As outlined by the Chairman at the AGM in May, the AMP Board today confirms it will adjust the remuneration package of Chief Executive Francesco De Ferrari to ensure he is appropriately incentivised and aligned with shareholders during the transformation of AMP.
Summary of adjustments
As indicated in the announcement of Mr De Ferrari’s appointment in August 2018, the AMP Board agreed an incentive package for Mr De Ferrari, which included a buyout of incentives from his previous employer (the “Buyout Incentive”) and an award to incentivise the delivery of a recovery in business performance (the “Recovery Incentive”).
The face value of these awards was based on AMP’s share price leading up to the date of that announcement (A$3.44), with the Recovery Incentives including significant stretch targets on share price performance to be achieved.
Prior to his start date of 1 December 2018, and in the period immediately afterwards, AMP’s share price and performance were impacted by a range of events outside Mr De Ferrari’s influence. Most significantly these included AMP’s original agreement to sell AMP Life in October 2018 and adverse consequences flowing from the Royal Commission.
Taking into account feedback from a range of shareholders, the Board has resolved to adjust Mr De Ferrari’s incentives to reflect the share price of the group immediately preceding his start date (A$2.45) and implement share price performance hurdles on the Recovery Incentive, which better reflect the challenges currently facing the company.
Mr De Ferrari will receive further shares and rights so that he holds the same number of shares and rights he would have been awarded originally had the reference price been A$2.45 instead of A$3.44. The value of the additional shares and rights he will receive is approximately A$2 million, meaning that the face value of his Buyout Incentive will be approximately A$7 million, down from A$10 million.
Further, the Board proposes to replace the Recovery Incentive. The new award will have a face value of approximately A$4.4 million down from A$6 million.
Vesting of the new Recovery Incentive will be subject to achieving a share price of A$2.45, representing the share price when the CEO commenced with AMP, with full vesting if the share price is A$2.75.
The new award will include terms to enable the Board to offset any value that may be achieved if the original Recovery Incentive did vest. The Board intends, subject to consultation with shareholders, to seek approval to cancel the original Recovery Incentive at the next AGM.
AMP Chairman David Murray said:
“As foreshadowed at the 2019 annual general meeting, the Board recognises that the original announcement of the sale of AMP Life, and a number of other company-specific matters that affected our share price, occurred before our new CEO took office. A number of shareholders have also expressed concern that the current long-term incentives may no longer be realistic. The Board has carefully considered these matters in the context of today’s revised agreement to sell AMP Life and with a new strategic plan, and has made these changes to Mr De Ferrari’s remuneration arrangements to retain, motivate and align him to shareholder interests.
“Originally the Buyout and Recovery Incentives were designed to compensate for Mr De Ferrari’s previously-earned remuneration. Together the adjustments made today do not fully compensate for the reduction in their value due to factors outside Mr De Ferrari’s influence.”
Contracted 2019 Long-term Incentive
In his remuneration package announced in August 2018, Mr De Ferrari was entitled under his contract to an LTI award with a face value of A$3.5 million.
This contracted award was intended to be granted early in 2019 but will now be awarded this month. As no trading window was available in the interim, the award now aligns with the strategic plan.
2019 LTI Transformation Award
The Board has decided Mr De Ferrari will also receive a 2019 LTI Transformation Award with a face value of A$3.5 million. This reflects the Board’s desire to ensure the CEO is appropriately motivated, aligned and retained to execute on the new strategy and transformation of AMP for the benefit of all stakeholders.
For the 2019 Contracted LTI and 2019 LTI Transformation Award, vesting will be measured based on a comparison of the compound annual growth rate in AMP’s total shareholder return (TSR) relative to a financial services comparator group of companies.
The tables set out in the below ASX announcement detail the remuneration adjustments for Mr De Ferrari with the Buyout and replacement Recovery Incentives as well as the 2019 Contracted LTI and 2019 LTI Transformation Award.