Would you credit it? Standard & Poor's chief executive resigns

Deven Sharma, head of top three ratings agency S&P, has handed in his notice. Could US debt have been one downgrade too far?

by Emma Haslett
Last Updated: 23 Aug 2011
Deven Sharma, the CEO of controversial ratings agency Standard & Poor’s,  which decided earlier this month to downgrade the credit rating of the US from AAA to AA+, has handed in his notice. S&P won’t say whether it’s anything to do with the downgrade, which managed to get more than a few backs up at the US Treasury (not to mention the markets) – or, indeed, whether it’s anything to do with a Department of Justice investigation into the top ratings it slapped on complex mortgage investments during the housing boom which subsequently lost millions for investors. But there’s already been plenty of speculation…

You can’t downgrade the largest economy in the world without consequences. Thus, when S&P revealed it was downgrading US debt, it sent markets into a spin from which they have yet to recover. It’s understandable that the US authorities were upset about it: Treasury Secretary Timothy Geithner said the agency had reached ‘absolutely the wrong conclusion’ and had shown a ‘stunning lack of knowledge about fiscal math’. Indeed: it turned out that S&P had made a $2tn error in the calculations it used to justify the downgrade (which the agency has since conceded). A bit more than forgetting to carry a couple of zeroes, then…

Still, we could be getting ahead of ourselves. S&P has already appointed Sharma’s successor, in the form of Douglas Peterson, currently chief operating officer at Citibank, who starts on 12 September – so presumably the company has been interviewing for a few months. The timing of Sharma’s resignation also coincides with the final stages of S&P’s split from parent company McGraw-Hill Financial, which took place last year. So S&P’s rather anodyne explanation that Sharma has decided to ‘pursue other opportunities’ might be all there is to it.

McGraw-Hill conceded that Sharma would be staying on until the end of the year to help with a ‘strategic review’ into its portfolio: having split with S&P, it’s also decided to sell BusinessWeek magazine and some of its TV stations and it’s considering the sale of its textbook division. Although some of its shareholders would like it to go a step further: the Ontario Teachers’ Pension fund and hedge fund Jana Partners, which between them own a 5.6% chunk of the company, want S&P to be sold off altogether. So perhaps Sharma’s exit was better timed than he realised…

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