Leading the reform requests is for the NYSE to “align regulator’s interest with investor’s interest,” to eliminate any potential conflict of interest that may arise from the commingling of regulatory functions and business dealings. “While we realize that the Exchange is a hybrid of a business and a regulator, we believe separation of the two functions will keep the regulator’s interest on investors, and allow the business of the Exchange to be conducted without a need for the delicate balancing of interest that must now occur,” said Jack Ehnes, CalSTRS chief executive officer and signer of a letter sent to the NYSE.
Additionally, the $100.2-billion public pension fund recommended that a majority of the NYSE’s board of directors should be independent directors. This includes individuals that do not come from the ranks of the listed or member firms or from those entities with close affiliations with the NYSE, the CalSTRS letter stipulates. Other recommendations include:
- reducing or eliminating the practice of cross directorships
- establishing independent Nominating and Compensation committees
- separating the roles of chairman and chief executive officer
- annually electing and evaluating the members of the board of directors.
With this also came calls by CalSTRS – which currently has 80% of domestic equity exposure, $32.2 billion, represented by companies traded on the NYSE – for the Big Board to “serve as the model for openness and transparency.” That includes the disclosure of member and staff charitable contributions and details into the composition and function of some key committees.
“Now’s the time for the Exchange to come in line with the governance reforms corporate America is embracing in this new environment of transparency and accountability,” said Ehnes in a news release. “By tackling these important issues and making the hard decisions, the Exchange will be truly responsive to its ultimate constituents, the country’s shareholders.”
This is not the first action the nation’s third largest public pension fund has taken against the NYSE in an effort to reform its corporate governance structure. Earlier this month, Ehnes joined with California State Treasurer Phil Angelides, one of the most powerful board members at the California Public Employees’ Retirement System (CalPERS) and New York State Comptroller Alan Hevesi, trustee of the Empire State’s $90-billion pension fund in requesting that then NYSEChairman Richard Grasso step down after news got out of his$139.5-million compensation package (See Pension Execs Join Grasso Resignation Call ).
Ultimately, the pressure from institutional investors,NYSE directors, floor traders and legislators became too much for the Big Board’s board of director’s, which last week announced that Grasso had resigned his post (See SE Chairman Grasso Resigns ).
More information about CalSTRS reform requests, including a copy of Ehnes’ letter can be found at www.calstrs.com , under the “What’s New” section.