NYSE chairman resigns amid furor over lavish pay package
Thursday, September 18, 2003
NEW YORK -- New York Stock Exchange chairman Dick Grasso resigned Wednesday amid rising fury over his $139.5 million pay 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 as chairman and chief executive 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 he was stepping down "with the deepest reluctance." He added that "I believe this course is in the best interest of both the exchange and myself."
Critics, from investor advocates to politicians and traders, say the lavish pay undermined the credibility of the exchange, a not-for-profit institution that is owned by its members and also serves as a regulatory watchdog.
"In an era of corporate scandals, you can't have the regulator of the world's largest stock exchange take tens of millions of dollars in remuneration from the people he's regulating. That's a conflict of interest," New York State Comptroller Alan Hevesi said.
The board was to reconvene later in the evening to name an interim replacement, as well as a search committee for a permanent successor. Larry W. Sonsini, a corporate attorney who leads a Palo Alto, Calif., law firm, was considering whether to accept the interim slot.
Grasso's tenure unraveled in just three weeks after the NYSE on Aug. 27 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, mostly during his eight years as chairman.
News of the lump sum payment roiled Wall Street, and even some board members were surprised by certain pay arrangements. On Sept. 2, Securities and Exchange Commission chairman William Donaldson sent McCall a letter asking for details.
Grasso has insisted he did nothing to influence his pay. At a Sept. 9 news conference, when he announced he would forgo another $48 million promised to him under his contract, he said each year when informed of his compensation he responded by saying, "I'm blessed. Thank you."
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 Wednesday by Democratic presidential hopeful Sen. Joseph Lieberman of Connecticut.
Michael LaBranche, the head of LaBranche & Co., one of the NYSE's largest stock-trading specialist firms, had come out earlier in Wednesday in favor of a change.
"We are calling for Grasso's immediate resignation in the interest of the New York Stock Exchange. We think Dick Grasso has to leave now in order for the exchange to move forward and restore investor confidence in the marketplace," he said.
As he departs, Grasso's contract says he is entitled to nearly $10 million in severance pay, 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 and a $5 million bonus.