Attention Now on NYSE Board After CEO Pick
Sep. 22, 2003
NEW YORK (AP) _ With an interim leader picked at the New York Stock Exchange, attention is turning to the board that approved ousted chairman Dick Grasso's lavish compensation in the first place.
Interim chairman John S. Reed knows well the subtle influences and connections that can exist among directors; in 2000, those forces cost him the job he shared with Sandy Weill at the head of Citigroup Inc. following the bank's merger with Travelers Group.
Respected as a senior statesman in the financial services industry and credited with revamping Citi's commercial bank, observers consider Reed a strong choice to reshape the NYSE's board and reform its governance.
``John Reed lost the battle to Sandy Weill, so he's not going to let these people step on him or push him aside,'' said Muriel Siebert, a seatholder since 1968 who runs a discount brokerage. ``He's not going to be railroaded.''
The irony of the choice has not been lost on many: It was Grasso's effort to bring Weill onto the board in a public interest capacity earlier this year that prompted regulators to look more closely at the exchange. ``I think, in a way, whoever thought of it had a lovely little dirty mind,'' Siebert said.
Named to the post Sunday, Reed is expected to formally start work Sept. 30, after he returns from a vacation in France. NYSE officials said Monday that he has been in touch by phone with co-chief operating officers Robert Britz and Catherine Kinney about the day-to-day operations of the exchange, and will be kept up to speed this week ahead of his arrival.
In the first departures since Grasso resigned, the NYSE said two executive vice presidents would retire in the coming days. Salvatore Pallante, who was in charge of member-firm regulation, and Frank Ashen, who was responsible for the human resources department, will leave at the end of the month. Pallante, 57, had planned to retire for some time. Ashen, 59, was not immediately available for comment.
The NYSE board's special committee on governance is to issue a report on Oct. 2 recommending reforms, including how top executives should be compensated, how the board should be structured and how the exchange itself should be owned. A big question is whether the reshaped NYSE will retain its regulatory function; many have suggested it should be independent from the business.
Critics, including the managers of major public pension plans and other consumer advocates, have also called for the board to be dramatically realigned to better serve investor interests. Reed himself has said he prefers working with a smaller board, perhaps with 12 to 14 directors.
At Citi, Reed was considered an intellectual ``out-of-the-box thinker'' with a prescient, though sometimes expensive, focus on technology, said Kathy Waldron, dean of Long Island University's School of Business, who worked with Citi for 15 years.
``He understands interconnections between people, and how the composition and membership of a board is critical for guiding an institution through crisis,'' said Waldron, who was vice president of the global private bank when she stepped left in 1998.
At his own suggestion, Reed, 64, will be paid a dollar for his work with the NYSE, no matter how long it takes. He's also stepped down from his board position at Altria Group, Inc., the world's largest tobacco firm.
Grasso lost his job because of outrage over $187.5 million pay package. Reed is also familiar with generous pay, having walked away from his 35-year banking career with stock and options worth an estimated $384 million and a retirement plan that pays him $2.9 million yearly, according to documents filed in 2001 with the Securities and Exchange Commission.
Critics said that Grasso, as chief of a not-for-profit organization that regulates is members, shouldn't have paid the same as top corporate executives, like Reed was.
The SEC is closely monitoring developments at the NYSE and pushing for tightened governance. It has been investigating allegedly illegal practices on the exchange's trading floor by several big firms.
The SEC joined the NYSE regulators' probe of the trading practices last spring, and it continues to be a key priority for the federal agency, a government official said Monday, speaking on condition of anonymity.
The investigation into trading by the so-called specialists on the exchange floor, who match buyers and sellers of stock, initially focused on whether they had made trades for their own firms' accounts at times when they should not have _ to the detriment of public investors. SEC officials reportedly asked the NYSE to expand the inquiry last summer into whether specialists mishandled customer orders by ``front-running,'' or trading ahead of them.
AP Business Writer Marcy Gordon contributed to this report.