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E*Trade Shakes up its Board

Online trading and banking concern E*Trade is shaking up the ranks of its board of directors with the appointment of four new members, the departure of two standing members, and the creation of a compensation committee to oversee executive pay packages.

The changes have been promised by the company's new CEO Mitchell Caplan, who vowed to Wall Street analysts in February that changes to the company's corporate governance structure were in the works, as part of his efforts to rebuild trust with investors.

Caplan was named as CEO in January after the company's founder and CEO, Christos Cotsakos, abruptly resigned amid controversial news that his pay package for 2001 was $80 million, at a time when the company's stock price was falling along with revenues. Cotsakos later gave back about $21 million the following May.

On Tuesday, in an effort to show that it is addressing investors' criticism over the pay deal, the Menlo Park, Calif.-based online brokerage said it has established a new audit committee for internal accounting reviews, in addition to a the compensation committee for overseeing pay packages.

The four board members appointed to serve as unaffiliated, independent outside directors are: Vaughn A. Clarke, executive vice president of the Federal Home Loan Mortgage Corporation; Michael Parks, currently managing director of the leveraged finance group for the Trust Company of the West; C. Cathleen Raffaeli, who is a managing partner, of The Hamilton White Group, and Donna Weaver, chairman of Mx Secure.

All the new directors, including the recently appointed CEO Mitchell H. Caplan, will stand for election at E*Trade's annual shareholder meeting, which is slated for May 22, 2003.

The two board members who are departing are William E. Ford, a board member since 1995, who said he would resign as of April 23. Peter Chernin, who has been a director since 1999, also said he would not seek re-election at the May shareholder meeting but would serve on E*Trade's advisory committee until the fall of 2003.

In a statement about the four new board members, George Hayter, the non- executive chairman of E*Trade Group, said one of his primary goals as chairman was to evolve the board structure to best suit the needs of the company "and to eliminate any shareholder concerns about corporate governance. The four new Directors are recognized leaders that add tremendous strength and diversity to our board," he said.

Hayter became non-executive chairman in January when then-president and COO Caplan stepped into the CEO slot.