John McFarlane, who officially becomes chairman next month, must decide whether to retain chief executive Andrew Moss
John McFarlane, the incoming chairman of Aviva, is expected to embark on a series of meetings with disgruntled investors as he leads the attempts to restore relations between the insurer and the City after the humiliating defeat of its remuneration report last week.
McFarlane, the former boss of Australia and New Zealand Banking Group (ANZ), must decide whether or not to retain Aviva’s embattled chief executive Andrew Moss. McFarlane officially becomes chairman next month but is expected to move quickly to begin trying to repair the insurer’s reputation.
Moss was on the backfoot at the AGM on Thursday, where 60% of investors failed to back the remuneration report. He admitted he was “as frustrated about [the share price] as anybody”. It has slumped 60% since he became chief executive in July 2007.
Moss and the outgoing chairman, Lord Sharman, were accused of destroying shareholder value and urged to step down at the annual meeting.
A City analyst said: “There is concern over leadership. If that was resolved, that might help the situation.”
The vote against the pay report indicates that investors are running out of patience with the management team after years of indecision and confusing strategies.
Moss will have to explain the insurer’s strategy to shareholders at an investor day on 24 May, in particular the rationale behind its move to strip out the regional layer of its management structure.
While the slimmer organisation was welcomed by the City, eyebrows were raised over Aviva’s decision to part company with its highly respected European chief, Igal Mayer. He lost out to Trevor Matthews, who joined from Friends Life last year to become Aviva’s UK head and was elevated to executive director of developed markets last month.
The restructuring reflects the company’s decision to focus on a core dozen countries, which was a major shift in strategy in November 2010. Two years ago, the insurer operated in 30 countries; now it is in 21.
In another U-turn, Aviva is believed to be considering a sale of its US operation.
Unlike other UK insurers, Aviva is heavily exposed to the European debt crisis. “The big issue is Italian sovereign debt and there is not a lot they can do about that,” said Barrie Cornes, insurance analyst at Panmure Gordon. He suggested boosting the capital position, and a sale of the US business. would be one way of achieving that. : “A change of chairman brings the benefit of a fresh pair of eyes looking at the business,” he said.
McFarlane was a high-profile figure in Australian banking circles in the runup to the banking crisis and is best known in the City for his tenure on the board of Royal Bank of Scotland.
Scottish-born, he joined the board on 1 October 2008 – just a fortnight before Fred “the Shred” Goodwin was ousted as chief executive and the bank bailed out – and was considered a potential candidate to chair the troubled operation at one point.
At Aviva’s shareholder meeting, McFarlane was asked about his role at RBS. “Hopefully I was helpful in the recovery of RBS and I’m certainly not guilty for its demise,” he said. “I was slightly instrumental in the change of the chief executive.”
While McFarlane ran ANZ for a decade, until September 2007, he had a varied career inside and outside of banking. He has also been a group executive director of Standard Chartered and was head of Citicorp/Citibank in the UK and Ireland.
His replacement at ANZ was 29-year-old HSBC veteran Michael Smith, who was lured to Australia’s third-biggest bank with a £3.8m signing-on fee, sparking some criticism that McFarlane had failed to groom an internal successor. Having quit ANZ before the banking crisis took hold, McFarlane left with his reputation largely intact.