NYSE Independence and "For Profit" Status

An earlier post set out a bit of history on the development of the NYSE policy with respect to the independence of its own board. The NYSE required that the board consist entirely of independent directors and that the directors be independent of listed companies and registered broker-dealers.

These independence standards took on renewed importance when the NYSE became a for-profit, public company in early 2006. At that time, the NYSE announced that it had expanded its independence policy. Moreover, to insulate the regulatory function from for profit influence, a separate entity was formed (NYSE Regulation) and given an independent board of directors. As the CEO of the NYSE Group has described: “Every director of NYSE Regulation, except for Rick [Ketchum, the CEO of NYSE Regulation], will be independent of broker-dealers, New York Stock Exchange-listed companies and management of NYSE Group.”  Testimony of John A. Thain, CEO, NYSE Group, before the Committee on Banking, Housing and Urban Affairs, US Senate, March 9, 2006. 

The board of NYSE Regulation could include a minority of directors from NYSE Group. The independence policy applicable to the NYSE Group, however, ensured that these directors would be independent of those subject to regulatory oversight by NYSE Regulation. Three directors from NYSE Group currently sit on the board of NYSE Regulation.  The board of NYSE Regulation, by the way, cannot be said to underrepresent law deans.  Its membership includes Mark Sargent, Dean at Villanova Law School, and Stephen Friedman, Dean at Pace Law School. 

Which brings us to the changes in the independence policy proposed in connection with the merger with Euronext, a transaction apparently approved by the Commission yesterday. More on that tomorrow.