MSRB's selection process an obstacle to diversifying the board, Gunyou says.

The Municipal Securities Rulemaking Board's selection process is a closed one that makes it difficult to diversify membership to include women and minorities, a former board member charged.

"I think the crux of the problem is the process itself. It's not an open process," said John M. Gunyou, Minnesota's finance commissioner and a former vice chairman of the MSRB. He was a member of the board from October 1988 until September 1991.

Gunyou, who was appointed to his state finance post in 1991, resigned on Friday. He will become chief financial officer for Minnesota Communications Group, a nonprofit organization.

"I think that is a problem," Gunyou said, speaking of the lack of a black board member since the MSRB's inception in 1975.

"Part of the problem I think is that the nominating process does not foster diversity," he said.

The MSRB has come under fire recently as two black securities professionals criticized the board for the dearth of black members.

In a Sept. 9 letter to the U.S. Commission on Civil Rights, Napoleon Brandford 3d complained of the lack of a black professional on the MSRB beard. Brandford asked that the MSRB be restructured and requested that the civil rights commission ask MSRB executive director Christopher Taylor to resign.

"In my opinion, the current executive director lacks the vision and leadership skills necessary to create the diversity needed for inclusion," Brandford wrote.

Brandford is vice chairman of Grigsby Brandford & Co. Inc., a blackowned investment bank.

Responding, Taylor said, "There are many groups who want to have someone on the board" to represent their view.

In testimony before the Civil Rights Commission last week, Alphonso E. Tindall Jr., chairman of the National Association of Securities Professionals, characterized Taylor's response as "insensitive."

Said Gunyou, "I thought it was not appropriate for Kit Taylor to suggest that this is another interest group that wants to be represented."

The MSRB consists of 15 members: five representatives of bank dealers, five representatives of securities firms, and five public members not affiliated with a bank dealer or securities firm. At least one public member must represent an issuer and another must represent investors. Each member serves a three-year term.

Annually, the MSRB appoints a nominating committee of six board members, plus three members from the municipal industry and the public who are not board members. The nominating committee solicits recommendations for nominees and nominates one person for each position to be filled. The board then accepts or rejects the nominees.

Since the bulk of the nominating committee consists of board members, there seems to be little opportunity to gain new members from outside that group, Gunyou said.

"I think that lends itself to more of an inside perpetuation," Gunyou said.

During his tenure, the board did discuss the issue of diversity, Gunyou said, but there was little result. "A few people would support that, and then you'd come back and no women or minority members," he said.

Gunyou said he was not familiar enough with minority bankers to know "who's good and who would be a strong candidate" in order to suggest any as possible board members.

"Typically, you look to the banks to identify bankers and the brokers to identify brokers," he said.

Although some black professionals were nominated, they were never chosen, Gunyou said. A common rationale would be that the black professional did not hold a senior enough position to be selected for the board, he said.

"It was always disturbing that it would be 'Well, not that person, this one's better,' "he said.

When the suggestion arose about seeking a minority or woman for the board, "the typical son of comment" was "there are not enough women and minority officials in a senior enough position to be considered," Gunyou said.

Gunyou said he considered such comments inappropriate.

"I don't think all members of the MSRB board have to be a CEO," he said, adding that public members were not always the top executive in their organization.

Therefore, "it doesn't have to hold sway in the dealer community:"

"I think those are legitimate but not strong criteria. It's the argument that has always been used as a reason not to move quickly toward diversity," Gunyou said.

Gunyou said he never saw any blatant racism or discrimination expressed by the board in its policies.

"But it never is," he added. Gunyou said he did not remember the executive director, a nonvoting beard member, taking a strong stance on either side of the issue.

When told that a Hispanic investment banker and a woman investment banker were recently elected to the board, Gunyou commented, "I'm glad to hear that in the last few years there's been more of an opportunity to do that."

Several other board members also expressed an interest in diversifying the membership.

"I wasn't the lone wolf," Gunyou said.

"The thinking was we should reach out and identify qualified women and qualified minorities and include consideration of them," said Richard M. Evans, director of finance for Savannah, Ga.

Evans served on the board from 1989 to 1992.

"The board was sensitive and took steps to try to reach out," Evans said, "but always with the thinking that we wanted qualified people." He did not give specifics.

"I never saw any blatant' racial type of discrimination," Evans said.

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