The Richard Grasso compensation crisis has pushed the New York Stock Exchange toward a possible major change in what some say are its conflicting roles as market operative and self-regulator.
The chaos at the Big Board has caught the attention of Congress, which grilled Securities and Exchange Commission Chairman William Donaldson yesterday. “We are at a stage now, in my view, where we really have to re-examine the locus of the regulatory mechanism” at the NYSE, Donaldson said at a Senate Banking Committee hearing.
As John Reed temporarily takes the NYSE helm, rumors have abounded that he intends to remove the investment banking CEOs who currently sit on the NYSE board of directors. The idea of the CEOs resigning originated with Goldman Sachs Group’s CEO Henry Paulson Jr. There are currently six Wall Street CEOs on the NYSE’s 27-member board.
Reed yesterday denied that there are any immediate plans to rid the board of CEOs, saying the exchange must first address its governance problems and then look at the make up of its board.
Other seats on the board are also in play. Daimler Chrysler AG Chief Executive Jurgen Schrempp resigned from the board this week, citing difficulty in participating in the recent fast-paced meeting schedule from his location in Germany. As the only European member of the NYSE board, Schrempp missed many meetings due to time differences and other challenges.
The AFL-CIO labor union is pressing for the resignation of director Kenneth Langone mostly because of his support of the massive $187.5 million deferred compensation package that led to Grasso’s resignation. Langone’s term ends in June and he isn’t eligible for reelection. He has said he plans to complete his term.
Donaldson told Congress that the NYSE needs to address how it finances self-regulation and the various other governance issues. Reed has indicated his desire to quickly overhaul the governance structure so the board can address its make-up. While he had said previously he prefers smaller boards, he said this week that larger boards can also work effectively.