Turnaround: Since becoming president of Nasdag, Alfred R. Berkeley III has improved the market's tarnished image and led an effort to make it friendlier to small investors.


May 10, 1998|By Bill Atkinson | Bill Atkinson,SUN STAFF

Shortly before Alfred R. Berkeley III was named president of the Nasdaq Stock Market Inc., a joke circulated among the investment community: "Did you hear the one about the new Nasdaq ad slogan?" it began. "Nasdaq, the stock market for the next 100 years with 25 years off for good behavior."

It wasn't funny to the executives of the world's second largest stock market, who felt as if they were staring into both barrels of a shotgun.

The Justice Department was probing a group of companies that buy and sell Nasdaq-listed stocks to see if they had colluded to fix prices. And the Securities and Exchange Commission was looking not only into whether brokerage firms cheated investors, but whether executives at Nasdaq's parent company, the National Association of Securities Dealers Inc., knew about the problems and ignored them.

Nasdaq's credibility with investors was in jeopardy, and Berkeley had plenty to lose if he took the job and changes that were promised weren't made.

He had a superb reputation as a managing director at Baltimore-based Alex. Brown Inc., plenty of money, and a spacious home in Roland Park. And he had just undergone surgery to remove a cancerous prostate.

So why would he risk all that for Nasdaq?

His wife, Muriel, answered the question best. "You have gotten a second chance," she told her husband. "The industry has been very good to you. Why don't you give something back?"

Berkeley, then 51, went for the job, beating out 136 candidates to become Nasdaq's first president since the electronic market began trading stocks in 1971.

A tall, athletic man, Berkeley hit the place like a tidal wave, bringing new life and ideas to the bruised company, employees and observers say.

Since joining Nasdaq, he has pushed to make it a friendlier stock market to small investors. He has helped patch strained relations with the SEC. And he has backed major investment programs with the hopes of becoming the biggest stock market in the world, and surpassing the New York Stock Exchange.

"If you had to dial Central Casting for somebody who would be perfect for the Nasdaq stock market, you couldn't have picked a better person," said Gordon S. Macklin, president of the NASD from 1970 to 1987. "He is a wonderful combination of businessman and dreamer."

William G. Christie, a longtime Nasdaq critic and an associate professor of finance at Vanderbilt University in Nashville, Tenn., says under Berkeley, Nasdaq has been willing to help small investors. "That is very much a change in philosophy from the old Nasdaq," hesaid. "I think he is very appropriately taking much more of a customer view."

If anything, Berkeley has brought a sense of humor and humility to Nasdaq.

He is a businessman, a computer nerd and a thinker fused into one. He dresses neatly in business suits, but lugs around canvas bags jammed with reports and papers. At his home, his dining room table is overwhelmed by papers and documents. And his Washington office is small and unpretentious, crowded with books, papers and boxes brimming with materials.

He punches at a computer on his desk and munches Altoids mints, to which he claims to be addicted. On a bookshelf behind his desk are figurines of black and white Holstein cows, which friends sent him after learning about a bizarre prank Berkeley pulled in college.

The mood at the office today is vastly different from what it was on May 9, 1996, when Berkeley first set foot on the 11th floor of Nasdaq.

The company was frantically trying to rebuild its image and mend its frayed relationship with regulators and critics, who were calling for sweeping changes.

In February 1996, Mary L. Schapiro became president of a new unit called NASD Regulation, which was created to police more than 500,000 brokers and 5,500 firms that buy and sell Nasdaq stocks.

Berkeley was appointed to run Nasdaq three months later, and in January 1997, Frank G. Zarb, the former chairman of Alexander & Alexander Services Inc., became chairman and chief executive of NASD.

He replaced Joseph R. Hardiman, another former Alex. Brown executive, whose distinguished 10-year career at the NASD was tarnished by Nasdaq's problems.

"We needed to staff up the whole organization in a fairly significant way," said Michael W. Brown, Nasdaq's chairman and the former chief financial officer of Microsoft.

But just three months after Berkeley arrived, the SEC dropped a bomb -- a massive report that concluded that NASD officials turned their heads while brokerage firms cheated investors.

There was a list of charges ranging from stock manipulation to brokers ripping off small investors by keeping the spread on stocks wide so they could pocket more money.

"They were under siege when I came in," Berkeley said.

Making progress

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