Corporate Law - Case Study on AMP's Overcharging Scandal

Running Head: CORPORATE LAW
Corporate Law
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CORPORATE LAW 2
AMP, the Australian leading wealth management firm is currently faced with a full-
blown crisis. Its board chairperson, Catherine Brenner had resigned after it emerged that the
company routinely overcharged its customers and misled regulators. The company manages
more than $150 billion in terms of assets. After the scandal was exposed, the share price
plummeted by approximately 25% in a matter of weeks to reach its lowest level in five years.
The company lost approximately $3 billion in market value (Maley, 2018).
Revelations at the Hayne royal commission reveal that the company charged its
customers without providing them with any service and further misled the corporate regulator
for 20 times. The ring fencing process involved orphaned clients of retired planners were
placed in a single pool where they were charged fees for up to 90 days for services they did
not actually receive (Maley, 2018).
The commission also revealed the role played by Catherine Brenner in what was
supposedly an independent investigation by AMP’s legal advisers seeking to uncover
information regarding the fees-for-no-service scandal. She ensured that the final report
presented to the ASIC exonerated Meller by inserting a paragraph that explicitly stated that
the chief executive, Meller, was unaware of the practices or their illegality (Maley, 2018).
The director’s statutory duties as provided by the Corporations Act require the
director to act in good faith, have a proper purpose, and avoid conflicts of interests. Other
duties covered by the act include dishonest or reckless conduct, management standards
involving care and diligence, and disclosure obligations. The actions of a director should be
in good faith and in the best interest of the company and done for a proper and legal purpose.
The investigations reveal that the board of directors was aware of what was happening
in the scandal revealing that the culture placed the interests of the shareholders before those
of the customers. The actions to mislead the ASIC were deliberate. The Royal Commission