NYSE's Grasso quits amid furor over $140M pay package
By Amy Baldwin
Associated Press
NEW YORK — New York Stock Exchange Chairman and CEO Dick Grasso resigned yesterday amid rising fury over his $139.5 million compensation package, his 36-year career ruined by cries that he made too much money running the world's richest financial market.
Grasso called an emergency meeting of the NYSE board shortly after the market closed and offered to resign if the board requested, said H. Carl McCall, chairman of the NYSE compensation committee.
"The board did so and accepted that resignation," said McCall, who chaired the meeting.
Grasso, in a statement, said, "I believe this course is in the best interest of both the exchange and myself."
He said he was stepping down after eight years as chairman "with the deepest reluctance."
The same contract that led to Grasso's downfall also could give him $10 million in severance pay, along with other benefits such as lifetime health insurance.
He is the latest prominent figure in the business world to fall in a three-year storm of public outrage over outsized pay and questionable practices in corporate boardrooms and executive suites. That anger was fed by the collapse of stock prices in 2000 and the scandals at major companies beginning with Enron Corp.
No one was suggesting wrongdoing by Grasso of the type that has brought criminal charges against executives at Enron, WorldCom Inc. and other companies. But some critics saw conflicts of interest among board members and too little control over Grasso's influence.
The charismatic Grasso was more than just the head of the NYSE; he was its biggest promoter and cheerleader, transforming the opening and closing bells into public happenings.
After the Sept. 11 attacks, he turned the resumption of trading — three years ago to the day — into a tribute to the dead and a first step toward the recovery of the financial district.
"I have worked with great partners to build and enhance the value and brand of the NYSE," Grasso said. "I look forward to supporting the board and the exchange in bringing about a smooth transition to a successor."
The board reconvened later in the evening and decided that co-chief operating officers Robert G. Britz and Catherine R. Kinney will handle daily operations, reporting directly to the board, until a new CEO is found. McCall, a former New York comptroller who works in private equity, was tapped as lead director.
Grasso's tenure unraveled in just three weeks after Aug. 27, when the NYSE extended his contract through 2007 and disclosed that the deal included a payout of $139.5 million in savings and benefits accumulated since he started working for the exchange in 1968, most of it in the past five years.
Critics called the pay excessive, and on Sept. 2, Securities and Exchange Commission Chairman William Donaldson sent McCall a letter asking for details.
The NYSE responded that Grasso actually was entitled to $48 million more, which he quickly said he would forgo.
But the sum had caught even some board members, including McCall, by surprise, and outrage spiraled.
Floor traders reportedly circulated petitions. Board members started calling for special meetings with seatholders.
On Monday, former NYSE Chairman James Needham joined calls for Grasso to go, followed Tuesday by influential pension officials in California and New York and yesterday by Democratic presidential hopeful Sen. Joseph Lieberman of Connecticut.
Grasso has insisted he did nothing to influence his pay. At a Sept. 9 news conference, he said each year, when informed of his compensation, his response was: "I'm blessed. Thank you."
Critics, from investor advocates to politicians and traders, said the lavish pay undermines the credibility of the exchange, a not-for-profit, member-owned institution that also serves as a regulatory watchdog.
According to Grasso's new contract, he is entitled to nearly $10 million in severance pay — equal to his salary and target bonus for the next four years, as well as health and life insurance for himself and his wife for the rest of their lives. But he has publicly declined several of the contract's provisions — such as supplemental retirement benefits, a $5 million bonus and funds vested in a capital accumulation plan.
Aside from the fantastic sums, there was little unusual in the contract's provisions in the event of "involuntary termination without cause," which is what appears to have happened in this case, said Peter N. Hillman, a partner at the law firm of Chadbourne & Park, who specializes in employment matters.
"It looks like something we might have done for one of our clients, though certainly not with so many zeros," Hillman said after surveying the contract. "This guy, he doesn't have to worry about a thing."
