By Erin McClam
The Associated Press
NEW YORK - The New York Stock Exchange, scarred by outrage over an eye-popping pay package for its ousted chairman, named a former Citigroup executive as its interim leader Sunday at a salary of $1.
John S. Reed, 64, will lead the exchange as it seeks a permanent replacement for Dick Grasso, who was forced out by news his compensation deal totaled $187.5 million - a figure seen as excessive even by Wall Street standards.
"Over the last couple of weeks we've had some failures at the governance level," Reed told reporters on a conference call from an island off France, where he was vacationing when the NYSE board offered him the job as interim chairman and chief executive.
Reed, who was co-chairman and co-CEO of Citigroup when he retired in April 2000, declined to discuss Grasso, but acknowledged the need for reform.
"I have seen crises that are quite comparable to the one the exchange has gone through," he said. "It didn't help anybody. It didn't help the people that were involved. It didn't help the exchange."
Reed, who insisted he was not a candidate for the permanent position, said he hoped the exchange would have a new leader by the end of the year. The NYSE will pay him $1 no matter how long he serves.
Although Reed spent more than 35 years at Citi, he has only set foot inside the NYSE once, and has never sat on an NYSE committee - a background that observers called key because of the pressure on the exchange to clean house.
Reed also said he would resign his seat on the board of Altria Group Inc., parent of tobacco maker Philip Morris, because of his new responsibilities. Grasso had come under criticism for sitting on the board of The Home Depot, which is listed on the exchange.
"They clearly wanted someone who's an outsider, but who's knowledgeable," said Steven Kaplan, a finance professor at the University of Chicago's Graduate School of Business. "He is a very thoughtful guy."
Securities and Exchange Commission Chairman William Donaldson, who had expressed displeasure about Grasso's pay and met with NYSE officials last week, praised Reed in a statement for his "impeccable credentials ... which will be crucial as he works with the NYSE Board to ensure the highest standards of governance."
New York State Comptroller and state pension fund trustee Alan Hevesi, who had called for Grasso's ouster, wished Reed well in a statement, but said he was waiting to see what reforms were implemented.
Reed will take over at the stock exchange on Sept. 30 but said he would start working immediately by phone with chief operating officers, Robert Britz and Catherine Kinney. Reed also said he likely would speak to Grasso in the coming weeks, if only as a courtesy and to ease the transition.
In a conference call with reporters Sunday, Reed said improving the exchange's governance was a priority, but offered few specifics.
"We have to be the best of the best," he said. "We are an example for all the listed companies on the exchange."
He said he believed smaller boards of directors of 10 to 12 people were generally easier to work with, but did not indicate whether he would seek to trim the 27-seat NYSE board.
Some critics want the entire NYSE board of directors to step down because the board itself approved Grasso's $187.5 million pay package, of which Grasso later said he would forgo about $48 million. The board has also been criticized for allowing its directors to sit on the boards of companies who trade on the exchange.
The exchange is expected to release a corporate governance plan Oct. 2 that will, among other things, address compensation for future CEOs and potential changes in the board's structure and the ownership of the exchange.
NYSE director Laurence Fink, who is chief executive of BlackRock Inc., is leading a search committee for a permanent exchange chairman.
Reed was the first choice of 12 people considered by a committee of directors charged with finding an interim leader, H. Carl McCall, one of the directors, said Sunday. But other names were floated between Grasso's resignation on Wednesday and the committee's launch on Friday. Former Treasury Secretary Robert Rubin was reportedly considered but said he did not want the job.
Billionaire financier Warren Buffett, former TIAA-CREF chairman John Biggs and former SEC chair Arthur Levitt were also mentioned.
Reed was named CEO of Citicorp in 1984 and was credited with building it into a corporate powerhouse through the 1990s, culminating with its merger with Travelers Group in 1998. He retired in April 2000 after losing a power struggle with then co-chairman Sanford I. Weill, and has spent the past three years teaching and writing in what he called a happy retirement.
On the Net
New York Stock Exchange: http://www.nyse.com
NAME: John S. Reed
EDUCATION: Received undergraduate degrees from Washington and Jefferson College and the Massachusetts Institute of Technology; master's degree from MIT; U.S. Army.
CAREER: Former chairman and co-chief executive of Citigroup, 1998-2000; chairman and chief executive of Citicorp and Citibank, 1984-1998. Joined Citibank in 1965.
QUOTE: "I have seen crises quite comparable to what the NYSE has gone through ... and clearly it did not help anyone."
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