(Reuters) - McGraw Hill Financial Inc
McGraw, the great-grandson of the founder of the 125-year-old company, will continue as chairman after relinquishing the CEO post on November 1.
Peterson is currently president of the company's Standard & Poor's ratings business, which is being sued by the U.S. government for $5 billion for allegedly defrauding investors by inflating credit ratings prior to the global financial crisis.
McGraw, who has been CEO for 15 years, was responsible for the breakup of the company that included the sale of its TV stations in 2011 and its textbook business this year. The company's name was changed from McGraw Hill Cos in May.
In addition to its ratings agency, McGraw Hill owns commodities and energy research firm Platts, market research firm J.D. Power, the S&P Dow Jones index business and several trade magazines including Aviation Week.
McGraw's last years as CEO were dominated by enormous disruptions to its businesses, including a sharp reduction in the number of bonds to rate in the wake of the financial crisis.
Peterson joined as S&P's president in 2011, replacing Deven Sharma who stepped down after the agency's downgrade of U.S. government debt sparked a row with the Treasury.
Peterson had earlier served as the chief operating officer of Citigroup Inc
McGraw Hill said Peterson would have a base salary of $900,000 and an annual target bonus of $800,000, while Terry McGraw will be paid a retainer of $400,000 a year.
McGraw Hill shares rose 2 percent to $57.01 in early trading on the New York Stock Exchange. Up to Wednesday's close, the shares had risen about 3.3 percent since the company reported stronger-than-expected results at the end of April.
(Reporting by Tanya Agrawal in Bangalore; Editing by Sreejiraj Eluvangal and Ted Kerr)