An embarrassing era in the New York Stock Exchange's history appeared to be over as the Securities and Exchange Commission (SEC) voted Wednesday to approve sweeping reforms in the Big Board's governance structure.
The issue blew up in September when the exorbitant pay package of former chairman and CEO Richard Grasso came to light. The scandal led to Grasso's resignation. The reforms approved yesterday include the separation of the chairman and CEO positions in the future as well as a smaller NYSE board and increased independence for NYSE regulators.
The nation’s largest pension fund, Calpers, filed suit on Tuesday against the NYSE and seven of its specialist firms, claiming fraudulent trading. Some speculated that the suit may have been timed to ensure the SEC commissioners' full attention as they took up the matter yesterday.
SEC Chairman William Donaldson announced the separation of the chairman and CEO positions, a change he had championed. Donaldson was the NYSE chairman in the early 1990s.
"In this way, the NYSE should be in a better position to protect against the concentration of too much executive authority in one individual," Donaldson said. NYSE spokesmen in New York had no comment, the Wall Street Journal reported.
NYSE Chairman John Reed designed the reforms, which also include a reorganized, independent board of directors and a separate advisory panel made up of representatives from the Big Board’s constituencies, including floor traders.