Ratings agency Standard and Poor’s announced that its president, Deven Sharma, will leave the company by the end of the year.
NEW YORK- The ratings agency Standard and Poor’s said late Monday that its president, Deven Sharma, who has become the public face of the firm in the wake of its historic downgrade on the United States’ long-term debt rating, will step down and leave the company by the end of the year.
The decision by Sharma to resign comes as the ratings agency is under pressure from several fronts, including an inquiry by the Justice Department into its ratings of subprime mortgage securities and a push by activist investors to break up its parent company, McGraw-Hill
Sharma will be replaced by Douglas Peterson, a top executive at Citigroup, the company said.
The management change had been in the works for months and was unrelated to either the Justice Department’s inquiry or to the emergence of the activist investors, Jana Partners and the Ontario Teachers Pension Plan, according to people briefed on the matter.
His replacement, Peterson, 53, is currently the chief operating officer of Citibank, the banking unit of Citigroup.
“We are pleased to welcome Doug to the important role of president of Standard & Poor’s as it continues to build on the enhancements of recent years and accelerates global growth,” Harold McGraw III, McGraw-Hill’s chief executive, said in a statement.
One of the most recognized names in finance, Standard & Poor’s is composed of two separate businesses. One is its credit rating agency, a vital cog in global capitalism that monitors the corporate world’s debt issuances. The other is a unit that manages its index products like the Standard & Poor’s 500-stock index.
The ratings agency’s decision arm to downgrade the United States’ long-term credit rating to AA(PLUS) from AAA on Aug. 5 set off a storm of controversy, including criticism by President Barack Obama and Treasury Secretary Timothy F Geithner. The decision contributed heavily to the worst drop in US stocks since the financial crisis three years ago, as well as volatility that continues to whipsaw the markets weeks later. The other ratings agencies, Moody’s and Fitch, have maintained their top-tier rating on US debt.
At the same time, S&P is being investigated over whether it improperly rated mortgage securities in the years leading up to the financial crisis, people briefed on the matter have previously said. That inquiry, which began before Standard & Poor’s downgrade of US debt, is centered on whether analysts’ decisions to assign securities a low credit rating on subprime mortgage loans were overruled by business managers.
Meanwhile, two activist investors pushing for change at McGraw-Hill have recommended that Standard & Poor’s ratings business appoint a “well-known independent oversight figure” to handle government relations.
But people briefed on the matter said Sharma had been considering stepping down well before the latest firestorm of attacks on the company. They say that Sharma first began pondering his options after McGraw-Hill announced in November that Standard & Poor’s would be split into its two component businesses.
