S&P president to resign after downgrading the US
Deven Sharma will call it quits as the president of S&P, at a time when the credit raters are amassed in controversy surrounding their recent downgrade of the US debt. Since S&P downgraded the US credit rating from AAA to AA+ earlier this month, both Congress and the Department of Justice have announced plans to investigate their decision and the inner workings of S&P.
Despite the recent report and the subsequent aftermath causing international headlines, McGraw-Hill Cos, the parent company of S&P, says that Sharma’s resignation is not related to the downgrade or the drama that has escalated in the weeks since. Theories on Wall Street have since emerged, however, linking Sharma’s resignation to the issuing of the AA+ rating and the investigations that have opened up against S&P in the weeks since. It is an unlikely coincidence, many investors note, that Sharma has chosen now as the time to resign as the market has gone haywire in the recent days and weeks and at least two governmental entities have expressed concern over alleged corruption at S&P headquarters.
Insiders tell The New York Times that Sharma’s decision to step-down has been in discussion “well before the latest attacks on the company,” the paper writes, going as far back as November. Another report released by The Times last week that made light of the Justice Department’s investigation, however, notes that they have been probing S&P since before the downgrade as well. According to the DoJ, Standard & Poor’s may have issued improper ratings to mortgage firms directly before the financial crisis of 2008.
Sharma has served as president of S&P since 2007 and will formally step-down effective September 12, 2012. Citibank Chief Operating Officer Douglas Peterson would replace Sharma as president of Standard & Poor’s.
"S&P will continue to produce ratings that are comparable, forward looking and transparent," reads a statement released today by the credit rating agency. Jana Partners, which owns around 5 percent of McGraw-Hill along with the Ontario Teachers’ Pension Plan, issued a statement of their to Peterson, saying that "Recognizing the need for help at S&P will be useful, but to address years of chronic underperformance for its shareholders McGraw-Hill will need to take much bolder steps."
Earlier this week, Jana Partners and the Ontario Teachers’ Pension Plan offered a presentation to McGraw-Hill in which they proposed the company split into four public entities, which would include an information and media division, a financial division, an education division and a financial division, which would include S&P, of course.