NYSE - Euronext Merger and Board Independence

We return to the issue of the NYSE and independence. As a recap from prior posts, the NYSE put in place an entirely independent board of directors in 2003. The board could not include executive officers of listed companies or most persons connected to registered broker dealers.  Similarly, the board of NYSE Regulation, the non-profit subsidiary responsible for oversight of brokers and listed companies likewise received an independent board.

Less than a year after emerging as a for profit company, the NYSE Group and Euronext agreed to merge. In December 2006, the NYSE Group submitted to the Commission a request for approval of the transaction and the creation of a new holding company, NYSE Euronext. The SEC approved the merger (actually the changes in the foundational documents) on Feb. 14, with the release published two days later. 

The two exchanges had very different philosophies when it came to board independence.  Euronext had a supervisory board (part of the dual board structure common in continental Europe). The board had a policy requiring director independence. The policy, however, differed substantially from the one employed by the NYSE Group. Rather than exclude representation of key interest groups, the policy required it.  As the Profile of the Euronext Supervisory Board states:  "The composition of the board also reflects the interests of key-parties in the capital markets i.e.:

                     - financial institutions, banks and brokerage firms;

                      - institutional and retail investors;

                      - listed companies

                      - asset management, investment banking"

While the NYSE had sought to maintain a board independent of the entities it regulated, Euronext did the opposite. To see the biographies of the directors of the Euonext Supervisory Board and their many industry connections, go here.  None of this was fully explained in the proposing release. The Release merely noted that the “ Euronext supervisory board members are not subject to an independence policy similar to the proposed independence policy of NYSE Euronext.” The language is here, in footnote 17 of the proposing release.

Tomorrow we will begin to examine how these disparate philosophies were addressed in the merger.