Question 1

Part A

AMP seeks $2.2m rights package for CEO Francesco De Ferrari

Under AMP's framework for 2021, Mr De Ferrari will receive fixed pay of $2.2m and a short-term bonus of up to 200 per cent of his base pay, as well as the $2.2m long-term incentive, subject to performance.

Approximately 75 per cent of the maximum remuneration he can receive for the current financial year is made up of short and long-term bonuses and was "at risk", AMP said.

Mr De Ferrari's long-term bonus will only vest if the wealth manager achieves relative total shareholder return performance at or above the median of its peer group.

Long-suffering shareholders will, on April 30, also vote on whether to approve the embattled wealth manager's remuneration report.

If 25 per cent, or more, of the votes are cast against the remuneration report, AMP will be hit with a second strike, triggering a vote on a board spill.

AMP's first strike at last year's (annual general meeting) AGM came after it was criticised over "disproportionately large" incentives paid to executives.

More than two-third of proxies voted against the 2019 remuneration report after proxy advisers Ownership Matters and ISS recommended shareholders vote against the pay packages.

Both proxy advisers argued that executive pay was overly generous and performance hurdles not rigorous enough.

Extracted from Cliona, O. AMP seeks $2.2m rights package for CEO Francesco De Ferrari. The Australian. Mar 15, 2021. Required

1. Explain AMP's framework for 2021 using agency theory. (Maximum words 300). (6 Marks)
2. Explain how the two-strike rule could help to mitigate agency problems. (Maximum words 200). (4 Marks)