s board for failing to come clean over the harassment allegations. “Given the continued lack of transparency from AMP, it is difficult to know whether AMP’s cultural and moral compass is on a sustainable footing,” Mr Mawhinney said (Roddan, 2020b).

 

Wade

Ironically, just weeks before Pahari’s demotion back to Infrastructure Equity and while he was still AMPC CEO, there were further explosive allegations made against the CEO of AMP Australia Alex Wade. Wade was the subject of several complaints regarding his conduct including sending explicit photos to female colleagues. A number of AMP staff have relayed complaints about Wade (both personally and through AMP’s whistleblower function) to AMP’s senior management.

Those allegations were taken to Francesco De Ferrari, AMP Group CEO and the AMP board. Pahari was extricated from a scheduled board meeting to join an emergency meeting with the rest of AMP’s global leadership team to discuss the matter. Following a further meeting between De Ferrari and Wade and AMP’s Head of People and Corporate Affairs Helen Livesey, Wade was given 24 hours to submit his resignation (Roddan, 2020d). ‘‘I arrived at my decision to resign from AMP in the interests of all parties,’’ a spokesman said on behalf of Wade in response to a lengthy list of questions. ‘‘My focus now is on a period of personal reflection and the relationships that are most important to me.’’

Despite several AMP sources confirming that multiple complaints had been made about Wade, and that AMP had previously discussed matters of conduct with Mr Wade, AMP elected not to answer any questions about the matter and associated issues. This lack of explanation about the departure of Wade, who only joined AMP in January 2019, left staff feeling frustrated.

Senior staff in internal AMP meetings have since refused to comment on employee questions, including one senior employee who told staff the situation was ‘‘like our last matter [Mr Pahari]; they’re sensitive issues’’ in response to questions (Roddan, 2020d).

This debacle has once again turned the spotlight on AMP’s handling of employee concerns.