At the end of the 1980s, Chicago’s futures markets still dominated the world. Foreign and electronic rivals were growing–but still distant–threats.
The colorful, boisterous open outcry method of setting prices at the Chicago Board of Trade and Chicago Mercantile Exchange was antiquated even then. But the two still towered over their rivals and so apparently believed they could spend most of the 1990s engaged in a spirited crosstown rivalry.
They did this rather than uniting forces and coming to grips with how to transform their clubby, costly, cumbersome infrastructures into something that could survive the new world of foreign competition, electronic trading and customized derivatives fashioned specifically for customers by investment firms.
Well, here they are at the end of this decade. And at the CBOT in particular, the competitive focus isn’t even on the crosstown rival anymore; it has turned totally inward. The membership ranks at the CBOT are consumed with an internal battle that deals not with whether their institution will survive, not with whether they can compete against more nimble rivals, but with turf battles over such things as whether to publicly release senior staff salaries and who will control the selection of directors.
That is a disgrace at a time when one of Chicago’s proudest and most storied institutions demands leadership. Tribune business columnist David Greising correctly called this a “fratricidal feud of miniature proportions.” The turf battles go to a vote on Wednesday, but the larger issues are no closer to resolution.
Behind all the huffing and puffing is a power struggle pitting President Tom Donovan and a majority of the board of directors against Chairman David Brennan. Donovan sees these ballot propositions backed by a dissident faction close to Brennan as undermining his and the board’s authority. Since the Brennan forces once tried–unsuccessfully–to oust Donovan, this viewpoint is understandable. But, on the face of it, these are not unreasonable propositions, particularly for a hidebound institution that had better get used to radical change–or might as well acknowledge it won’t be around much longer.
This infighting harms the CBOT at a critical time. On the big issues, the Donovan faction appears to be more forward-thinking, while the Brennan faction does not. But the Donovan faction has all but invited this showdown by running what amounts to a closed shop. There are no heroes in this fracas, but everyone at the CBOT will be a loser if the fighting goes on.
