ASX taps David Clarke as chairman, as investor pressure claims Damian Roche

Investors say the beleaguered ASX board still has work to do to boost its expertise and ensure accountability for a bungled technology upgrade, despite the changeover of chairman.

David Clarke is replacing Damian Roche as ASX chair.

Investors say the beleaguered ASX board still has work to do to boost its expertise and ensure accountability for a bungled technology upgrade, despite chairman Damian Roche bowing to pressure and handing the reins to former banker David Clarke.

As the fallout from the failed CHESS technology replacement project continues, the ASX said Mr Clarke, chair of Charter Hall and the former Investec Bank Australia boss, would join the board immediately. He transitions to chairman following the company’s upcoming annual general meeting on October 28, where investors will vote on the appointment.

Mr Clarke also had a lengthy executive career including stints running BT Financial Group and the failed Allco Financial Group.

Some investors have taken aim at Mr Roche – a former JPMorgan banker who has served as an ASX board director since 2014 and was elected chair in 2021 – given the bungled CHESS technology upgrade led to steep writedowns and regulatory court action against the company.

CHESS is the ASX’s legacy clearing and settlement system, which underpins the efficient ­operation of the exchange.

ASX’s shares fell almost 0.2 per cent to $64.45 on Wednesday, less than a 0.3 per cent decline in the S&P/ASX 200.

The corporate regulator last month launched a landmark legal case against the ASX, alleging a “collective failure” by the board and senior executives in February 2022, when they told investors the CHESS replacement project was progressing well and remained “on track for go-live” in April 2023. The ASX is yet to outline whether it will defend the case.

The action struck the ASX with force given the regulator ­alleged the market operator made “misleading and deceptive” statements to investors about the status of the technology upgrade. The maximum penalty for the ­alleged contravention of the ASIC Act is $555m.

Merlon Capital Partners has previously written to the ASX board to express concerns about governance and accountability, partly stemming from the failed CHESS upgrade. On Wednesday, ASX investor Merlon welcomed efforts at the company to refresh the board, but said it could not rest on its laurels.

“There is still a lot to work through on the technology side and I think the board has to be accountable,” said Hamish Carlisle, a Merlon director. Merlon’s letter to the ASX board said the firm was particularly pleased with the appointment of former Westpac chief information officer David Curran as a non-executive director, given his technology experience, but questioned Mr Roche’s suitability as chair.

“The cultural reset is positive, and I think the relationship with regulators and government is on a much better footing,” Mr Carlisle said.

Australian Shareholders’ Association chief executive Rachel Waterhouse said the appointment of a new ASX chair was “a step in the right direction”, but did not go far enough.

“We have called for pretty much a succession plan and transition including all directors that were involved throughout that period and who had oversight of CHESS,” Ms Waterhouse said.

The ASA is closely assessing whether it believes the ASX board has the right mix of skills, ahead of meeting with the company before the AGM.

Ms Waterhouse is also urging the ASX to be more transparent, improve its communications and to rebuild trust with investors and stakeholders.

The ASX has seen about 50 per cent turnover of its board since Mr Roche started as chair, and when longstanding director Yasmin Allen steps down later this month that figure will rise. Still, former Colgate-Palmolive executive Melinda Conrad has served on the ASX board since 2016 and former KPMG partner Peter Nash since mid-2019.

Former ASX executive Philip Galvin, who is seeking to get elected to the ASX board next month, said the company had not sought out candidates with the “most poignant experience”, covering stock exchanges and notable technology transformations.

“Their selection process has not served the organisation well given its current and future requirements,” he said, following Mr Clarke’s appointment.

A market pundit, who declined to be named, expressed disappointment with Mr Clarke taking over the chairmanship of the ASX given his Allco experience. “He was right there in the death spiral (of Allco),” he said.

Damian Roche with ASX CEO Helen Lofthouse.

He inherited the entirely overleveraged and arcane structure but didn’t cover himself in glory in the end.”

At the time of Mr Roche’s re-election to the ASX board last year, he told shareholders it would be his final term, as he committed to focusing on board renewal and chair transition.

On Wednesday, Mr Roche said the process of refreshing the board had “been key” in moving the ASX to its next strategic phase.

“As with all transformations, there remains much work to do, but I’m confident [chief executive] Helen Lofthouse and her team will continue to drive our strategic outcomes with the guidance of a highly credentialed chair,” Mr Roche said.

“In addition to his deep boardroom experience and extensive executive career in financial services, David brings the right combination of skills and experience to take ASX forward.”

Mr Clarke indicated he expected to reduce his current professional commitments “over time”. As well as chairing Charter Hall, he also helms the boards of AUB, Fisher Funds Management and Resolution Life Australasia. On Wednesday, Mr Clarke said he would retire from the AUB board on October 31, after the company’s AGM.

Mr Clarke said: “It is a privilege to take up the role of chair at an institution that stands at the heart of Australia’s financial markets, and I look forward to working with the board, Helen and the management team to continue building the capability, trust and confidence befitting a world-class exchange. I am honoured to be part of the journey that ensures a successful future for ASX.”

Ahead of the ASX annual meeting, the board was assessing investor views and trying to gauge whether it faced a strike over its remuneration report, or whether shareholders were targeting any directors up for election or re-election. ASX narrowly avoided a vote last year that could have forced a board spill.

Mr Galvin and ex-Nasdaq senior vice-president Bob Caisley are seeking seats on the ASX board at the upcoming AGM, in part due to their frustration over the company’s CHESS replacement efforts.

Former Australian Prudential Regulation Authority chair Wayne Byres, who was appointed to the ASX board in May, will be seeking shareholder approval for his appointment at the AGM.

Late last year, ASX sealed an agreement with Indian conglomerate Tata Consultancy Services to replace its existing cash equities clearing and settlement system, using the TCS BaNCS platform. That followed the shelving of the prior CHESS upgrade that drew on distributed ledger or blockchain technology.