<<<Mr. Reed, who will be paid $1 for his term, told reporters that changes in the corporate governance of the exchange were his top priority and that he hoped to find a successor within this calendar year.>>>
nytimes.com
Stock Exchange Names Ex-Banker Its Interim Chief
By LANDON THOMAS Jr.
nternational Herald Tribune
After days of turmoil on Wall Street following the forced resignation of Richard A. Grasso as head of the New York Stock Exchange, the exchange's directors named a former top executive of Citigroup today as interim chairman and chief executive.
The appointment of John S. Reed, former chairman and co-chief executive officer of Citigroup, came four days after Mr. Grasso was forced to resign amid a furor touched off by the revelation that he was set to receive $139.5 million in deferred pay and retirement benefits. It was a package that Mr. Grasso said had been honestly negotiated but which critics considered extravagant for the head of a regulatory body.
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Mr. Reed, who will be paid $1 for his term, told reporters that changes in the corporate governance of the exchange were his top priority and that he hoped to find a successor within this calendar year.
The announcement leaves many questions unresolved, starting with the identity of Mr. Reed's eventual successor, or perhaps successors: There has been talk of dividing the leadership of the exchange. Some board members have been seriously criticized for approving the agreements that led to the $139.5 million package. And how much transparence will come to the embattled exchange remains to be decided.
Mr. Reed, 64, will find himself at the center of a storm over such governance issues, and over the influence held on its board of representatives of some of the very firms it regulates.
Other potential candidates — Larry W. Sonsini, a California lawyer; Herbert M. Allison Jr., chief executive of a teacher's pension fund; and Robert E. Rubin, former treasury secretary — had politely turned down the post, whose holder will be subjected to extraordinary scrutiny, will work with a divided board and will be expected to push the exchange in new directions with greater accountability.
But Laurence D. Fink, who headed the exchange's search committee, said that Mr. Reed was the first choice of the committee among 12 finalists, and the only one offered the job.
"John's excellent managerial experience, outstanding background in corporate governance, and familiarity with the N.Y.S.E.'s varied constituents make him the ideal choice to chair the board," Mr. Fink said in a statement released by the exchange. "John was at the top of the list."
H. Carl McCall, chairman of the exchange's governance committee, and the lead director who presided over today's board meeting, said Mr. Reed was "committed to very thorough reforms" of corporate governance; "business going forward will be very different," he said.
Speaking from France via a conference call, Mr. Reed said, "The governance reforms we will propose are critical."
Mr. Reed, an M.I.T.-trained engineer, declined to say what specific changes he was likely to enact once he begins work at the exchange on Sept. 30.
He added that he had no intention to seek permanent appointment to the post. "I would say we are talking months, not years," he said, adding that he would move "with all deliberate speed" to find a permanent leader.
Mr. Reed will resign as lead director of Altria Group Inc., which owns Philip Morris, because, he said, his new post makes that directorship "inappropriate."
William Donaldson, chairman of the Securities and Exchange Commission, said in a statement posted on the commission's Web site that he was pleased by the board's action today and "gratified" that Mr. Reed had accepted the post. "He is independent, experienced and has impeccable credentials, all of which will be crucial as he works with the N.Y.S.E. Board to ensure the highest standards of governance," Mr. Donaldson said.
Richard H. Koppes, legal counsel to the California Public Employees Retirement System, the largest public pension fund in the country, had called for Mr. Grasso's ouster, saying the exchange needed "a good strong leader and someone who is willing to put themselves in the eye of the hurricane."
Mr. Reed had retired as chairman and co-chief executive of Citigroup on April 19, 2000, 18 months after the merger of Citicorp and Travelers Group Inc. He had shared Citigroup leadership with Sanford I. Weill, who ultimately forced him out. From 1984 to 1998, Mr. Reed had been chairman and chief executive of Citicorp and Citibank.
One of Mr. Reed's challenges will be to redefine the role of the financial industry's representatives on the board. Industry representatives now hold 12 of the 27 seats. These include directors of some of the largest brokerage firms, such as Merrill Lynch, Lehman Brothers and Morgan Stanley, which have come to dominate the board, though the exchange regulates their firms.
Executives of these firms were first to demand Mr. Grasso's departure, once his compensation was publicized, and some of them seek rule changes that would bar representatives of such firms from the board.
Other directors, from smaller firms, had supported Mr. Grasso until his departure, and the gap between the two sides remains to be bridged.
The debate over a remaking of the exchange's governance is important because the stock exchange has both a commercial responsibility and an important regulatory function. It oversees trading-related matters involving listed firms. This includes insider trading cases. The recent controversy has fueled calls for a separation of these duties, and for a remaking of the board to leave it with fewer encumbering ties to Wall Street.
Meanwhile, Mr. Grasso's ultimate compensation, the immediate source of the furor, remains unclear.
Mr. Grasso had been considered something of a hero by New Yorkers after he returned the stock exchange to operation within days of the terror attacks on Sept. 11, 2001. He clung to the job amid the rising complaints about his compensation, and said last week that he was leaving with "the deepest reluctance."
He has said that he will forgo a payment of $48 million, which the exchange said he is entitled to on top of the $139.5 million. But the matter has not finally been resolved. |
