A larger-than-life image of Shrek appeared in Times Square on the Nasdaq OMX market site’s towering electronic billboard to promote the opening of the DreamWorks Animation SKG musical on Broadway and its conversion to a Nasdaq-listed company. DreamWorks was one of 24 companies to switch its exchange allegiance this year. Reflecting on the events of the past year—including the thrill of seeing Shrek and DreamWorks CEO Jeffrey Katzenberg ring the market site’s opening bell—is Bruce Aust, executive vice president of Nasdaq OMX. Fresh from a full-day conference devoted to corporate governance issues sponsored by the exchange, Aust says that what public company board directors need today is mostly pragmatic advice in this interview conducted and edited by Judy Warner, managing editor of Directorship.com.
Let’s begin with Washington: what are you telling your boards to be on the lookout for?
Mostly there is trepidation around what is unknown. Washington is focused on health care right now, but boardrooms, obviously, need to be aware of what’s happening. At Nasdaq OMX and on behalf of our issues, we want companies to be public companies. It’s good for our capital market. It’s good for job creation and it’s good for innovation. There is certainly an awareness that Washington is going to play a key role as we come out of the recession on issues such as tax, cap and trade, immigration and jobs.
And there any non-corporate governance challenges that concern you?
There’s a common belief that health care is going to be expensive and we will need resources to pay for it. Where are those resources going to come from? It’s still an unknown and is making a lot of people very uneasy.
Is the recession over? What are some of the important challenges that remain in your opinion?
There are positive signs. We’ve had resurgence in the IPO market. The second half was strong with some private equity and a few venture capital deals…There is general awareness that we need to create more jobs and more opportunity.
What should we to come out of the great compensation debate?
We just completed a corporate governance survey going into 2010. Proxy access, compensation and board elections are all up in the air. We do believe that there will be changes driven by the SEC and the exchange will follow suit. The U.K. financial services sector has been interesting in particular but I don’t think here you will see changes that lead to other industries. Instead, I do think there’s a greater move toward more disclosure around executive pay and I would expect that to continue.
What’s new on the activist shareholder front and what is NASDAQ OMX doing to help directors navigate this landscape?
Activism has been increasing from even before the economic downturn. We have tools to help you understand your shareholder better, to identify when shareholders are in acquiring positions, and to get messages out to your shareholders. Activists were here before the downturn and it’s likely we will see an increase as more investors turn to stock. We may see an increase–see more investors for stocks
As you look ahead to the New Year, what are the main governance themes you see for 2010?
This will be the first year that brokers will not be allowed to vote shares, which will create new costs, as you make sure you’re getting your shareholder vote. Given that this is the first year, companies will have to spend a lot more time making sure that every vote is counted. The other question that every board member is going to want to know is what is the risk element and it could be as minor as is our cash protected to what’s the dollar doing. I think the government will put into place greater transparency around securities and risk. Nobody liked the stock price but at least you knew what the stock price was. I think you will see over-the-counter derivatives traded on more exchange-type platforms as well to give investors a better sense of their value.
Green initiatives took a back seat during the recent global climate, but do you see things changing coming out of the Copenhagen summit? ?
Carbon trading is going to be looked at in 2010, 2011, 2012–it’s a matter of priorities. We just saw that coming out of Copenhagen. I do believe that companies must be prepared and understand that we will have carbon trading. To that point, Nasdaq acquired Nord, an energy and carbon-trading platform in Norway where there is more trading. Directors need to keep a close watch. Europe has a lot of trading.
What’s are your professional priorities for the New Year?
To continue to execute on our strategy. As part of our deal with OMX, we now operate 70 exchanges around the globe. Nasdaq itself was always known and now with the Philadelphia options market we are much more diversified for equity. In the last year, 24 companies have switched to Nasdaq including large cap brands such as Mattel, DreamWorks, and most recently, Micron.