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The annual report showed Lofthouse forgoing her short-term bonus, which dropped her remuneration to $2.4 million despite the board lauding their CEO’s strategic performance.
“Ms Lofthouse demonstrated leadership and full accountability for the risk management issues experienced this year and offered to forgo her [short-term bonus],” the annual report said.
She received an $850,000 bonus the previous year.
And there is no hiding from the ongoing costs of the ASX’s self-inflicted wounds, which continue to rise. Last week, ASX flagged an extra $25 million to $35 million in costs this year because of an inquiry by ASIC – separate from its legal action – into ASX’s governance and operational failures.
Shares tumbled last week following that announcement, as well as the news that steps are being taken to finally introduce competition in the form of US giant Cboe. As UBS pointed out after the result on Thursday, ASX faces uncertainty over recurring cost increases following the ASIC inquiry, as well as expenditure and execution risks around the replacement of its core trading platform.
The big focus is obviously the ongoing fallout from ASX Ltd’s attempt to jump from the Stone Age to bleeding edge with an upgrade of the decades-old clearing and settlement system (CHESS) that underpins sharemarket trades.
ASIC chairman Joe Longo has been scathing of ASX’s many failures and took the unprecedented step of suing the market operator for allegedly breaching its own disclosure rules.Credit: Steven Siewert
The project to move this trading to a blockchain-based technology began in 2016. By the time it was abandoned in November 2022, it was already two years past its delivery date. The massive delays and cost overruns triggered a $250 million writedown of ASX’s investment in the project.
It was a spectacular and very public failure, with ASX now aiming for a more basic replacement for the CHESS system, which is due to be delivered in 2029.
“This is an extraordinary example of hubris on the part of ASX,” Longo told a parliamentary joint committee after the project collapsed in 2022.
The fiasco should have cost ASX chief Dominic Stevens his job, but he resigned when the company was still assuring investors all was well.
His chairman, Damian Roche, was allowed to retire last year amid the continuing fallout.
Lofthouse has been left to face the music, an exodus of senior executives and fresh problems from the cascading impact of the failed upgrade.
Before Christmas, this included the unprecedented failure of its ability to settle trades on CHESS, which it has been forced to stick with.
Last week came the most embarrassing failure: this time, the nation’s stock exchange mixed up two company names in an error that briefly wiped $400 million off the market value of our third-biggest telco, TPG Telecom.
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In short, an ASX employee failed to tell the difference between a $10 billion telco traded on the ASX, and a US private equity giant. It was the latter that launched a $651 million takeover of ASX-listed software group Infomedia.
Embarrassment aside, it was not the most alarming ASX issue this year.
In March, Australian building products giant James Hardie announced a transformational $14 billion deal with US group Azek.
Shares plunged as investors woke up to the full horror of how the deal would transform James Hardie in ways they had not imagined.
The first shock was that they were denied any say on a deal they clearly loathed as overpriced.
Lofthouse has been left to face the music, an exodus of senior executives, and fresh problems from the cascading impact of the failed upgrade.
The other surprise was how its enterprise was aided and abetted by ASX, which gave James Hardie a waiver from having to get its investors to approve the issue of 35 per cent of its listed shares to Azek investors, and allowed James Hardie management to hide this from its investors for weeks.
ASX insiders argued that listed companies argued for this higher hurdle for investor approval of listed company mergers, saying any regulatory benefits in terms of investor protection were outweighed by the potential costs from imposing a shareholder approval requirement.
Ah yes, the cost. The James Hardie deal cost shareholders $6 billion within weeks of its announcement as investors fled the stock in horror.
It made one thing clear to Australian investors: ASX sees its real customers as the executives at the companies on its bourse, who decide whether or not they should remain listed on the ASX – not investors.
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If Australians had any choice when it comes to buying locally listed shares, the $12 billion ASX Ltd would surely be out of business. But we don’t, and it will be a long time before we do.
Last week, wheels were set in motion that should give the green light to Cboe to conduct new listings in Australia. Eventually, it should lead to ASX facing more competition in the market for initial public offerings, but that is expected to take years.
The only salvation for budding investors is that there has never been a better time to invest overseas and avoid the local monopoly altogether.
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