Question 21 – AGM transcript
There has been a lot of interesting territory covered during today's AGM. In addition to the webcast archive, will Macquarie also publish a full transcript of the Q&A session on its website. Judges are not told to wade through video recordings of court proceedings and nor should shareholders. Please join the likes of Transurban, IAG and Woolworths and get with the AGM transcript program.
Question 20 - remuneration
Could remuneration committee chair Jillian Broadbent comment on the laudable decision to ditch “fair value” when calculating incentive grants and also whether she has considered also following the ASA argument for Macquarie to disclose actual take home pay rather than just what the accountants calculate? Also, how has Jillian found chairing the Macquarie rem committee given the complexity of pay at Macquarie across its global operations?
Answer: Jillian spoke but didn't say much. They are not giving ground on take home pay.
Question 19 - Shemara shareholding
When Shemara joined the Macquarie board in August 2018 she owned 800,000 ordinary shares which at the time were worth about $100 million. Today she owns 992,881 shares worth $155.5 million. Is Shemara aware of another public company financial services CEO with a bigger shareholding than hers and can she confirm that she intends to maintain her magnificent record of never selling a share in Macquarie Group whilst employed by the group since 1987?
Answer: No plans to sell after 34 years of acquiring stock since joining in 1987.
Question 18 – APRA intervention and risk
What repercussions have flowed from the problems APRA identified with the bank and as chairman of the risk committee with a background in banking regulation, could Glenn Stevens comment on the board's involvement. Is it correct that some institutional shareholders such as CALPERS have chosen to vote against Glenn's re-election today to show some accountability at board level for the APRA sanctions. Is that fair?
Answer: Stevens spoke saying the board was heavily involved and he was pushing for greater engagement with regulators so that Macquarie can "reach its full potential". That's a funny way to describe sucking up to your regulator.
Question 17 - Chairman competing
The last Macquarie Group chairman, Kevin McCann, in my view inappropriately went off and joined a listed competitor, Evans and Dixon, serving on their advisory board. Could chairman Peter Warne confirm that on retiring from Macquarie Group next year, he won't offer his services to any competitor of Macquarie? Also, are any external headhunter firms being used to support the search for the next chair of Macquarie and does this search including assessing external candidates, such as former Macquarie CEOs?
Answer: No headhunter involved, the chair will be an internal appointment and Peter Warne promises not to compete.
Question 16 – Bank tax
How much is the Big Five Bank tax costing Macquarie each year and is it fair that we have to pay the tax but foreign competitors and smaller rivals like Bendigo and Bank of Queensland are exempt? Are we lobbying to have this unfair tax either removed or applied equally to all banks in the Australian market or is it a Bipartisan position that is unlikely to change? Has Josh Frydenberg given any indication of potential relief from this unfair tax?
Answer: CFO Alex Harvey made no political commentary but disclosed the cost at $80 million a year.
Question 15 – CEO tenure
Shemara owns $155 million shares in Macquarie and has received almost $15 million in dividends since becoming CEO in 2018. She turns 60 this financial year, has been with Macquarie for 34 years and clearly doesn't need to work. Tony Berg was CEO for 8 years, Allan Moss ran Macquarie for 15 years and Nicholas Moore was in charge for 10 years. Can Shemara imagine a scenario where she would serve for as long as any of her CEO predecessors and what is her current view of retirement?
Answer: Only been in the job for a couple of years and no plans to retire.
Question 14 – German chemical explosion
The explosion on Tuesday at the German Currenta business is very serious with at least two dead, 30 injured and others missing. As the world's biggest infrastructure manager, is this the most serious accident and damage that has occurred on our watch and what sort of implications could this have on Macquarie. When we are a financial services company, why do we take the risk of directly owning and managing dangerous assets such as chemical plants without any industry partners?
Answer: a terrible accident two days ago and we are focusing on securing the site and the wellbeing of our staff but this was core business for Macquarie as it was providing utilities services to chemical plants, rather than running actual plants.
Question 13 - Jobkeeper
What was the Macquarie Group board's view on the widely rorted $90 billion JobKeeper program. It was very easy to qualify by just forecasting a drop of revenue, even if it didn't eventuate. Competitors such as Moelis participated in the scheme whereas other companies like Scentre Group took the moral high ground and refused to apply. How did Macquarie play JobKeeper, including in the many Australian business that we manage for third parties? Did any entities we control claim or then later pay back any JobKeeper claimed?
Answer: Shemara said they didn't claim JobKeeper.
Question 12 - RBA Borrowings
When COVID first hit, the RBA slashed interest rates to zero, started lending cheaply to banks and committed to unprecedented money printing by buying $5 billion of Federal and State Government bonds a week, which has led to purchases exceeding $200 billion. Please summarise the impact and involvement of Macquarie in all this. How much have we effectively borrowed from the RBA and have we been active participants in buying up the record amounts of Federal Bonds being issued to fund programs such as JobKeeper?
Answer: CFO Alex Harvey said they had borrowed $1.7 billion as at March 30 and an additional $9.5 billion before the scheme closed on June 30.
Question 11 – board size and proposed constitutional change
Macquarie's constitution mentions 10 as being the maximum number of directors and we currently have 10 directors. Macquarie is one of the only ASX100 companies with no constitutional room for board expansion to accommodate a non-board endorsed external candidate. Will you consider amending the constitution at next year's AGM to either adopt the Rio Tinto model of having no board size cap or matching AMP's cap of 16, ANZ's 15, BHP's 20, Scentre Group's 16, Westpac's 15 or the many listed companies which have a maximum of 12 directors?
Answer: We have no plans to change and this has never caused a problem.
Question 10 – PwC as auditor
Out auditor PwC was paid $35 million to audit Macquarie Group last year and we paid them an additional $12 million for non-audit services. How long has PwC been our auditor, when did we last tender the audit contract and was it a mistake to have PwC as the auditor of Nuix, even though it was only 78% owned at the time. How deep does the PwC relationship go into our various funds, subsidiaries, associates and investments like Nuix?
Answer: Alex Harvey and the auditor both spoke with the key disclosure being that $9 million of the $12 million was for "assurance work".
Question 9 – Bo Pahari lunch.
According to Myriam Robin in The AFR's Rear Window column, our CEO had lunch with AMP executive Bo Pahari and one other party at Sydney restaurant Balcon on Thursday August 20, 2020, right in the middle of the public controversy about sexual harassment issues involving Mr Pahari at AMP. Could Shemara please provide the context behind, purpose and outcome of this lunch meeting? Was it a mistake in hindsight, given the optics?
Answer: Shemara said it was a private lunch and not related to AMP.
Question 8 – growth in funds under management.
Including the $60 billion in assets under management with the recent AMP fixed interest business that we bought, total funds under management are now at a record $753 billion. It was only $534 billion when Shemara was announced as CEO in 2018. What is the likely time frame for Macquarie's assets under management to crack $1 trillion of the $300 trillion managed globally and are we yet in the top 20 in terms of the world's biggest asset managers?
Answer: The asset management boss Ben was invited to answer and he said there was no time frame but they had plans to grow both organically and through acquisitions.
Question 7 - proposed proxy adviser regulations
The Federal Government is currently proposing tougher regulation on proxy advisers, including that they be forced to show companies copies of their reports before they are published. Do any of the proxy advisers currently do this with Macquarie and does Macquarie support the proposal? Are there any concerns that such a move could set a precedent that would require our analysts to send drafts of their reports yo companies before they are sent to clients and investors?
Answer: Chair Warne said some proxy advisers do send through drafts and this is good practice to avoid mistakes but he didn't weigh in on whether this should be mandatory under law.
Question 6 – supporting a Macquarie book
Independent books have been written about BT, Afterpay, Twiggy Forrest, Kerry Stokes, James Hardie and many other Australian corporate topics. Why hasn't Macquarie ever pro-actively collaborated for a comprehensive book about the Millionaire Factory, given that we are now a remarkable global success story with a market capitalisation of $58 billion. Shemara and chair Warne, what discussions about a Macquarie book have occurred during your combined 49 years with the company?
Answer: Chair Warne said they were all too busy running the business to worry about a book.
Question 5 – commitment to Nuix in medium term
The spindoctors brought in by Nuix after the float when various issues blew up have basically being blaming Macquarie Group in briefings with journalists. Is that fair? Macquarie floated Nuix at $5.31 last December, receiving $565 million after selling down from 76.18% to 30.1%. The stock is now trading below $3 after hitting a low of $2.16 in late June, making Nuix one of the worst IPOs in recent history. Shemara told journalists this morning that Macquarie is committed to remaining a Nuix shareholder “in the medium term”. What is the current book value and does that mean we won't be selling any of our 30% stake before next year's AGM, even though it comes out of escrow next month?
Answer: Shemara repeated the answer she gave to many other Nuix questions - namely that they were a supportive medium term investors and the only problem was missing its prospectus forecast.
Question 4 – proxy adviser recommendations
There are 5 proxy advisers in the Australian market – Ownership Matters, ISS, CGI Glass Lewis, ACSI and the Australian Shareholders' Association. We know that ASA is recommending and voting against the re-election of chairman Peter Warne on tenure grounds. Have any of the other proxy advisers recommended against any of today's 8 resolutions? If not, does that mean proxies in favour exceed 95% with all resolutions?
Answer: chair Warne said the ASA recommendation against his re-election was the only resolution in which a proxy adviser which didn't support the board's recommendation.
Question 3 – Fund vs Macquarie investments
How do we manage the potential conflict of interest when Macquarie decides to invest in principle with its own balance, rather than using one of its many managed funds. Please explain the different approaches with the recent $3.5 billion Vocus Telecommunications takeover, Nuix, the recent $450 million profit from the sale of the industrial smart meters business in the UK and the recent purchase of Wavenet in the UK by Macquarie Capital. Were all these shareholder investments or were they shared with managed funds? Do fund clients ever complain about missing out on some of the best deals?
Answer: Shemara gave a re-assuring answer basically saying that the funds back low risk more mature investments whereas Macquarie itself tends to back venture tech starts up such as Nuix.
Question 2 – windfall from Texas storms
Did we really enjoy a $300 million windfall from the Texas storms earlier this year and please provide an update on any backlashes against this, in terms of litigation, consumer anger or regulatory intervention. Is Texas likely to impose a gas reserve policy and how does pocketing super-profits from a natural disaster that hurts a community sit within our ESG framework?
Answer: CFO Alex Harvey tried to claim Macquarie was supporting its clients by delivering much needed gas when it was most needed in a crisis.
Question 1 – Proxy disclosure
Ausnet agreed to a request to release the proxy votes with the formal addresses lodged with the ASX before its July 15 AGM, in order to facilitate better AGM debate. Afterpay did likewise last year. Why did Macquarie reject a written request to do the same and instead resolve to withhold disclosure of the proxies until after all questions are asked today, when this also goes against Australian Shareholders' Association AGM guidelines? Can you cite anyone who supports withholding proxy disclosure like this?
Copyright © 2021 The Mayne Report. All rights reserved