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NYSE Board Member Resigns

Juergen Schrempp, DaimlerChrysler CEO, steps down ahead of expected governance reforms at the exchange.

September 29, 2003|Jeff Green | Bloomberg News

DaimlerChrysler Chief Executive Juergen Schrempp has resigned from the New York Stock Exchange board, a spokesman for the auto giant said Sunday.

The decision comes as interim NYSE Chairman John S. Reed prepares corporate governance reforms in the wake of a controversy over the $140 million paid to former Chairman Richard Grasso.

Schrempp, head of the world's fifth-largest automaker, resigned to "clear the way for changes," spokesman Han Tjan said. Schrempp was among the first directors to question whether Grasso should receive an additional $48 million promised in his contract through 2007, board minutes show.

Reed, a former co-chairman of Citigroup Inc., arrived in New York from his home in France on Friday and met with executives at the exchange. In a letter to NYSE members, he said his priority was to restore confidence.

H. Carl McCall, co-chairman of the exchange's committee on governance, resigned Thursday, saying he wanted to give Reed a "clean slate."

"They're all going to resign," said Francis Maglio, a former floor broker who has owned a seat since 1973 and leases it out. "Eventually, the whole board will be replaced because they didn't do their due diligence to protect the shareholders."

Tjan said Schrempp served on the board for little more than a year. After McCall's resignation, Securities and Exchange Commission Chairman William H. Donaldson said he hoped "the other directors will rally around John Reed." Donaldson will meet with Reed today in Washington.

Under pressure from the board, Grasso said Sept. 9 that he would forgo the additional money. He resigned Sept. 17.

Grasso's pay drew criticism partly because it was set by board members who represented Wall Street firms and listed companies that the NYSE helps regulate.

Reed has said the NYSE's 27-member board should be cut to no more than 12 and directors must take responsibility for awarding Grasso's pay package.

"I can't see how this board has any legitimacy to stay," said Wayne Shaw, corporate governance professor at Southern Methodist University. "These guys are the ones who made the decisions, and if those decisions are bad, they've got to go."

NYSE spokesman Ray Pellecchia declined to comment on Schrempp's resignation. The NYSE is the world's largest exchange, with about 2,700 listed companies with a market value of $14 trillion.

Grasso's pay prompted criticism from investors and the heads of some public pension funds, including the three largest, in California and New York, who said it was improper for the head of a regulator to receive such a large pay package.

McCall recommended seven corporate-governance changes in his resignation letter to Reed.

The balance of the board probably will shift in favor of investors and away from companies listed on the exchange, said Michael Flaherman, a senior advisor at New York-based buyout firm New Mountain Capital.

"It's probably almost a done deal at this point that one or more people who are closely identified with major investors will ultimately end up on the board," Flaherman said. "They're not conflicted the same way Wall Street securities firms are."

Kenneth Langone, chief executive of Invemed Associates Inc. and a founder of Home Depot Inc., chaired the compensation committee from 1999 until June, while Grasso served on the Home Depot board and its compensation committee. Langone has said he did not intend to resign from the board.

Schrempp, 59, has been chairman of DaimlerChrysler since March 2000.

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