PALO ALTO, Calif. (CNN/Money) -
Eliot Spitzer can congratulate himself for gratuitously torpedoing the nomination of Citigroup's Sandy Weill to the New York Stock Exchange's board of directors. Weill, it seems, was about to be named as a director of the Big Board as, get this, a "public" representative.
New York State Attorney General Spitzer scotched that idea over the weekend, evidenced by NYSE Chairman Dick Grasso's statement Sunday that Weill won't be a candidate after all. That Weill was even up for the job after Citigroup's Salomon Smith Barney paid a huge settlement last year for issuing biased stock research drew chuckles from Wall Street cynics and raised ire from true public advocates.
Now that the affair is over perhaps the agency whose job it actually is to regulate securities exchanges (hint: its main office is in Washington and Harvey Pitt used to be its leader) can focus on just who's overseeing the New York Stock Exchange.
To that end, Pitt's successor as SEC chairman, William Donaldson, this week sent letters to the various exchanges charging them with reviewing their oversight policies.
According to exchange's bylaws, 12 of its board members represent the securities industries and another 12 represent the public. Grasso and two top staffers round out the board.
In another black eye for the NYSE following the Weill news, one of the candidates to represent the securities industry was knocked out of the running on Wednesday. Todd J. Christie, CEO of Spear Leeds & Kellogg, the stock trading specialist unit of Goldman Sachs, abruptly resigned on Wednesday.
A few examples of who's currently representing the securities industry on the NYSE board are Goldman Sachs CEO Henry Paulson; First Albany Chairman George McNamee (whose investment banking firm trades on Nasdaq -- go figure); Christopher Quick of Fleet Specialist; and CSFB Chief Executive John Mack.
Makes sense: Securities guys representing the securities industry.
Who's watching out for you and me?
But a look at the exchange's "public" representatives suggests a curious definition of "public" in the canyons of Wall Street.
They include: Carol Bartz, CEO of software maker Autodesk; Mel Karmazin, chief operating officer of media biggie Viacom; and Juergen Schrempp, CEO of DaimlerChrysler. Martha Stewart was a public representative before she resigned last year.
Looks like heading a public company seems to be a good proxy for taking up the public's interests, at least as far as the NYSE is concerned.
But these people don't wake up each morning wondering how they can protect investors -- they wake up thinking about how to make money for their companies, a noble goal to be sure, but not exactly the watchdog role the securities markets might like.
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As for the others representing the public, there's J.P. Morgan CEO William Harrison (another securities guy); former AOL Time Warner CEO Gerald Levin; and Silicon Valley super-lawyer Larry Sonsini, whose firm is famous for representing high-tech startups, not the downtrodden or the impoverished.
The NYSE does have some public-minded types on its board. Former New York Comptroller and gubernatorial candidate Carl McCall is a public representative. Interestingly, he recently joined the board of Tyco, the Big Board-listed company that kills any NYSE argument that all the bad stuff happened at Nasdaq companies. The exchange is also nominating Herb Allison of pension-fund manager TIAA-CREF.
But the NYSE clearly needs to do more.
"As we begin the new year with hope and optimism, restoring investor confidence remains paramount," is the message the NYSE's Grasso posted to his organization's Web site earlier this year.
Earth to Grasso: Appointing so many foxes to protect the hen house isn't going to restore investor confidence -- no matter how many times you say those magic words.
Adam Lashinsky is a senior writer for Fortune magazine. Send e-mail to Adam at lashinskysbottomline@yahoo.com.
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