Kennedy School of Government (KSG) fellow Marshall N. Carter was elected to serve as chairman of the New York Stock Exchange’s (NYSE) board of directors Thursday, taking the helm of an 11-member body charged with regulating the world’s largest stock exchange.

Carter—a fellow and adjunct lecturer at the Center for Business and Government and Center for Public Leadership at KSG—offered few specifics about his plans for the NYSE, but he did say that he was not taken aback by the board’s decision to elect him as the new chairman.

“There was really no surprise. I was very aware of what the challenges of the exchange were and where we were going,” he said. Carter has served on the board since 2003.

Carter replaces John S. Reed, who plans to return to private life. According to Bloomberg News, Carter will earn a $250,000 salary as chairman.

Carter, 64, said that in his new role he will be responsible for ensuring the independence of the board while simultaneously collaborating with other constituencies, including the Securities and Exchange Commission (SEC), NYSE chief executive ??officer John A. Thain, member companies, and NYSE customers.

“I think we need to make clear that this is the largest pool of capital in the world,” Carter said. “It’s very important that we continue to manage this thing, 24/7, flawlessly.”

But Carter will also face a number of challenges as chairman. His appointment comes at a time when the NYSE is still recovering from a financial scandal that rocked the exchange nearly 18 months ago. After receiving intense criticism concerning a $140 million retirement package, former NYSE chairman Richard Grasso yielded to mounting pressures and resigned in September of 2003.

Barbara L. Kellerman, a research director at the KSG Center for Public Leadership who has worked with Carter, said that Carter’s succession to the chairmanship comes at a thorny time for leaders of the exchange, which is staffed by 1,500 employees.

“He’s coming to the exchange after a difficult time,” she said. “I think all leaders are under closer scrutiny than they have been in recent times.”

Market experts say Carter will also have to deal with pressures to modernize the NYSE and transform it into a more competitive market. Some investors have criticized the NYSE for being the last major stock exchange to still rely on human trading in addition to computers.

Carter said that the NYSE has submitted a proposal to the SEC for a hybrid system aimed at balancing the concerns over moving towards new technology.

“We still feel that some human intervention, especially when turbulence occurs in the market...is necessary to prevent wild swings in the stock price,” Carter said. “But we think that a lot of the top few hundred shares can be done electronically.”

Carter said that the NYSE is also examining a possible shift to for-profit status. Though he wouldn’t offer an opinion on the move, he said that the NYSE is awaiting a report that will assist it in making a decision.

Kellerman said that Carter’s leadership experiences in the public, private, and military sectors make him a good fit for the challenging job. Carter, a graduate of West Point Military Academy, served in the Marine Corps for 14 years. He was also chairman and CEO of State Street Bank and Trust Company for nine years. Following the terrorist attacks of Sept. 11, he headed a special task force to review security concerns at Boston’s Logan Airport for the State of Massachusetts.

“He’s levelheaded, and he is one of those rare birds who has a strong moral compass,” Kellerman said.

Hannah Riley Bowles, an assistant professor of public policy at KSG, said Carter is widely admired by students in her classes.

“He’s incredibly forthright and grounded,” she said.

After Carter taught Bowles’ leadership class for one day, Bowles said that a number of female students approached her offering praise for the respect that they thought Carter showed in addressing gender issues.

Carter said he plans to maintain both of his positions at Harvard during his tenure as chairman.

—Staff writer Javier C. Hernandez can be reached at jhernand@fas.harvard.edu.??