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Market Names Interim Leader

The New York Stock Exchange taps a former Citigroup executive -- to be paid a token $1 -- after a pay furor that forced its chief to quit.

September 22, 2003|Thomas S. Mulligan and Tom Petruno | Times Staff Writers

NEW YORK — Directors of the New York Stock Exchange named former Citigroup Inc. executive John S. Reed interim chairman and chief executive Sunday, counting on the veteran banker -- and stock exchange outsider -- to steer the Big Board through its troubles until a permanent leader is found.

Reed, 64, replaces Richard Grasso, who was forced out of office Wednesday amid outrage over his $139.5-million compensation package. Revelations about Grasso's pay and how it was approved precipitated the worst crisis in decades at the venerable exchange, with public officials, consumer advocates and Big Board traders alike calling for his resignation and demanding sweeping changes in how the NYSE is governed.

At a news conference early Sunday, NYSE board member Laurence D. Fink, who was chosen by the board Friday to head the search for an interim chairman, said Reed was "the first choice among a number of candidates" and was the only person offered the job by the search committee.

Joining the news conference by phone from France, where he is on vacation, Reed said he would work for a token payment of $1. He said he wasn't interested in becoming the NYSE's permanent leader.

Reed said he had been "pretty happily retired" for three years, teaching part time at MIT and at Princeton University as well as working for nonprofit organizations. But he said that when he got the call from the NYSE board, he quickly decided that the welfare of the institution was "too important" to turn down the request.

Reed said he discussed the job with Securities and Exchange Commission Chairman William H. Donaldson, though he did not give details of their talk. Donaldson, however, quickly endorsed the choice.

"I have known John Reed for many years and am pleased that the New York Stock Exchange board has taken prompt action in reaching out to him," Donaldson said in a statement. "He is independent, experienced and has impeccable credentials, all of which will be crucial as he works with the NYSE board to ensure the highest standards of governance."

The search committee, in a meeting Saturday morning in Manhattan, selected Reed from about a dozen potential nominees, panel member Robert B. Fagenson said Sunday. The committee reached Reed later in the morning and got his assent.

"We moved quickly," Fagenson said. "That's what happens when your first choice says yes."

In Reed, the NYSE found an interim leader with several crucial qualifications, according to New York University finance professor Roy C. Smith.

"They needed somebody with name recognition, neutrality and lack of baggage," Smith said. It helped that Reed had no ties to the NYSE board, which had approved Grasso's employment contracts, Smith said.

Reed said that in his long career in financial services, he had visited the NYSE only once, had never met Grasso and had never served on any exchange committees or advisory boards. "I am really an outsider when it comes to the NYSE," he said.

Reed nevertheless is a familiar figure on Wall Street. He helped engineer the historic 1998 merger of Citicorp and Travelers Group that created Citigroup, but he left in April 2000 after losing a power struggle with current Citigroup Chairman Sanford E. Weill.

Reed said it would be premature for him to discuss his views of the exchange's governance procedures or what changes he might suggest.

"But certainly everybody would have to say that over the last few weeks, we've had some failures at the governance level," he said.

About half of the NYSE directors run companies that are subject to regulation by the exchange, which critics said presented a huge conflict of interest when they voted on Grasso's pay.

Reed declined to comment on the specifics of Grasso's case but said: "It did not help any of the people involved, it didn't help the exchange, and very frankly it didn't help the reputation of the private sector in the United States."

Reed said it was crucial for the NYSE, as a regulator of Wall Street firms and of the exchange's 2,800 listed companies, to be "the best of the best" in its own governance practices.

Asked how long it would take to find a permanent chairman, Reed said he hoped a successor could be named by year-end but that in any case it would be "months, not years."

Reed said he would be back in the U.S. a week from today to start the NYSE job and would be talking with exchange managers and directors before then by phone.

One of Reed's first tasks as interim chairman will be to help prepare a report for the SEC on corporate governance. The NYSE had set an Oct. 2 deadline for completing the report; it's unclear whether that deadline will be extended.

Reed said he would resign the only corporate board seat he holds, at tobacco and food giant Altria Group Inc., parent of Philip Morris USA Inc.

Counting Reed, the NYSE board now has 26 members, with one vacancy.

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