VideoSecurities and Exchange Commission Chairman William Donaldson told Congress at a Wednesday hearing that self-regulatory organizations (SROs) like the New York Stock Exchange must at least match the governance standards they demand from companies they list.
"SROs play a critical role as standard setters for sound governance practices," Donaldson said in prepared remarks to the Senate Securities and Investment Subcommittee. "Just as SROs have demanded that their listed companies strengthen their governance practices, we must demand that, at a minimum, SROs match the standards they set for listed companies."
To this end, Donaldson said there are a number of related issues that merit the SEC's attention. They include board composition and independence of directors; the independence and function of key board committees; the transparency of the SRO's decision-making process; and the diligence and competence required of board and committee members to ensure their focus on the adequacy of regulation.
This said, the chairman conceded that an SRO that operates a market "has an inherent conflict of interest between its roles as a market and as a regulator."
Robert Greifeld, chief executive of Nasdaq Stock Market Inc., agrees. On Wednesday he once again called for the stock markets to separate their regulatory and market functions, citing conflicts of interest, according to Reuters. "Our basic feeling is, if you have to take a long time explaining why your structure is right, you're probably on the wrong path," Greifeld reportedly said.
Greifeld stated that he has met with commissioners and staff at the SEC to discuss Nasdaq's exchange application, which if approved will allow Nasdaq to separate from its parent, the NASD, and completely separate the two functions.
After the Senate subcommittee hearing, Donaldson said that SEC approval was "imminent" for the new listing standards proposed by the NYSE and Nasdaq more than a year ago, according to Reuters.
Earlier this week, The Wall Street Journal said the approval will come on Thursday. An SEC spokesman said he has no idea when this will take place.
Among the proposals: Companies would be required to have a majority of independent directors, to have more independent board committees, and to have regular meetings of independent directors apart from company officers.
Billionaire Loads Up on Computer Associates
Software giant Computer Associates, which is the subject of two separate government investigations into its past accounting practices, is apparently the target of another wealthy investor who has been aggressively buying up its shares.
Last Thursday, Swiss billionaire Walter Haefner of Careal Holding plunked down around $150 million to buy 5.8 million shares. He bought another 500,000 shares the following day.
The purchases lifted his holdings to 125.8 million shares. Two weeks ago, Haefner spent $92.6 million to buy 3.6 million shares.
By the time he finished his buying, the stock was already down more than 18 percent in two days after the company announced the resignations of its chief financial officer and two other finance executives.
You may recall that in the past few years, Computer Associates successfully fended off two hostile bids for the company by investor Sam Wyly.
In July 2002, Computer Associates paid Wyly $10 million, thereby guaranteeing that the company's top officials would be re-elected to the board at its annual meeting. In 2000, Wyly sold Sterling Software — which he had acquired in a hostile manner — to Computer Associates for $4 billion.
Mesa Threatens Proxy Fight with Airline Holding Company
Mesa Air Group Inc. Tuesday said it will nominate a slate of seven directors to replace the current board members of Atlantic Coast Airlines Holdings Inc.
In addition, the regional airline has made an unsolicited stock offer of 0.9 of a Mesa share for each outstanding share of Atlantic Coast. The offer is worth $493.6 million, slightly lower than Mesa's October 6 offer, which was worth $512 million.
"We are disappointed that we have not received a response from ACA management or its board of directors to our October 6 letter outlining an acquisition proposal for ACA," said Mesa chairman and CEO Jonathan Ornstein, in a statement. "We have made a full and fair proposal to merge with ACA based on a proven strategy that we believe will result in long-term profitability."
This is the first hostile takeover attempt in the airline industry in more than 20 years, according to The Washington Post.
Atlantic advised shareholders to take no action in response to Mesa's offer.
Analogic to Restate Due to Accounting Issues
Analogic Corp., a producer of health and security imaging equipment, said it will restate its financial statements for the nine months ended April 30, 2003, and the fiscal years ended July 31, 2002, and July 31, 2001, to adjust for certain accounting practices.
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