John Reed, who was named interim chairman of the New York Stock Exchange on Sunday, wants to shrink the number of directors by more than half, bring "fresh blood" to the board of the world's biggest stock exchange and find a permanent leader within four months.
"You can't run the NYSE like a club or you won't have the confidence of the public," the former Citigroup Inc. chairman said yesterday near his home in Ile de Re, an island off the west coast of France.
Reed said the NYSE board should consist of 10 to 12 people rather than 27. The exchange also needs new directors to restore credibility following the ouster of chairman Richard Grasso after the disclosure last month of his $140-million pay package.
The comments came as the largest U.S. pension funds met with exchange officials for the first time since Grasso's exit to demand sweeping changes in governance at the NYSE. The fund managers also asked Securities and Exchange Commission Chairman William Donaldson to conduct an independent review of Grasso's compensation package.
"We want to press for an independent review of what happened at the exchange," said Sean Harrigan, president of the California Public Employees Retirement System. "I don't think we want to wait for the exchange to do its own review."
Grasso came under criticism after the NYSE was forced to disclose that he helped pick members of the committee that agreed to pay him more salary in some years than General Electric Co. paid Jack Welch, its former chairman. The board included executives of Wall Street firms and other companies that Grasso helped regulate as head of the stock exchange.
Henry Paulson, chairman of Goldman Sachs Group Inc., said last week that the board should exclude executives of securities firms and listed companies. Paulson was among the NYSE directors who voted 13 to 7 to accept Grasso's resignation.
Speaking mostly in fluent French during an interview at the Les Colonnes Caf near his home, Reed said board members can't defend themselves by saying they didn't realize the size of Grasso's package. "They are from the biggest institutions in the world and they can't say, 'We didn't know what we were doing,' " he said.
Reed said he plans to fly back to New York as early as tomorrow to meet exchange employees and expects to be in the job for as little as three months. He said he has no interest in taking the job on a permanent basis.
"My responsibility is to restore credibility," Reed said. "We must move quickly. Finding a new guy is the responsibility of the board and it can be done in three months."
A series of recommendations on corporate governance changes at the exchange, which was to have been presented to the NYSE board next Thursday, will probably have to be delayed for several weeks, Reed said. The NYSE says it set up a panel to make such changes in February.
"I will go to Washington to say what I think needs to be done and I will talk to the board and investors," Reed said. "I think that by the 10th or 15th of October that can be done."
Donaldson is looking forward to working with Reed, according to Laura Cox, the SEC chairman's spokeswoman.
"Chairman Donaldson is committed to working with John Reed," Cox said. "Clearly, there are many views on how this process should proceed."
Reed left Citigroup after losing a boardroom power struggle in April 2000 to co-chief executive officer Sanford Weill. In 1998, the two had created the world's largest financial company by revenue through the merger of Reed's Citicorp and Weill's Travelers Group Inc.
Since his retirement, Reed has kept a low profile, investing in U.S. Treasurys, bicycling around his hometown of Princeton, N.J., or in southern France, and declining interviews. Reed had realized $288 million in options gains by the time he resigned from Citigroup, according to the company's 2001 proxy.
