NYSE EuroNext CEO Duncan Niederauer ruminates on climate change, financial regulation and the role of the CRO.

By the editors

As part of its formal partnership with NYSE Euronext, CR Magazine, CRO Summits, and CROA are all showcasing the CR thought leadership of the top executives of the world’s largest stock exchange during 2010 and beyond. Duncan Niederauer is the global CEO of the 8,000-listed-company NYSE Euronext, and an outspoken advocate for the rapid professionalization of CR practices.  We recently caught up with him in his Wall Street office.

CR: On February 12, Corporate Responsibility Magazine rang the opening bell at the Paris Bourse with your colleague Dr. Miguel Marques who heads NYSE Euronext’s CR initiatives worldwide and is on the Corporate Responsibility Officer Association Board of Governors. There, he said that you have set for NYSE Euronext and its 8,000 worldwide listed companies a classic triple-bottom-line agenda—improving environmental and social impact while boosting profits.  Why is this so important now?

Niederauer: Today more than ever, global forces are shaping both business and the challenges we face as global citizens.  NYSE Euronext is a truly global company—we have offices around the world and listed companies in 55 countries.  As a result, we are highly impacted by events and challenges that happen all over the globe, and it is very important to us to be part of the solution.  For instance, we had many employees who were directly impacted by the earthquake in Haiti.  We responded quickly with a financial donation, and our security team has been helping our employees locate loved ones.  Also, in the wake of the financial crisis, we decided that being a good global citizen meant that we should leverage our expertise and credibility in markets to build a comprehensive financial literacy strategy, which we are currently in the process of launching.

CR: At the CRO Summit in Chicago last October, your colleague NYSE Euronext SVP Walt Lukken talked about the big three areas of CR focus in the capital markets:  accountability, transparency, and smart oversight.  On the transparency topic, in your opinion has the recent round of re-regulation done much to improve transparency, especially in the derivatives area?

Niederauer: No, I do not believe we have seen enough substantive action in this area yet. We all know there was simply not enough transparency in our trading system, and this has to be fixed.  We believe that policymakers should focus their efforts on mandating that standardized derivatives clear through regulated clearinghouses.  Derivatives do not necessarily need to trade on exchanges, since central clearinghouses alone will eliminate much of the systemic risk.

CR: Several NGOs and authors have recently proposed that any public company that receives federal assistance in any form must first designate one executive as its Corporate Responsibility Officer, or CRO, the one point of contact for holding the company accountable for its stakeholder promises. What’s your opinion of the spirit of that idea?

Niederauer: I agree with the spirit of that idea.  While the precise title and role can and should vary within individual companies, I believe all large corporations—particularly those that received federal assistance—have an obligation to give back, be part of the solution, and do their part to encourage and promote a strong economic recovery.  Rather than lobby against progress, I believe the financial services industry has a responsibility to work with policymakers to learn the lessons of the crisis and fix the core areas that failed.  And at the same time, legislators have an obligation to invite these executives to offer meaningful input in the debate, rather than continuing to use “Wall Street” as a prop for televised expressions of indignation.

CR: On September 1, 2009, NYSE formed an independent advisory committee to look at U.S. corporate governance and the proxy process. How’s that process going?

Niederauer: The process is going very well.  The committee has met several times and is working to show policymakers that, with regard to corporate governance, private sector solutions can be more effective than a top-down, one-size-fits-all approach mandated by the federal government.  It is important to keep in mind that the financial crisis was not caused by failures in corporate governance. So, in order to truly learn the lessons of the crisis, it is important to stay focused on fixing the areas of capital markets that failed and not get distracted by other issues.

CR: While the recent Copenhagen climate change summit failed in its most ambitious goals, many CEOs have said that it convinced them that ignoring the climate change threat is no longer an option.  What was the biggest business impact you have seen from Copenhagen so far?

Niederauer: Climate change is an issue where companies around the world must work together to be part of the solution.  At our company, we have an extensive green initiative internally to make ourselves more eco-friendly.  And on a more macro level, we also are strong advocates of cap and trade, which we believe leverages market incentives to help reduce greenhouse gases. We currently own a successful carbon exchange in Europe called BlueNext and we are looking to make this a more global environmental platform.

CR: Since 36 million jobs from the U.S. economy flow through the more than 4,000 U.S. NYSE listed issues, let’s talk workforce. HR leaders say CR is 100 percent about winning the war for talent.  CFOs say CR is for staying strong with investors and regulators. Sales and marketing leaders say it’s exclusively a brand-builder. Who’s right?

Niederauer: They are all right, and when you pose the question to heads of other corporate disciplines, you’ll gain other perspectives.  CR is fundamentally a commitment to, and aggregation of, best practices born from every function within an organization.  The key is to recognize the merit and respect the intent of all these inputs in order to effectively produce a CR vision that serves the corporation and all communities it serves.  It’s a true democratic process rather than top-down approach. NYSE Euronext is uniquely positioned to also represent the views and interests of our listed companies, itself a diverse global community.   One of our goals at NYSE Euronext is to listen to our issuers, and based on that, advocate positions that create an environment that fosters growth, job and new product creation, innovation and enterprise, and ethics and integrity.

CR: Let’s talk about trends, past and future.  Since 2007, board-level CR discussions have rapidly trended away from compliance/Sarbanes-Oxley and toward environment/energy/climate change.  In your opinion will this trend continue, or do you see a new board-level hot-button CR issue coming?

Niederauer: One of the inherent responsibilities of corporate boards is to be forward-looking while striking a balance.  There certainly exists a greater appreciation of CR at the board level and the role of the corporation with respect to the environment, energy, and climate change.  Directors understand that addressing these matters serves the immediate and long-term best interest for the business, its shareholders, and society.  So, the bar has been raised, and this dynamic will continue to garner more attention.

CR: With over 8,000 listed issues worldwide representing the largest market capitalization of any exchange group, NYSE Euronext is in a unique position—to set new standards for its internal corporate responsibility practices, as well as setting a higher responsibility bar for its listed companies globally.  What message do you want companies to get?

Niederauer: Ours is a unique and significant responsibility, and we set the highest compliance and governance standards of any exchange group.  We also lead by example, and have embedded CR into our corporate DNA.  The fact that 88 of our listed companies, so many great brands, are part of the Corporate Responsibility Magazine’s 2010 100 Best Corporate Citizens List speaks well of integrity, ethics and CR practices of NYSE Euronext listed companies. CR as part of the corporate culture is good business and, when applied strategically and continuously, produces value for customers, shareholders, employees, and all communities.