[16741]
November 6, 2003
TO: EQUITY MARKETS ADVISORY COMMITTEE No. 30-03
SEC RULES MEMBERS No. 150-03
RE: NYSE ISSUES GOVERNANCE AND MANAGEMENT STRUCTURE PROPOSAL
The New York Stock Exchange has sent a proxy statement to its members containing
proposed amendments to the NYSE Constitution that would alter the governance and
management structure of the Exchange.1 The most significant aspects of the NYSE’s proposal
are summarized below.
In particular, the NYSE’s proposal would place responsibility for governance,
compensation, internal controls and supervision of regulation in the hands of a Board of
Directors that would be independent from NYSE management, NYSE members, member
organizations and listed companies. The new Board would consist of eight members2 as well as
the NYSE Chairman and Chief Executive Officer.3 The initial Board would serve until June
2004. Thereafter, the entire Board would stand for election in June of each year.
The Board of Directors would appoint a Board of Executives made up of approximately
twenty constituent representatives, balanced among the major broker-dealers, the “floor,” lessor
members, institutional investors and large public funds, and listed companies. The Board of
Executives would meet at least six times a year and would discuss Exchange performance,
membership issues, listed company issues and public issues relating to market structure and
performance.
The members of the Board of Directors also would serve on several Board-level
committees. Specifically, it is anticipated that the Board would have an Audit Committee and a
Regulatory Oversight & Regulatory Budget Committee to ensure that proper controls and
regulatory supervision are in place; a Human Resources & Compensation Committee to ensure
1 The proxy statement can be found on the NYSE’s website at
http://www.nyse.com/pdfs/ProxyStatement110403.pdf.
2 The proposed slate of directors consists of Madeleine K. Albright, Herbert M. Allison, Jr., Euan D. Baird, Marshall
N. Carter, Shirley Ann Jackson, James S. McDonald, Robert B. Shapiro, and Sir Dennis Weatherstone.
3 The Board would choose a Chairman and a CEO annually in June. If the Board identifies a person able to lead both
it and the Board of Executives and to discharge the functions of chief executive, one person may serve both roles.
Otherwise, it would select a different person for each role.
2
that management is paid appropriately; and a Nominating & Governance Committee to ensure
that the Board of Directors and Board of Executives function well and that appropriate people
are nominated for the Board and appointed to the Board of Executives. The Board also would
appoint some of its members to committees (along with Board of Executives members) dealing
with the Quality of Markets, Market Structure and Strategy, Finance, and appeals of
disciplinary actions and de-listings.
Finally, the transparency of the workings of the Board of Directors and the NYSE in
general would be increased. Among other things, prior to the Board’s annual meeting, the
NYSE would publish a proxy statement disclosing: the Board Committee charters and the
Committee reports on their activities for the year; membership on the Board, on the Board of
Executives, and on the various standing and advisory Committees; the facts establishing each
Board member’s independence, including any non-director relationship between Board
members and the NYSE itself and any material relationships among Board members; and Board
compensation. In addition, the annual report of the Human Resources & Compensation
Committee would detail compensation decisions for the top five NYSE officers, the existence of
any contracts for these individuals, the compensation for the top management team as a whole,
and the competitive comparisons and performance judgments that guided the Committee’s
recommendations. The Board of Directors also would detail the considerations that lead to
membership on the Board of Executives, and the current membership. A report of the activities
of the Board of Executives would be included in the proxy statement.
The NYSE’s proposal will be voted on by NYSE members at a special meeting on
November 18th. If the proposal is approved, the NYSE will submit the proposal to the SEC for
consideration and public comment.
Ari Burstein
Associate Counsel