AMP has suffered a first strike on its remuneration report after coming under fire from shareholders and proxy advisers over the disproportionately large incentives paid to its executives. At the companys virtual annual general meeting on Friday, 67 per cent of proxies voted against the remuneration report. It comes after influential proxy advisers Ownership Matters and ISS recommended shareholders vote against the generous pay packages. Both proxy advisers last month argued that executive pay was overly generous and performance hurdles not rigorous enough. If the company receives a second strike next year, it will trigger a board spill under the two-strikes rule. Commenting on the executive remuneration plan, Mr Murray [Chair of the Board] said the generous package was required to attract and retain an executive team that could execute the companys transformation strategy. The 2019 remuneration structure was designed to reflect the scale, complexity and challenges involved in transforming the business executing an ambitious strategy, separating the life insurance business, completing client remediation and addressing the companys challenging regulatory and legal matters. In our CEO and executives, we have a capable and driven team to deliver our plan. Their awards are substantial, but the hurdles are challenging. For the awards to be realised over the long term, these demanding hurdles must first be achieved, including a significant improvement in business performance and share price, Mr Murray said. Taking aim at the two-strike rule, which sees a board spill if more than 25 per cent of shareholders vote against a companys remuneration report two years in a row, Mr Murray warned it reduced the incentive for companies to properly invest in specialist care, ultimately leaving the more difficult workouts to the unlisted markets. AMP chief executive Francesco De Ferraris pay package came in at $13.43m last year, buoyed by share rights, options and restricted shares, even as the under-pressure wealth group posted losses of $2.5bn. Mr De Ferraris remuneration for the 12 months ended December 31 included a $2.18m base salary, $1.32m cash bonus, other short-term benefits of $1.71m and almost $8.2m in rights, options, and restricted shares. Extract from Grieve, C. Shareholders hit AMP with first strike against executive pay packets. The Australian. 8 May 2020. Required: From the information provided: a) Do you think that remuneration incentives are working in the way intended under agency theory for AMP Ltd? Why or why not? (Maximum word limit 500 words) (8 marks) b) How might earning management be relevant to remuneration incentives? Explain. (maximum word limit 250 words) (4 m