Macquarie ‘Millionaires Factory’ Put at Risk by Investor Revolt

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Harvey, a former tech and media investment banker who later headed the firm’s Asia operations, was tired of the daily rigor, according to people who have spoken to him. That comes as Wikramanayake is likely to extend her tenure amid the present uncertainty, they said. 

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Harvey wasn’t available for comment.  

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At last week’s annual meeting, Chairman Glenn Stevens batted away assertions his team had done too little to clip executive pay when things went wrong in recent years. 

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“We found a problem, we owned the problem, and we’ve moved to address it,” said Stevens, a former central bank governor. He added that more may be done in coming months to curb bonuses after a lawsuit filed by the markets regulator. 

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While Wikramanayake’s A$24 million pay package for the year ended March 31 was trimmed, her other nine key managers were largely unaffected. They drew more than A$100 million in combined remuneration, which is a mix of fixed pay and performance-linked shares and bonuses.

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Macquarie’s board and leadership have “turned a blind eye for a long time because they were making so much money and nobody was going to do anything to them,” said Andy Schmulow, an associate professor at the University of Wollongong who specializes in conduct risk in financial services.

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The suit filed in May alleged the firm misreported millions of short sales for more than 14 years, a move that carries a penalty as high as A$783 million. Joe Longo, chairman of the Australian Securities & Investments Commission, has accused the firm of complacency and hubris in its compliance culture. Macquarie said it’s working on an improvement plan.  

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There are other headaches outside Australia. In Germany, the firm is ensnared in an industry-wide investigation related to dividend trading. About 100 current and former staff have been designated as suspects by authorities, and Macquarie is facing a number of civil claims. 

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In the US, Macquarie paid a fine of about $80 million in September to settle charges including overvaluing collateralized mortgage obligations. In the UK, its British unit was penalized £13 million ($17 million) after a junior trader on the London metals desk booked fictitious trades.    

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Overall, more than 50 people were fired in the last fiscal year for improper conduct or policy breaches, among the roughly 140 cases reviewed, according to a bank presentation. Some pay has been withheld from executives due to lapses in the US, according to Stevens. Meanwhile, regulatory compliance spending at the Sydney-based firm has more than doubled in the past five years to about A$1.2 billion, a separate presentation showed, even as it grapples with tougher capital requirements.  

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The shareholder dissent “reflects ongoing concerns about the alignment between pay and performance, as well as expectations for transparency and accountability,” according to the Australian Shareholders’ Association CEO Rachel Waterhouse. 

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One Macquarie institutional investor who declined to be identified said the regulator may be much tougher on the bank in the future when it comes to liquidity and capital requirements. An executive at another big shareholder was supportive of the firm’s pay package, reasoning that compensation needs to be competitive with big Wall Street firms.

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Macquarie’s woes add to a litany of regulatory probes at Australian firms, many of which have struggled to shed their cowboy culture. At ANZ Group Holdings Ltd., a string of bad trader behavior including alcohol and substance abuse prompted the regulator to impose punitive capital requirements and eventually led to the departure of CEO Shayne Elliott. Even the stock exchange operator, ASX Ltd., is under review for “repeated and serious” failures in governance and risk management.