Key facts
- ISS urged ASX investors to vote against the company's remuneration report.
- ISS cited executive bonuses as "misaligned" with recent performance.
- The ASX's share price closed the year down 23.6%, according to ISS.
- One-year total shareholder returns underperformed peers and the index.
- The board did not use discretion to reduce the bonus pool, which remained at 100% of target.
- CGI Glass Lewis recommended shareholders endorse the pay report.
Influential proxy adviser Institutional Shareholder Services (ISS) has urged Australian Securities Exchange (ASX) investors to vote against the company's remuneration report, stating that executive bonuses were "misaligned" with its recent performance. ISS noted that the ASX's short-term variable remuneration failed to reflect its financial results and shareholder returns.
The ASX has faced increasing scrutiny from investors and regulators regarding its governance and ability to deliver market infrastructure, following a series of platform outages and other missteps. ISS highlighted that the ASX's share price closed the year down 23.6%, and its one-year total shareholder returns underperformed peers and the broader index. Despite these declines, the board did not exercise discretion to reduce the bonus pool, which remained at 100% of target. Former CEO Helen Lofthouse received her full target bonus despite declines in profit and dividends, and negative total shareholder return.
Bonuses were largely based on a profit measure that did not account for costs borne by shareholders, including A$51.5 million in losses from regulatory fines and expenses related to a new clearing system replacement project. Additionally, half of the bonuses were tied to non-financial performance measures, some of which ISS described as akin to executives' "day jobs."
Under Australia's "two strikes" rule, companies must present their remuneration report for a shareholder vote annually. A "no" vote exceeding 25% results in a strike. If companies receive two consecutive "no" votes above this threshold, shareholders can then vote on removing the company's entire board. The ASX received its first strike in 2024 for similar concerns about executive bonuses but avoided a potential board spill after shareholders endorsed its pay plans last year. In contrast, another proxy advisory firm, CGI Glass Lewis, recommended shareholders endorse the pay report, noting operational progress such as the delivery of the first phase of a new clearing system.