Saying sorry may not be enough for AMP

By GILES PARKINSON Sydney View

Even if Australian Prime Minister John Howard cannot bring himself to say sorry, at least the chairman-elect of AMP knew how to find the words for the company's two million shareholders.

AMP last week held its first annual meeting since the true extent of its disastrous takeover of GIO and the bitter infighting that has destabilised its board came to light.

At its previous annual meeting, shareholders were charmed by the humour of then chairman Ian Burgess and the brash confidence of chief executive George Trumbull.

This time, stand-in chair Stan Wallis and Mr Trumbull's successor, Paul Batchelor, were in a more earnest mood, pointing to positive earnings results, good fundamentals and cautious plans to expand their business. (They promise to do due diligence next time.)

That was what the market wanted to hear, but it was encouraging to see many shareholders, even an institutional investor or two, using the forum for its rightful purpose - giving the directors a hard time before retiring for tea and biscuits.

Mr Batchelor is now the man in the spotlight. He clearly has his enemies. He escaped relatively untouched by the GIO debacle, even though as chief financial officer he was involved in, and responsible for, the takeover as much as anyone else.

In the week before the annual meeting, the anti-Batchelor camp paraded all his perceived misdemeanours to an eager media. It was riveting stuff, not so much because it was an attack on one of the most senior executives in corporate Australia, but because it revealed so much about the naked ambition, the jealousies, the rivalries and the hunger for revenge that existed in the country's most eminent boardroom.

Still, as much as Mr Wallis was keen to ask forgiveness for the events of the past 12 months, it is still clear there is a huge gulf between the way Australian boardrooms and the investing public view the world.

It would have been reasonable to expect that after the kerfuffle that followed the $A13 million ($16.4 million) payout to Mr Trumbull, AMP would have been careful about how it packaged Mr Batchelor's remuneration.

Having admitted that it had knocked back a $A21-a-share offer from the National Australia Bank, it was surprising to see that the hurdle for Mr Batchelor's 1.3 million options should be a mere $A16.

The point was picked up by Peter Morgan, Perpetual Trustees senior investment manager, who became the first professional fund manager in living memory to take on a board in a public forum.

Mr Wallis just did not get it. He ushered the motion through, declared his admiration for Mr Batchelor's abilities and said he thought AMP's share price was worth closer to $A30 than $A20. The market still does not believe him, even if a burst of enthusiasm on Friday pushed the shares back above $A15. Mr Batchelor's best bet of getting a bigger payout than his predecessor is attracting a good takeover offer. The shareholders might be thinking that is their best bet too.

Last week, New Zealand did Australia its biggest favour since it decided not to declare war over the underarm bowling incident more than 20 years ago.

There was widespread speculation that the Reserve Bank of Australia would jump in quickly should US Fed chairman Alan Greenspan go for a 50-point increase in official interest rates. Mr Greenspan went the whole hog, but before the Reserve Bank of Australia needed to act, its transtasman cousin stepped into the breach with dramatic consequences.

The NZ Reserve Bank mimicked the 50-point rise in the hope it could contain damage to its dollar. Its actions probably exacerbated the fall, by causing a direct link to overseas interest rate movements and the defence of a currency. .

Whether the Reserve Bank of Australia maintains its cool is another matter. There is no domestic economic rationale for another lift in interest rates. If that means Australia (and NZ) have to live with a lower dollar, so be it. The Americans can enjoy their incredibly strong currency, but it will not last forever.

* Giles Parkinson is deputy editor of the Australian Financial Review.