GAM shareholders have dealt a heavy blow to the board of directors at the annual meeting, rejecting the proposed management pay.
During a consultative vote on the compensation report, a majority of 54.2% of GAM’s shareholders voted against the proposal, with only 17.6% in favour and 28% abstaining.
In turn, the discharge of the budget has been authorised after the Zurich group increased its compensation to top board members despite a challenging year for the group.
Group CEO Alexander Friedman received CHF 6.14 million during 2016, a salary increase of 23% over the course of one year, a sum that the GAM has proposed to keep unchanged going into the next financial year.
This has been widely criticised, namely by Zug-based asset management firm, ZCapital which claimed GAM was a 'persistent offender’ on compensation.
The revolt comes as the Zurich group has recently suffered jibes from activist shareholder RBR Strategic Value, which put forward board member candidates for election.
However, this bid was rejected during the annual meeting.
RBR had proposed the election of Kasia Robinski, Willian Raynar and RBR founder Rudolf Bohli as members of the board of directors, with Robinski taking on the role of chairman of the board as the firm holds over 4% of company shares.
Reports on Thursday suggested Robinski received the most support with 43% of the votes backing her nomination.
With Robinski however failing to recieve an outright majority, Hugh Scott Barrett won shareholder confidence as GAM’s proposal to appoint him as chairman of the company was approved.
Last month, Scott Barrett urged shareholders to vote against the candidates proposed by the Küsnacht-based hedge fund firm RBR Capital.
The chairman said he will be looking closely at the group’s compensation structures, while a review will be headed by board member Nancy Mistretta, who joined the firm in 2016 from Russell Reynolds Associates.
‘Our CEO, Alexander Friedman, has requested that alongside this review, any variable compensation awarded to him for 2017 should only be in the form of long-term restricted shares and should be capped at no more than his fixed pay,’ Scott-Barrett added.
The new chairman is set to replace Johannes de Gier, who is retiring.
The vote is held on an annual basis and decides the compensation of the board of directors in advance as a maximum aggregate amount for the period until the next AGM.
A rejection of the report means that all management bonuses must be approved at a future shareholders meeting.
The compensation report released by GAM outlined plans to keep the fixed base cash fee for the members of the board of directors, other than the chairman, to remain unchanged.
It continued: ‘The Compensation Committee will recommend a reduction in the fixed base cash fee of the Chairman of the Board of Directors.
‘Additionally, the Compensation Committee will recommend certain changes to the fees payable to members of the Board of Directors serving on its various committees, which will also result in a further reduction in the overall cash compensation of the Board of Directors.’
With this in mind, the compensation committee expected that the aggregate maximum amount of fixed compensation to be paid to the current group management board members in 2017 would not exceed CHF 8 million.
At the 2016 AGM, shareholders approved the amount of CHF 3,000,000 of compensation of the board of directors for the period AGM 2016 to AGM 2017.
This is while they approved CHF 8 million in fixed compensation of the group management board and CHF 15 million in variable compensation for the 2016 financial year.