Public

ASX Ltd (ASX) 2016 AGM Voting Intentions

Company/ASX Code : ASX Limited (ASX)
Registry : Link Market Services
Poll/Show of Hands : Poll on all items
Webcast : Yes
Venue :
10am ASX Auditorium, Exchange Square
18 Bridge Street
Sydney, New South Wales
Monitor : Ms Carol Limmer
AGM Details / NoM : Wednesday 28th September, 2016

Momentum has been maintained pending appointment of new CEO

This company is monitored by Carol Limmer, assisted by Joyce Yong. The company monitors had a pre-AGM meeting with Chairman Rick Holliday Smith and General Counsel & Company Secretary Amanda Harkness.

 

ASA Position
Not Applicable
Item 1: Consideration of accounts and reports

Financial performance

ASX’s financial performance was very sound. Operating Revenue, NPAT, dividends (fully franked) and EPS all increased from previous year – 7.1%, 6.5%, 5.7% and 7.1% respectively. The 90% payout ratio was maintained. Share price growth was good – greater than S&P ASX All Ords. The share price over the past 5 years has increased from $29.36 to $45.76.

Key financial ratios for past 5 years are clearly set out on page 69 on Annual Report.

Significant technology transformation is well underway with investment in capital expenditure of $50.2 million in last 12 months. Technology platforms are critical to their business.

Technology, current market positioning, size of Australian market and need for companies to meet fairly significant capital requirements create barriers to entry. The current market competitor does not make serious inroads to their business.

ASX make (and clearly disclose) $100,000 payments to each of the two major political parties for business forums/networks – they see this as a way of keeping a foot in the door on matters generally. Their reasoning is set out in the Annual Report (page 11).

There is a strong focus on diversity issues and targets.

The financials and other information are well set out in the Annual Report and are comprehensive in content but contained to 75 pages only. It is a user friendly document with good use of tables etc.

Key Board or senior management changes

ASX has an active Board renewal program and reasonable proportions of gender representation.

(Previous) CEO, Elmer Funke Kupper, resigned in March 2016 due to issues at previous company, Tabcorp, being investigated. New CEO, Dominic Stevens, commenced in the role on 1 August 2016. Mr Stevens was previously an ASX independent non-executive director (NED) and member of Audit & Risk Committee as well as various ASX clearing and settlement boards. He has very good financial services background and experience for the role and, of course, knows the company well already.

ASX was well managed during the period from Mr Funke Kuppe’s departure until Mr Stevens taking up in the role. The arrangements were covered in a meeting held by ASA with ASX in March 2016.  In the interim period, Peter Hiom (Deputy CEO) and Amanda Harkness (Group General Counsel) managed the business under the oversight of Chairman. Whilst Chairman took a more active role during the period he did not receive any extra remuneration. The Board agreed special interim arrangements including Board Chairman not being regarded as independent, the framework for arrangements was documented in amendments to ASX’s charter and Chairman attended Board Committee meetings as an observer only. A special Board sub-committee also provided guidance to the Chairman and oversaw operation of interim arrangements.

The Board Chairman also chairs Cochlear and just recently took up chairmanship of QBiotics (which is an unlisted anti-cancer drug company). He was able to devote extra time during the interim arrangements for the CEO vacancy.

ASA focus issues

ASX has a policy covering directors’ need to have ‘skin in the game’ and all hold reasonable levels of equity in the company. There is no similar policy for executive KMP.

Summary


ASA Position
Not Applicable
Item 2: Consideration of accounts and report – National Guarantee Fund of Securities Exchanges Guarantee Corporation

No issues identified.


ASA Position
For
Item 3: Re-election of Dr Ken Henry as a Director

Appointed a non-executive director in 2013. He is also member of Audit & Risk Committee. Well qualified for the role with extensive experience as economist in Australia and overseas and has worked as policy adviser to successive Australian governments. Served as Secretary to the Australian Treasury for 10 years. Dr Henry is also Chairman of NAB and holds 5,000 shares in ASX.


ASA Position
For
Item 4: Election of Ms Melinda Conrad as a Director

Appointed a non-executive director on 1 August 2016.  She is an experienced NED – currently a director of OFX Ltd and The Reject Shop and previously served on the Boards of David Jones and APN News & Media. Ms Conrad is an active member of AICD. Ms Conrad has been a strategy and marketing adviser and been senior company executive. She brings skills and insights as an executive and director from range of industries, including retail sector, financial services and healthcare. Ms Conrad recently purchased 2,000 shares in ASX.


ASA Position
For
Item 5: Adoption of Remuneration Report

ASA voted for Remuneration Report last year as well as giving ASX received a bouquet for their positive remuneration changes. 60% of STI is deferred – 30% for 2 years and 30% for 4 years.

Across the group, fixed remuneration increased on average 2% from 1 July 2016. STIs for executives ranged from 90-110% and on average were at target. The target and maximum STI opportunity for executives was increased to reflect the lower upfront cash payment and longer vesting period under the STI deferral arrangements. As a result, executives are receiving higher STI payments, a portion of which is deferred for a longer period. When compared with the prior executive remuneration structure, there is also a greater focus on the STI. ASA prefers a greater focus on the LTI.

The Board’s assessment of performance against STI objectives is set out in the Annual Report (page 19). LTI arrangements are covered under Item 6.

There were special payments of $250,000 to Mr Hiom and Ms Harkness in recognition of additional responsibilities during period of CEO vacancy.

Payments to former CEO were satisfactorily explained at meeting held with ASX in March.

The level of Board Fees is considered reasonable.

The Remuneration Report is relatively easy to understand and also included table of actual remuneration for the year. 


ASA Position
For
Item 6: Approval of LTI grant to CEO/Managing Director, Dominic Stevens.

Mr Stevens took up the CEO/MD role on 1 August 2016. His fixed remuneration is $2 million, has target STI of $2m with maximum opportunity of 150% of target. 60% of STI will be deferred in equity with 30% being for 2 years and 30% for 4 years.

Mr Stevens’ fixed remuneration is $250,000 higher than his predecessor, however we acknowledge that Mr Funke Kuppe’s fixed remuneration had not been increased for a number of years prior to his departure.

The proposed LTI grant is valued at $1 million with allocation being calculated on actual market value. There is a four year performance period with two performance hurdles – TSR (50%) and EPS (50%). The TSR requirement has not always been met with previous CEOs. For the past year, the (then 70%) EPS hurdle for 2014 grant has not been met. There is no retesting and clawback provisions apply.

ASA queried whether they would introduce a minimum equity holding requirement for the CEO. Whilst new to the role Mr Stevens already holds 11,500 shares (worth over $500,000) which he purchased as a NED. ASX believes that with grant of performance shares and STI deferral, he will soon have a significant equity holding.



The individual (or their associate) involved in the preparation of this voting intention has a shareholding in this company. 


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