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James J. Needham, 80; chairman of New York Stock Exchange fought reforms in early 1970s

April 11, 2007|Adam Bernstein | Washington Post

James J. Needham, the first full-time, salaried chairman of the New York Stock Exchange, who presided over the Big Board during the legislative and regulatory tumult of the early 1970s, died Friday at his home in Southampton, N.Y. He was 80 and had myelodysplastic syndrome, a bone marrow disorder.

Needham was a certified public accountant and held a seat on the Securities and Exchange Commission before the NYSE hired him in 1972 to guard against reforms proposed in Washington that would make the securities industry less clubby and far more competitive to smaller investors.

Among the major changes he tried to prevent on his four-year watch was the elimination of fixed brokerage fees -- a nearly 200-year-old practice -- and the implementation of negotiated rates for stock transactions.

John C. Coffee Jr., a securities law expert at Columbia University, said Needham "was on the wrong side of history" on rate reform.

In time, the 1975 congressionally mandated ban on fixed fees "proved to be a huge boon for the securities industry," Coffee said. "Once competitive rates were abolished by Congress, we got more trading, and the public was more willing to buy securities."

He said commissions for smaller investors were as high as 10% to 15%, but today "it's pennies." He described the NYSE as "a cartel that fixed rates."

At first, Needham proposed to work with Congress on negotiated commission rates if Congress would in essence do away with third-market trading -- when a publicly traded stock moves from investor to investor and circumvents a stock exchange.

He later took a harder stand, memorably challenging the SEC to fight the change "on the courthouse steps" to prevent a change to negotiated rates. He argued that the change would reduce incentive for NYSE membership.

Because of what some regarded as a brash personality, Needham wound up angering important constituencies in New York and Washington. He further had the misfortune to serve during a major market downturn, which made elimination of fixed commissions more difficult for many companies to endure as some reduced fees by 50% to lure clients. Many companies merged; others closed.

Needham was widely reported to have been pressured into resigning in April 1976. He left office nearly two years before his contract was to expire and was replaced by William Batten, a former chief executive of J.C. Penney Co. and an exchange director praised for his diplomatic skills.

The contractual remainder of Needham's $400,000 annual salary was paid to him as a lump sum on his departure.

He made news in 2003 for criticizing what he considered the NYSE's excesses, including the $139.5-million payout package at the time for NYSE Chairman Richard Grasso. Needham said Grasso and the NYSE board should resign, adding, "The NYSE is now beginning to look like Enron and all those other crummy companies."

James Joseph Needham was born Aug. 18, 1926, in Queens, N.Y. As the eldest of three children, he helped support his family upon his father's death. After Navy service during World War II, he graduated from St. John's University with a bachelor's degree in business administration in 1951.

After college, he joined what is now PricewaterhouseCoopers. He was a partner at A.M. Pullen & Co. until 1969, when he became the first accountant appointed to the SEC.

He arrived at the exchange after a massive reorganization did away with the board of governors and replaced it with a paid chairman who led 20 directors, half from the brokerage community and half from the greater business world.

Needham was credited with making advances toward computer automation on the exchange to reduce paperwork and trading backlogs.

After leaving the Big Board, he did corporate consulting on planning, financial and regulatory matters and served on company boards.

President Reagan named him U.S. ambassador to the International Exposition in Japan in the mid-1980s, and he served a term on the Southampton Town Council in the early 1990s.

His wife, Dolores Habick Needham, whom he married in 1950, died in 1993.

Survivors include his wife of 11 years, Patricia Campo Needham of Southampton; and five children from his first marriage.

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