17 Oct Magellan activist to vote against John Eales as director

Source:  Financial Review

By: James Thomson

Activist investor Sandon Capital says it will vote against the re-election of Magellan Financial Group director and former rugby union legend John Eales at the fund manager’s annual general meeting, citing the group’s pay policies.

Sandon, which launched an activist campaign against Magellan in June, has written to new chairman Andrew Formica informing him of Sandon’s intention to vote against Magellan’s remuneration report and Mr Eales’ re-election.

“As chair of the remuneration committee, we believe he has a greater responsibility than other directors for the oversight of remuneration policies at Magellan and therefore must be held accountable for what we consider failings in Magellan’s approach to remuneration,” Sandon managing director Gabriel Radzyminski says in the letter.

Sandon is critical of Magellan’s remuneration policies, including the fact the company does not have a long-term incentive plan (LTIP) and has not moved to put one in place since the appointment of chief executive David George in May 2022.

“More than a year since the appointment of the CEO, we expected that some form of LTIP would have been devised and presented to shareholders for approval,” Mr Radzyminski said.

“Shareholders will continue to navigate in the dark, without any clear insight into the criteria against which the board thinks corporate performance should be judged. The vague platitudes of returning to funds under management of $100 billion does not constitute a strategy.”

Sandon also labelled Mr George’s base salary of $1.8 million “excessive” and said it is particularly “staggering” when compared to what CEOs of other listed investment companies are paid.

“The level of fixed remuneration paid to Magellan’s CEO is far higher than any of its peers in both absolute and relative terms. It represents nearly 1 per cent of the enterprise value of the company and is nearly 2 per cent of its revised cost guidance of $95 million to $100 million.”

Shares dive

Sources close to Magellan said the group’s sliding share price and unique challenges made it more difficult for it to implement incentive plans to attract and retain talent, and Mr George’s higher base pay reflects this environment. The company did say in its 2023 financial year presentation it would develop a new “accountability and alignment model”.

Magellan sources said the company sees Mr Eales as a key driver of cultural change at Magellan over a tough period for the group.

Magellan will hold its AGM in Sydney on November 8. The company’s shares have plunged 28 per cent since the start of the month following concerns about continued outflows at the fund manager. Funds under management sat at $35 billion at the end of September.

Sandon has previously urged Magellan to consider returning capital to shareholders to help rebuild market faith in the group.

Magellan has been facing activist pressure on several fronts. On Monday, it announced it intends to convert its $2.65 billion closed end fund, the Magellan Global Fund, into an open-ended exchange traded fund following pressure from activist investor Nick Bolton.