Paulson urges NYSE to sack directors - including himself

The future path of the New York Stock Exchange was under fraught debate yesterday as its board prepared to gather for an emergency meeting in the wake of the stunning resignation of its chairman, Dick Grasso, on Wednesday.

On the table at last night's meeting were issues ranging from finding a replacement for Mr Grasso to consideration of a proposal from the chief executive of Goldman Sachs, Henry Paulson, for sweeping reform of the board's membership to remove all directors drawn from the financial services industry, including himself.

Meanwhile, the shock at Mr Grasso's sudden ejection, triggered by outrage at a pay package worth $140m (£88m), had hardly subsided. One board director, Mel Karmazin, the president of Viacom, offered to resign from the board while speaking up in support of Mr Grasso, including his pay package. He voted against Mr Grasso departing.

The task of finding a successor was becoming every more chaotic, amid reports that as many as five potential candidates had declined to accept the post. Those who had already turned down offers by the board included the Silicon Valley lawyer Larry Sonsini and Herbert Allison, chief executive of the financial group TIAA-CREF.

Several prominent names being floated as possibilities to take the helm at the exchange ranged from the legendary investor Warren Buffett to the former US Treasury Secretary Robert Rubin. However, the board was also expected to consider separating the positions of chairman and chief executive.

Mr Paulson was said to be pushing his plan to remove from the board all representatives of Wall Street as the only way to answer conflict-of-interest concerns. Critics charge as unethical the current arrangement where board members from Wall Street, whose businesses are partly regulated by the NYSE, are also responsible for setting pay levels of those that lead the exchange. Presently securities firms represent 12 of the board's 27 members.

The failure of the board to have a successor in place brought new expressions of outrage. "It's absolutely stunning that they would be so ill-prepared," thundered Jeffrey Sonnenfeld, associate dean at the Yale School of Management. "It is a basic tenet - that you have to have a succession plan."

Not everyone seemed happy that Mr Grasso was gone. Mr Karmazin, who was in Britain attending the Royal Television Society conference in Cambridge, called him a "terrific leader". He went on: "Do I think the NYSE would be better run without Dick? No."