SEC Asks Exchanges to Review Governance

Securities and Exchange Commission Chairman William Donaldson on Wednesday ordered the 10 U.S. stock exchanges to review their corporate governance policies, telling them they needed to be a model of good business ethics.

Donaldson wrote to the exchanges four days after New York Atty. Gen. Eliot Spitzer derailed the New York Stock Exchange’s nomination of Citigroup Inc. Chairman Sanford I. Weill to its board. Spitzer objected because of the bank’s $400-million settlement of charges it misled investors with biased stock research aimed at winning business from corporate clients.

“In light of the era we’re in right now, just as every board in the country is looking internally at its governance structure, it’s only logical that the exchanges should be reviewing theirs,” Donaldson said. He told the exchanges to report back on their governance reviews by May 15.

Carl McCall, New York State’s former comptroller and an NYSE board member, said the exchange already has formed a committee to study governance issues.

Donaldson said his directive wasn’t prompted by the Weill controversy, though “obviously we’re aware of the recent flap.”

The NYSE and the Nasdaq Stock Market also have faced criticism in recent days for banning reporters from the Arabic Al Jazeera TV network from using their facilities. Nasdaq specifically objected to Al Jazeera’s airing of images of dead and captured U.S. soldiers in Iraq.

The Weill debacle follows long-standing criticism that the NYSE board is too closely aligned with the exchange’s interests and not the public’s.

Briefly

Nearly two-thirds of U.S. corporate pension plans are underfunded, according to a survey released Wednesday, in another sign of the pension squeeze facing corporate America. The percentage of employers with fully funded pension plans fell to 37% in 2002 from 84% in 1998, according to a survey by Washington-based consulting firm Watson Wyatt. The 2002 data are based on a survey of 419 companies.