DaimlerChrysler's CEO resigns from Big Board

"These guys are the ones who made the decisions, and if those decisions are bad, they've got to go."

Wayne Shaw, a professor of corporate governance at Southern Methodist University

DaimlerChrysler AG chief executive officer Juergen Schrempp resigned from the New York Stock Exchange (NYSE) board, as interim exchange chairman John Reed prepares corporate governance reforms in the wake of a controversy over the US$140 million paid to former chairman Richard Grasso.

Schrempp, head of the world's fifth-largest automaker, resigned to "clear the way for changes," said Han Tjan, a company spokesman. Schrempp was among the first directors to question whether Grasso should receive another US$48 million promised in his contract through 2007, board minutes show.

Reed, a former co-chairman of Citigroup Inc, arrived from his home in France yesterday and met with executives at the exchange. In a letter to NYSE members, he said his priority is to restore confidence. Carl McCall, co-chairman of the exchange's committee on governance, resigned yesterday, saying he wanted to give Reed a "clean slate."

"They're all going to resign," said Francis Maglio, a former floor broker who has owned a seat since 1973 and leases it out. "Eventually, the whole board will be replaced because they didn't do their due diligence to protect the shareholders."

Tjan Schrempp served on the board just over a year.

After McCall's resignation on Thursday, Securities and Exchange Commission chairman William Donaldson said he hoped "the other directors will rally around John Reed."

Donaldson will meet with Reed today in Washington.

Schrempp one of the good guys," said Maglio. "He questioned the pay package early on."

Under from the board, Grasso said on Sept. 9 he would forgo the additional money. He resigned Sept. 17.

Grasso's drew criticism in part because it was set by board members who represented Wall Street firms and listed companies that the NYSE helps regulate.

The NYSE's 27-member board should be cut to no more than 12 and directors must take responsibility for awarding Grasso's pay package, Reed said in an interview near his home on Ile de Re, an island off western France, earlier this week.

"I can't see how this board has any legitimacy to stay," said Wayne Shaw, a professor of corporate governance at Southern Methodist University in Dallas, this week. "These guys are the ones who made the decisions, and if those decisions are bad, they've got to go."

NYSE Ray Pellecchia declined to comment on Schrempp's resignation. The New York Stock Exchange is the world's largest, with about 2,700-listed companies with a market value of US$14 trillion.

Grasso's prompted criticism from investors and the heads of some public pension funds, including the three largest, in California and New York, who said it was improper for the head of a regulator to receive such a large pay-package.

McCall seven corporate-governance changes in his resignation letter to Reed. He said the exchange should consider separating regulatory and trading functions, add a representative from "the investing public" to the board, and ensure that the compensation committee is made up "solely" of independent directors.

Many probably will leave to help trim the board to a manageable size, said Charles Stonehill, global head of capital markets at Lazard LLC, the largest privately owned investment bank.

"There's going to be a huge cleanout at the board," Stonehill said. "It's too big. It's an ungovernable number."

Grasso has his defenders. Former New York Mayor Rudolph Giuliani told financial news network CNBC that Grasso did a "superb" job.

"It's one of the few times someone has been removed for doing a good job," Giuliani said. "I think the whole question is one that should've been resolved beforehand, not after the fact."