AMP, Australia’s largest asset manager, has been mired by scandals for years and serves as a prime example of how seriously underlying ESG issues can impact a firm. Our Insights Platform's ESG impact tracker explored the events leading up to another corporate scandal that will undoubtedly usher in reforms in corporate governance.
Sexual harassment in the workplace is unfortunately nothing new. However, how we as a society treat and tolerate these cases is changing, and investors are taking notice. AMP (AMP: ASX), Australia’s largest asset manager, serves as a prime example of how seriously underlying ESG issues can impact a firm.
AMP’s promotion of Boe Pahari to CEO on July 1st, after he was the center of a sexual harassment investigation from 2017, led to a short tenure as CEO that ended as loudly as it began. After less than two months and a 23.2% stock dip Pahari was demoted and Chairman David Murray resigned on August 24th. The Australian media has described it as an "investor revolt" as AMP have lost nearly three-quarters of their share value over the last year.
Our Insights Platform’s ESG impact tracker had AMP ranking the 8th lowest in impact score over the last seven days for financials with the third most mentions.
Australia’s Sex Discrimination Commissioner has called AMP’s case a "watershed moment." This comes on the heels of the media circus surrounding McDonald’s former CEO Steve Easterbrook for allegations of sexual harassment, and Washington Football team owner Dan Snyder’s allegations of misconduct.
As the AMP case shows us, these developments can very quickly go from being a distraction to a full blown catastrophe from a PR and stock price standpoint. The exorbitant price tags of lawsuits that come with such scandals and the ensuing media headlines even after the perpetrators have left the company, as is the case with McDonald’s, distract from a company’s core business news and use up valuable time and resources. Steve Easterbrook was fired last November and nearly a year later his name continues to appear in the media. Also, brand reputation and loyalty which is not as easily quantified can forever be marred. Erosion of brand reputation can have lasting impact and can lead to loss of revenue and customer turnover for years down the road, even after the immediate firing of the perpetrators within the company.
One wonders whether the increasing financial and reputational risks associated with sexual harassment lawsuits from top company members will change how companies structure their boards in terms of diversity and inclusion. Increased diversity and inclusion at the board level can lead to more holistic decision making regarding the governance of the company as well as reducing the potential for workplace misconduct. Companies can also modify their hiring practices for executive members to mitigate the potential for scandal in the future. We will be watching on our Amenity Insights platform to see which companies are making strides in this regard.
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About Amenity
Amenity Analytics is the industry leader in providing insights from unstructured text by using Natural Language Processing (NLP) assisted by Artificial Intelligence (AI) and Machine Learning (ML). Amenity’s NLP system is a sector-agnostic, language-dependent tool for quantitative text analysis that is deployed across the financial services industry and beyond.
This communication does not represent investment advice. Transcript text provided by FACTSET and S&P Global Market Intelligence.
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