AMP Capital’s Boe Pahari steps down as CEO following sexual harassment furore

AMP Capital chairman John Fraser also resigned along with AMP Ltd chairman David Murray as shareholder pressure leads to changes at the top.

Pahari was promoted to CEO 1 July but on 24 August he was demoted to his previous role

Boe Pahari has resigned as chief executive of AMP Capital with immediate effect due to pressure from shareholders over how the firm handled allegations of sexual harassment made against him by a female subordinate in 2017.

Pahari, who took up the role on 1 July, will resume his previous role as global head of infrastructure equity at AMP Capital. AMP Limited chief executive Francesco de Ferrari will assume direct leadership of AMP Capital on an interim basis while the firm undertakes a search for a successor.

AMP chairman David Murray has also resigned from the company’s board and has been replaced by Debra Hazelton with immediate effect. Hazelton joined AMP’s board in June 2019 and has served on AMP Capital’s board since 2018. She was previously the local chief executive for Mizuho Bank in Australia and Commonwealth Bank of Australia in Japan. AMP Capital chairman and AMP Ltd non-executive director John Fraser has also stepped down.

Pahari’s appointment as chief executive of AMP Capital was the subject of intense media scrutiny after the Australian Financial Review revealed the board of AMP Ltd had appointed him despite knowing he had been financially penalised in 2018, following the settlement of a sexual harassment claim brought against him. The claim was filed by Julia Szlakowski, who oversaw North American distribution for AMP Capital’s infrastructure debt and equity strategies at the time of the alleged incidents. Pahari was global head and managing partner, infrastructure equity, north-west region at the time.

In a statement today, AMP said that it had “always treated the complaint against Boe Pahari seriously. It remains AMP’s view that it was dealt with appropriately in 2017 and Mr Pahari was penalised accordingly,” the firm said.

Pahari also issued a statement, saying: “I deeply regret the events in 2017, and I apologise to Julia Szlakowski. I also acknowledge the significant impact the matter has had on our clients, our people and AMP’s shareholders. I have decided to stand down as AMP Capital CEO in the interests of all parties, and to minimise disruption to the business. I am committed to doing everything I can to see this business and our people reach full potential. The best way I can make amends is to do the job I have been given to the best of my ability.”

In a new statement, Szlakowski said: “It gives me some comfort to see that AMP has today acknowledged the seriousness of my complaint and is moving to try and address the culture of the company. That work however still has a long way to go, and that’s why I’m continuing to call for AMP to release the full text of my complaint, the findings document and all other documents relating to the report’s commission.”

Allegations against Pahari

Szlakowski lodged a seven-page complaint against Pahari with AMP in June 2017 alleging a series of incidents that her Australian legal representatives Maurice Blackburn described last week as “serious, persistent and wide-ranging”.

Szlakowski was not named in initial media reports but decided to go public over AMP’s response to questions about Pahari’s appointment after the existence of her complaint came to light.

AMP commissioned an external investigation led by British QC Andrew Jones, which identified “lower level breaches” of its code of conduct. In addition to a A$500,000 ($358,000; €304,000) financial penalty, Pahari also received “counselling for his conduct”, the firm said in a statement.

AMP released for the first time the conclusion to Jones’ investigation into Pahari’s conduct, dated 19 June 2017, which stated: “For these reasons I find that there was poor judgement exercised by [Boe Pahari] during this evening and one moderate and two minor incidents which overall added up to a relatively modest breach of the AMP Workplace Behaviour and Equal Opportunity Policy.

“However this involved a senior manager who ought to have been observing a high standard of equality and diversity practice and who ought to have had a much better understanding of how his actions might be perceived by and may affect a junior colleague.”

AMP said it subsequently applied a range of actions to Pahari including both financial and non-financial penalties, reaching a financial settlement with Szlakowski when she left AMP Capital in March 2018.

“The Board reiterates that Mr Pahari’s comments and behaviour in this matter were unacceptable and apologised to Ms Szlakowski for the distress caused at the time,” AMP said.

Szlakowski said in her statement earlier this month that she had “never received an apology from Mr Pahari”, although Murray and De Ferrari had said in an internal memo seen by Infrastructure Investor that he had “apologised and shown contrition for the comments made and his behaviour”.

According to a statement issued by the law firm last week, the investigation into Szlakowski’s complaint focused on nine allegations, all of which were substantiated and accepted by AMP. They included Pahari asking Szlakowski personal questions about her dating history, giving her his personal credit card and asking her to communicate via WhatsApp while at a private club in the early hours of the morning.

Report and findings

Last week AMP said that it was willing to release the QC’s investigation report and its findings, with Szlakowski’s consent. Pahari had given his consent to the publication of the report.

Maurice Blackburn principal Josh Bornstein, acting for Szlakowski, said that his client had no concerns over her seven-page complaint being released alongside the short document she was given by AMP at that time, outlining the findings of the investigation. However, she had never been provided with a copy of the full investigation report and so could not provide “meaningful consent” to AMP’s request without seeing this first.

Maurice Blackburn reiterated a call today for AMP to release the full text of Szlakowski’s complaint as well as to provide its client with all documents relating to the investigation process including its terms of reference.

The law firm remains in discussions with AMP about the potential release of the full report and the complaint. Infrastructure Investor understands that Pahari’s resignation does not rule out the report being released and that AMP’s offer to make it public still stands.

An ‘untenable’ position

While the AMP Ltd board had previously stuck by its appointment of Pahari, saying previously that a wide range of criteria had been used to assess his appointment including “extensive consideration” of the 2017 complaint, pressure from large shareholders in the ASX-listed firm has grown.

Simon Mawhinney, portfolio manager at Allan Gray, a major shareholder on the AMP Ltd register, said of Pahari last week: “As an investor, given the continued lack of transparency from AMP, it is difficult to know whether AMP’s cultural and moral compass is on a sustainable footing.

“The board appears to be tone deaf to the cultural issues at play. It is very hard for us to envisage an outcome, assuming the allegations are true, where a person like this could earn the trust, confidence and respect of colleagues, clients and shareholders. Without this, leadership is significantly weakened and, in this case, probably untenable.”

Infrastructure Investor understands that multiple LPs in AMP Capital funds have reached out to the firm to discuss the above issues, and at least one investment consultant has placed the firm and its funds on watch over how the situation has been handled.

Australian Council of Superannuation Investors chief executive Louise Davidson said last week: “The further revelations about the sexual harassment case involving Pahari are very concerning. Investors expect AMP to provide a greater level of transparency about the case. There appear to be significant cultural issues that need to be addressed. It is hard to see how Pahari’s position as CEO remains tenable in light of these more detailed revelations about the case.”

AMP Ltd declined to comment further beyond its statement.