New York Stock Exchange members overwhelmingly approved interim chairman John S. Reed's reform plan Tuesday, clearing the way for significant changes in the way the 211-year-old exchange is run.
In a meeting after the closing bell, members approved a slate of eight directors from outside the securities industry who will exercise final authority over all NYSE operations, including regulation and executive compensation.
Reed's plan, prepared in just two months, is intended to eliminate conflicts of interest and move the exchange past the controversy generated by the compensation package of former NYSE chairman and chief executive Dick Grasso.
The plan, while popular with the NYSE's 1,366 members, has been called insufficient by large investor groups. The Securities and Exchange Commission must approve Reed's plan before it can go into effect. SEC Chairman William H. Donaldson has praised the plan as a good first step but indicated that more may need to be done.
Officials of large shareholder groups and state pension funds have complained that under the plan NYSE members would still elect the directors charged with regulating them. Critics say this could lead to a situation in which members vote out directors viewed as tough regulators.
State pension fund officials also have complained that Reed's plan fails to guarantee representation for institutional investors on the new board and does not require that the roles of exchange chairman and chief executive be split. Reed left the question of splitting the jobs to the new board, saying he did not want to tie directors' hands as they search for a permanent successor to Grasso.
Investor groups have complained that several members of the proposed new board also serve as directors at NYSE-listed companies. That could present a conflict, critics contend, because the exchange enforces corporate governance standards on listed companies. In addition to complaints from investor groups, some SEC officials have said they still believe the NYSE should be stripped of its regulatory authority over member firms.
Reed, the former co-chairman of Citigroup who was brought in to head the exchange after Grasso was forced out, is scheduled to testify Thursday before the Senate Banking Committee. Senators are expected to question him on his reform plan.
In a meeting after the closing bell, members approved a slate of eight directors from outside the securities industry who will exercise final authority over all NYSE operations, including regulation and executive compensation.
Reed's plan, prepared in just two months, is intended to eliminate conflicts of interest and move the exchange past the controversy generated by the compensation package of former NYSE chairman and chief executive Dick Grasso.
The plan, while popular with the NYSE's 1,366 members, has been called insufficient by large investor groups. The Securities and Exchange Commission must approve Reed's plan before it can go into effect. SEC Chairman William H. Donaldson has praised the plan as a good first step but indicated that more may need to be done.
Officials of large shareholder groups and state pension funds have complained that under the plan NYSE members would still elect the directors charged with regulating them. Critics say this could lead to a situation in which members vote out directors viewed as tough regulators.
State pension fund officials also have complained that Reed's plan fails to guarantee representation for institutional investors on the new board and does not require that the roles of exchange chairman and chief executive be split. Reed left the question of splitting the jobs to the new board, saying he did not want to tie directors' hands as they search for a permanent successor to Grasso.
Investor groups have complained that several members of the proposed new board also serve as directors at NYSE-listed companies. That could present a conflict, critics contend, because the exchange enforces corporate governance standards on listed companies. In addition to complaints from investor groups, some SEC officials have said they still believe the NYSE should be stripped of its regulatory authority over member firms.
Reed, the former co-chairman of Citigroup who was brought in to head the exchange after Grasso was forced out, is scheduled to testify Thursday before the Senate Banking Committee. Senators are expected to question him on his reform plan.
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