E-Trade Shuffles Board Of DirectorsE-Trade Shuffles Board Of Directors
The online brokerage is dropping two longtime directors and adding four veterans of the financial-services industry in an effort to overcome investors' concerns
April 8, 2003
SAN FRANCISCO (AP) -- Online broker E-Trade Group Inc. is reshuffling its board of directors in its latest attempt to overcome investor doubts about the company's oversight of management.
With the shake-up, E-Trade's board gains four veterans of the financial-services industry and drops two longtime directors, venture capitalist William E. Ford and Peter Chernin, president and chief operating officer of News Corp. E-Trade expects to announce the changes Tuesday. The new directors are: Vaughn A. Clark, executive vice president of the Federal Home Loan Mortgage Corp.; Michael K. Parks, former chief executive of Aurora National Life Assurance; C. Cathleen Raffaeli, a managing partner for a financial advisory service; and Donna L. Weaver, formerly a senior manager in the savings and loan and brokerage industries. The overhaul represents E-Trade's latest act of contrition as it tries to win back investors disillusioned with the board's decision to reward then-Chairman Christos Cotsakos with an $80 million compensation package after the company lost $241.5 million in 2001. E-Trade disclosed Cotsakos' windfall amid a wave of corporate scandals that incited demands for more vigilant boards to protect shareholders from management cronyism and shoddy financial controls. Shareholders' indignant reaction to the Cotsakos package prompted the executive to relinquish $23.5 million in benefits and prodded the company to promise a more autonomous board. Despite the concessions, E-Trade's stock remained in a funk, contributing to Cotsakos' resignation in late January. Cotsakos walked away with a $4 million severance payment and a $4 million bonus for his work in 2002. Cotsakos had agreed to waive his salary through May 2004. E-Trade's stock has plummeted by 40 percent since the revelation of Cotsakos' compensation package. The company's shares fell by a penny to close at $4.50 Monday on the New York Stock Exchange. The company's four new directors will be the only members on the E-Trade compensation committee that reviews executive pay. "It was important to send a very strong signal to the market that we are absolutely focused on doing the right thing," said Mitchell Caplan, who replaced Cotsakos as E-Trade's CEO. Caplan is the only E-Trade executive on the company's 10-member board, which is chaired by another outsider, George Hayter. Ford, an E-Trade director since 1995, was on the compensation committee that approved Cotsakos' package. Caplan said Ford decided to step down largely because his venture capital firm, General Atlantic, sold its stake in E-Trade. David Hayden, another former member of E-Trade's compensation committee, resigned last year. Ronald D. Fisher, who joined the compensation committee a year ago, has been shifted to the finance committee.
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