"Doug's enthusiasm and great nature have made him a mentor and friend to many over the years," Gene McQuade, the CEO of Citibank, wrote in an internal memo that was circulated announcing Peterson's departure.
Citi hired Peterson in 1985, fresh from Wharton's MBA program, and he worked his way up from corporate banking role in Argentina to country manager in Costa Rica and then Uruguay. (He met his Argentinean wife, with whom he has two sons, while working in Latin America.) After Citicorp and Travelers merged in 1998, Peterson oversaw the integration of their respective audit teams. He was then appointed chief auditor of the combined group in 2001.
But whether Peterson will be a success at S&P is still up for grabs, in large part because the business is in flux. Even if he can help repair S&P's credibility, he must work through investigations and lawsuits that could drag on for years. The results of these legal actions could greatly change the landscape for ratings agencies and their legal liabilities vis-a-vis ratings.
Regulators and politicians are also working to take ratings out of regulations, which would be another game changer for S&P. Rules governing the fixed income securities that banks and institutional investors can hold, and in what amounts, rely on credit ratings. And the only ratings that count are those from Nationally Recognized Statistical Rating Organizations (NRSROs), of which Moody's, Fitch, and S&P are the dominant global firms, giving them a pseudo-regulatory role and a sea of customers who must use ratings. (New York Times columnist Thomas Friedman famously told Jim Lehrer that there were two superpowers in the world -- the United States and Moody's.) Even S&P's outgoing president Deven Sharma told Fortune that regulations should not mandate the use of ratings.
Taking ratings out of the system could greatly decrease the power and influence that the big three ratings firms have over Wall Street, and possibly impair their earnings power. But that sort of mass overhaul still seems a long way off, points out ratings watchers like Larry White, a professor at NYU's Stern School of Business.
While Peterson is inheriting a difficult situation at S&P, the move could prove very lucrative for him. No succession plan has been announced, or even speculated upon, for McGraw-Hill's 62-year-old CEO Terry McGraw. It is possible that Peterson would be a possible successor. After all, he would be running the company's most lucrative division, and has a broad array of managerial experience at a massive organization.
Moreover, Jana and Ontario Teachers are pushing for a break up of McGraw-Hill into four separate businesses: education, media, indexes, and ratings. If S&P is spun off, Peterson would suddenly rise from respected division head to the chief executive of a standalone, influential, and highly profitable Wall Street firm. (McGraw has balked at the idea of so drastic a move.) If Moody's, which was spun out of Dun & Bradstreet in 2000, is any indication, S&P shareholders could stand to reap the benefits of a split. Moody's shares rose nearly 40% a year after their initial public offering. Five years later, the stock had tripled. The value of executive stock options soared, enriching executives.
