Proxy adviser calls for Australia’s ASX shareholders to reject pay report

Influential proxy adviser Institutional Shareholder Services (ISS) has advised Australian Securities Exchange (ASX) investors to vote against the company's remuneration report, citing executive bonuses as misaligned with recent performance. ISS argues that the short-term variable remuneration (STVR) does not accurately reflect the company's financial results and shareholder returns. The STVR outcome is the primary concern, according to ISS.

The ASX is set to hold its annual meeting on October 22, marking the first under new CEO Anthony Attia. Despite the ASX's share price declining 23.6% and one-year total shareholder returns underperforming peers and the index, ISS maintains that the board did not use its discretion to reduce the bonus pool, which remains at 100% of the target.

Lofthouse received her full target bonus despite declines in profit and dividends and negative TSR, primarily driven by a profit measure that failed to account for costs such as A$51.5 million in regulatory fines and expenses related to a project to replace the clearing system. Half of the bonuses also relied on non-financial performance measures, including employee engagement.

Under Australia's two strikes rule, companies must submit a remuneration report for shareholder vote annually. A vote against the report exceeding 25% constitutes a strike. Two consecutive strikes result in another shareholder vote on whether to remove the entire board. The ASX received a first strike in 2024 over similar concerns but avoided a potential board spill when shareholders endorsed the pay plan last year.

CGI Glass Lewis, another proxy advisory firm, recommended endorsing the pay report at the upcoming meeting, acknowledging operational progress but weak shareholder returns.