NYSE names Goldman’s president as new executive
NEW YORK (AP) – Moving quickly after federal regulators approved an overhaul plan for the New York Stock Exchange, the Big Board named Goldman Sachs investment firm president John Thain as the exchange’s new chief executive on Thursday. The announcement came only a day after the Securities and Exchange Commission approved the NYSE’s proposal to overhaul its governing structure, including splitting its top executive positions to avoid a concentration of power.
Thain, 48, will succeed interim CEO and chairman John Reed, who has held those positions since the September departure of Dick Grasso, who resigned amid a furor over the size of his pay.
Grasso’s $188 million compensation package raised the issue of an imperious chief executive and exposed potential conflicts of interest at the exchange, a quasi-public institution charged with regulating the firms that do business on its trading floor.
At a news conference where Thain was introduced, Reed, who led the search for a permanent successor, said, “I think we have an exceptional person at a time when frankly we require an exceptional person. There are a lot of things we need to get done and I think John will do that.”
Reed also said Thain was known for “integrity, intelligence, and extensive knowledge of the financial markets.”
The selection could disappoint those who were hoping the new NYSE chief would come from outside Wall Street. Goldman Sachs is one of the most prominent investment firms in the financial industry.
On Wednesday, SEC commissioners voted to approve an overhaul plan for the nation’s largest stock exchange after the NYSE separately agreed to split the jobs of chairman and CEO.
The NYSE’s former 27-member board, largely composed of financial industry executives, formally resigned Wednesday, and a new, smaller and more independent board took its place. A separate board of executives, with members representing investors, listed companies and the financial industry, will serve as an advisory panel to the board. The overhaul plan also calls for the appointment of a chief regulatory officer.
Reed, a retired Citigroup co-chief executive, is being paid a symbolic $1 to overhaul how the exchange governs itself. He said he would stay on as interim chairman while the search continues for a permanent replacement, and would remain as a board member if necessary.
Thain’s appointment is effective Jan. 15. Reed said Thain will be paid a total of $4 million a year, including all benefits, a sum that is in the mid-range of what leaders of stock exchanges around the country are paid. There will be no employment contract; Thain will serve at the pleasure of the board.
In a statement, Thain said he viewed the appointment as “a tremendous opportunity and challenge” and said he intends “to build on the strengths of this great institution.”
Thain has been president of Goldman Sachs Group since May 1999 and previously oversaw its European operations as well as Goldman’s involvement in electronic trading platforms.
The NYSE’s auction-style trading system, in which human “specialists” are responsible for matching buyers and sellers of stocks, has been criticized as being antiquated.
At the news conference, Thain said his goal was to ensure the exchange remains “the most liquid and most efficient marketplace.”
That may involve a greater degree of electronic trading, he said.
Thain had been seen as a possible successor to Goldman Sachs CEO Henry Paulson, though Paulson has not announced plans to retire.
Paulson praised Thain and the NYSE’s selection of him, in a statement Thursday.
“John has distinguished himself throughout his career by his rigorous intellect and personal character,” Paulson said. “While we are sorry to see him leave Goldman Sachs, the New York Stock Exchange is fortunate to gain such an able and effective leader.”
SEC chairman William Donaldson, who has praised the overhaul plans proposed by Reed, congratulated the NYSE board for selecting Thain, saying the Goldman Sachs executive “brings a distinguished record of leadership and knowledge.”
Donaldson said he and the rest of the commission looked forward to working with Thain as the NYSE “moves to address the many ongoing and important challenges that lie ahead.”
While most agree the changes in governance at the NYSE are an important step forward, some critics have said they fall short of what needs to be done. Even after the SEC unanimously approved the changes on Wednesday, commissioner Harvey Goldschmid remarked that “much more may be needed.”
Officials with the nation’s biggest public pension funds – which control hundreds of billions of dollars of investments in nine states – complained Wednesday that the reforms were insufficient to restore public trust after the scandal over Grasso’s pay.
Reed said he’s read the first draft of a report on Grasso’s pay, which is being compiled by former federal prosecutor Dan K. Webb, and the details are “embarrassing.” He said the report would likely be circulated among board members over the holidays, and would appear on the agenda of its Jan. 8 meeting.
On Tuesday, the nation’s largest public pension fund, the $154 billion California Public Employees Retirement System, announced it is filing a class-action lawsuit against the NYSE and seven trading firms, alleging that fraudulent practices cost it millions of dollars in recent years. The pension fund is seeking unspecified damages, but fund officials said it could add up to hundreds of millions of dollars if other parties join the suit.
The NYSE and the SEC have been investigating the alleged trading abuses. CalPERS officials said they decided to sue rather than rely on the SEC because the agency has not fulfilled its regulatory duties.
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