NYSE's Reed Scraps Report, Plans New One
John Reed , the interim chairman of the New York Stock Exchange, is scrapping a special board committee's report on overhauling how the NYSE is governed, and is launching a sweeping review aimed at producing more extreme changes.
One of the main issues being scrutinized in the top-to-bottom review, according to people with knowledge of the matter, is whether compensation, corporate governance and audits should be voted on by the full board of directors or be reviewed by board committees, as it currently is. Critics say one reason former Chairman Dick Grasso's compensation mushroomed -- and ultimately led to his ouster last week -- is that his pay and bonuses were set only by a handful of directors rather than the whole board.
Late Thursday, lead director H. Carl McCall, who was co-chairman of the board's special committee on corporate governance and led the review now being scrapped, resigned from the board, effective Monday. He is expected to be the first of many NYSE directors to step down in the next few weeks.
Mr. Reed, who was named interim chairman last weekend, has said he wants to shrink the number of directors from its current level of 27 seats. People who have talked to him this week say he favors a system under which a much smaller board, perhaps one with only a dozen or so directors, is responsible for setting compensation and for corporate governance. Mr. Reed, who has been in France, is expected to return to New York Friday. NYSE spokesman Richard Adamonis declined to comment.
Along with a review of the NYSE's own corporate governance, the NYSE is also likely to review the rules it proposed for its listed companies in June 2002. At the SEC's request, the exchange recommended stricter corporate governance standards for its listed companies. The NYSE's proposed rule changes were intended to restore investor confidence in the aftermath of corporate meltdowns of Enron, WorldCom and other companies. The SEC hasn't yet approved these proposed rules.
The exchange recommended, among other things, that the boards of companies whose stocks are listed on the NYSE establish committees of independent directors to review audits, compensation and corporate governance. This is much the same way that the Big Board's own directors have functioned.
The rationale was that smaller committees could focus more sharply on these individual issues than the full board might. But Mr. Reed and others are now keenly aware that the separation of powers on the NYSE's own board accounted for many of its problems. For example, Mr. Grasso's $187.5 million deferred compensation and retirement package was reviewed by a six-member compensation committee. His compensation didn't have to be put to the full board for a vote.
Because the directors who serve on the compensation committee have rotated in recent years, no one board member is responsible for having reviewed all of Mr. Grasso's pay contracts. Mr. McCall has been the chairman of the compensation committee since June. Many directors have said they were surprised that Mr. Grasso's pension grew as his salary and bonuses soared. His pension was based on a formula roughly equivalent to 50% of his last three years' pay.
In 1996, for example, Mr. Grasso's income that his pension could be based on totaled about $3 million. By the end of 2001, it quintupled to about $15 million. Mr. Grasso was also granted special bonus monies that year that weren't part of his income that his pension could be based on.
People who are working closely with Mr. Reed say that one of his first moves will be to undertake a review of all of the top NYSE officers' salaries and pensions, although these people say that none begin to approach the magnitude of Mr. Grasso's. They say that in some instances, income that can be used to calculate pensions will be re-set to reflect salary and bonus increases. Moreover, this review will likely to put to a full board, rather than to a small committee.
In a letter to Mr. Reed, Mr. McCall said he was resigning "to ensure that you -- and the NYSE -- can move forward without being encumbered by the past."
In the letter, Mr. McCall offered a series of recommendations for improving the NYSE's governance including having annual elections and evaluations of directors; adding more representatives of the investing public to the board and to key committees; and reworking the nominating and compensation committees so they comprise only independent directors. He also suggested that the exchange consider separating the NYSE's regulatory arm from its trading functions. He said he would still preside over a meeting of the Big Board's special committee on governance Monday.
"I came to a point where I said . . . I think I've done my job," Mr. McCall said in an interview Thursday.
But Securities and Exchange Commission Chairman William Donaldson, who had asked the exchange in March to examine its own corporate governance practices, was concerned that Mr. McCall wasn't taking the review seriously, according to a person familiar with the matter. After Mr. Grasso resigned, Mr. Donaldson told Mr. McCall that governance was important and that the board needed to focus on it.
Mr. McCall quickly agreed and told Mr. Donaldson that the board would get the governance review to the SEC by Oct. 2. Mr. Donaldson, afraid that Mr. McCall was too focused on the deadline and not the substance of the review, told him the date wasn't important, this individual said. Mr. McCall said he understood, according to this individual.
Steve Greenberg, a spokesman for Mr. McCall, said only that "Carl McCall has been committed to reforming the governance practices at the exchange, and the need for real reform is something that he has fought vigorously for."
In a speech last night, Mr. Donaldson said that while he didn't believe the full NYSE board should be forced to resign, he would be keeping in close touch with Mr. Reed, with whom he plans to meet today.
This week, the NYSE board retained a new lawyer, H. Rodgin Cohen, managing partner at the New York law firm of Sullivan & Cromwell. Mr. Cohen has known and worked with Mr. Reed before. Mr. Reed will keep him on as a representative to the new board if the current board is reconstituted, say people with knowledge of the matter. Mr. Reed is likely to seek resignations of current board members, these people say.
Wachtell, Lipton, Rosen & Katz partner Martin Lipton is counsel to the NYSE board's special corporate-governance committee and drafted much of the report that now will be scrapped, say people who have seen it. Mr. Lipton, who did the work pro bono, doesn't advocate splitting the jobs of chairman and chief executive at the exchange, these people say, another issue that will now be reviewed.
People who have seen the draft say that there wasn't any provision to remove from the board the heads of Wall Street firms the NYSE regulates. That is something that is likely to be considered anew, they say. Mr. Lipton also heads the exchange's Legal Advisory Committee, another pro bono role to which he was appointed by Mr. Grasso. Considered a brilliant adviser on governance and other corporate legal issues, Mr. Lipton is expected to retain some advisory role under Mr. Reed.
NYSE代理董事长计划推出治理新方
纽约证交所(New York Stock Exchange)代理董事长约翰?瑞德(John Reed)驳回了证交所董事会特别委员会就改革证交所治理体系提交的报告，准备对现有治理状况进行全面评估，推出一份大刀阔斧的改革报告。
据知情人士透露，评估中审查的主要问题之一就是，证交所高管人员的薪酬、公司治理和审计工作究竟是应该提交全体董事表决，还是应该像现在一样，由董事会委员会进行审查。批评家认为，造成证交所前董事长迪克?格拉索(Dick Grasso)薪酬增长过快的一个原因就是，他的工资和奖金只是由少数董事，而不是全体董事会来决定的，而薪酬过高正是格拉索最终于上周被迫宣布辞职的导火索。
周四晚间，牵头董事麦考尔(H. Carl McCall)宣布辞职，自下周一起生效。麦考尔是证交所董事会公司治理特别委员会联席主席，目前被驳回的报告就是在他的主持下草拟的。预计今后几周还将有多名董事步麦考尔的后尘辞职。
SEC主席唐纳森(William Donaldson)周四晚间表示，麦考尔所做的是“他认为正确的事情”。但他认为并非所有的纽约证交所董事都应当辞职。唐纳森将于周五与约翰?瑞德会面。
上周末被任命为临时董事长的瑞德一直声称，他希望减少证交所董事的席位。证交所目前共有27名董事。本周与瑞德接触过的人士说，瑞德倾向于这样一种体制：由一个规模小得多的董事会－－可能只有大约12名董事－－来负责制定高管人员薪酬和公司治理规则。预计一直在法国度假的瑞德将于周五返回纽约。纽约证交所发言人Richard Adamonis拒绝发表评论。
除了评估自身公司治理状况以外，纽约证交所可能还将审议2002年6月为该所上市公司制定的规则提案。在证券交易委员会(SEC)的要求下，纽约证交所建议上市公司采取更严格的公司治理标准。在美国先后爆发安然(Enron)、WorldCom等公司丑闻案后，纽约证交所上述改革方案旨在恢复投资者信心。但证券交易委员会尚未批准这些提案。
SEC主席唐纳森表示，随著Sarbanes-Oxley法案的通过，公司已在治理方面取得重大进展，但是目前仍存在部分问题，包括纽约证交所及共同基金公司在公司治理方面的问题。
