Conflicts of interest,
Almost all of the reports we have
seen about the NYSE and its CEO have complained about the
conflict of interest which existed between Grasso and the
directors. There were also conflicts of interest because of
interlocking interests among the directors. The CII study
suggests the following:
"The White Paper states
that the Exchange has three key constituencies: the
members (broker-dealers, etc.), companies that list
on the Exchange and the investing public. Of these,
it calls the investing public its ultimate constituency.
The paper goes on to suggest
that because it has to balance the interests of these
three constituencies, it has the same kinds of checks
and balances as the federal government." (CII
Monograph) The monograph of the CII, however, considers
the investing public to be "the missing guest at
dinner." Only one of these constituencies can vote.
That same constituency, the broker-dealers, "picks
the board and the nominating committee, and thus, indirectly
the other committees."
A short list of potential conflicts
of interest among the board members, provided by the CII,
(CII, pp. 5-6)
We should repeat the first
point for emphasis, as it is quite important in the
story of Grassos compensation: "Until
recent pressures forced an end to this overlap, director
Langone was on the NYSE compensation committee while
chairman Grasso sat on the Home Depot compensation committee
a company Langone co-founded and on whose board
- Until recent pressures forced an end
to this overlap, director Langone was on the NYSE
compensation committee while chairman Grasso sat on
the Home Depot compensation committeea company
Langone co-founded and on whose board he serves.
- Directors Jung and Langone serve on
the GE board.
- Directors Langone, Grasso, and Fink
sit on the NYU board of overseers.
- Until recently, Merrill Lynch was
represented on the NYSE board by David Komansky, who
serves on director Finks board at BlackRock.
Merrill is now represented by director ONeal,
Komanskys successor, and TIAA-CREF is represented
by former Merrill executive Allison.
- Chairman Grasso and director Allison
both serve on the Yale School of Management advisory
- Chairman Grasso sits on the advisory
board of governance committee co-chair Panettas
Institute in California.
- Chairman Grasso and director ONeal
serve on the board of the Lower Manhattan Development
Corporation. (Both have missed two thirds of the corporations
- A partner of director Sonsinis
sits on the board of director Bartzs company,
- Directors Karmazin and Levin serve
together on the Lustgarten Foundation corporate advisory
- Director Caynes chairman at Bear
Stearns, Alan "Ace" Greenberg, sits on Viacoms
board where director Karmazin is president.
- Directors Levin and Paulson serve together
on the Council of International Advisers.
- Directors Levin and Purcell serve together
on the Independent Committee for Education.
- Directors Mack and Paulson serve together
on the board of the Indian School of Business.
- Director Harrisons company provides
services to director Allisons company.
- Director Caynes company handled
the sale of a business to director Larsons company.
Director ONeals company also did work
for director Larsons company. (Mr. Larson is
- Directors Jung and Harrison serve together
on the Catalyst board.
- Director Harrison and director Macks
companies provided financial services to director
- Director Sonsinis firm has done
business with the companies of directors Cayne, Mack,
- Director Sonsinis firm "regularly
represented" director Paulsons firm.
- Director ONeals company
provided tax advice to director Larsons company
(advice that was subsequently successfully challenged
by the IRS).
- Director Macks company has provided
banking services to director Karmazins company.
- Director Purcells company provided
services to director Jungs company.
- Director Caynes company and director
Langones served together as underwriters.
- Director Purcells company and
director Sonsinis firm have provided financial
and legal advice to mutual clients on the same cases.