Calpers says NYSE reforms 'doomed'
By Vincent Boland in New York
Published: November 6 2003 23:39 | Last Updated: November 6 2003 23:39
The largest US public pension fund launched a stinging attack on the New York Stock Exchange on Thursday, saying its corporate governance reforms were "doomed to failure" without a complete separation of its regulatory function and more board seats for investors.
The California Public Employees Retirement Scheme, which invests much of its $147bn of assets in NYSE-listed stocks, said it had asked the Securities and Exchange Commission to reject the NYSE's proposal to address regulatory and governance weaknesses through the appointment of an eight-member independent board of directors.
Growing opposition to the NYSE's proposal from some big customers could pose an immediate crisis for the new board, which is due to be approved by exchange members on November 18. Calpers wants a third of seats on the board reserved for investors and an end to the exchange's right to regulatemembers.
Sean Harrigan, Calpers' president, said he was "extremely disappointed" by the NYSE's proposal on regulation. The dual board structure to be put in place was "complex, unnecessary and untested in the US" and would not prevent more corporate governance failures, following the outcry over former chairman Richard Grasso's compensation.
"We can't afford another failure, it would be devastating," Mr Harrigan said. He was speaking after a meeting with John Reed, the NYSE's interim chairman. Mr Reed on Wednesday nominated eight people independent of the securities industry to join the new board, which would oversee regulatory and compensation issues.
Mr Harrigan said he would be speaking to other investors, including private asset management firms, in the next few days to form a united front against the continued self-regulatory status of the NYSE. Most investors are not NYSE members and have no formal role in exchange affairs. But some - including Calpers - were instrumental in forcing Mr Grasso's resignation six weeks ago.
William Donaldson, SEC chairman, suggested yesterday that further reforms to the NYSE and other US securities markets would be forthcoming. "Both the exchange and the commission far from done [on reform]," he said, but he characterised Mr Reed's proposal as "important progress".
Securities lawyers said the SEC would probably endorse the NYSE corporate governance changes, monitor them closely and decide whether to go further once it has concluded a review of wider structural issues at the US securities markets. This is expected next spring. |
