Print

Mail

wiki links

Departure of Grasso no longer unthinkable

"He represents greed. He's putting a sign on the exchange that we are as greedy as Enron and all the other guys who robbed the public."

Bernard Herold, a 40-year NYSE member

The prospect of Richard Grasso's departure as chairman of the New York Stock Exchange, unthinkable as recently as two weeks ago, is being discussed by everyone from traders to directors to the executives of listed companies.

NYSE floor traders, including Michael LaBranche, James Rut-ledge, Bernard Herold, and James Maguire say Grasso's US$140 million payout this month is excessive and a distraction.

Three members of the NYSE's 27-person board today scheduled a meeting for Sept. 18 to "judge the sentiment of the floor," said Robert Fagenson, a board member who represents brokers.

"He was the hero of Wall Street but the rest of the world doesn't live on Wall Street," said Phillip Phan, professor of entrepreneurship at Rensselaer Polytechnic Institute and a consultant to the World Bank. "It's really hard to explain something like that to the average Joe."

Some traders who asked not to be named are threatening to convene a special members' meeting to call for Grasso's ouster unless the board acts. They said they have oral support from about 200 of the NYSE's 1,366 members to sign a petition that would force a special meeting. NYSE rules require 100 signatures for a non-scheduled meeting of members. Maguire, who has worked on the exchange floor since 1954, called on Grasso to resign immediately.

Grasso, who has been chairman since 1995, said at a press conference three days ago that he had no plans to resign and intends to serve out his contract until mid-2007. He also said he'd give up US$48 million due him through the end of his contract.

"You will all have the opportunity to bid me a farewell on the last day of May 2007," he said. His spokesman Ray Pellecchia said today the exchange stands by that statement.

Retired broker William Higgins is circulating a second petition, which would require 175 signatures, to force changes to the composition of the board.

"Grasso should go because he's overpaid," said Herold, 82, who has been an NYSE member for about 40 years. "He represents greed. He's putting a sign on the exchange that we are as greedy as Enron and all the other guys who robbed the public."

For some traders, an appropriate benchmark for Grasso's pay is the NYSE itself -- 326 of about 2,700 listed companies have a market value of less than US$140 million.

SEC chairman William Donaldson last week demanded an explanation of Grasso's compensation and New York Attorney General Eliot Spitzer in April criticized the ability of the "Big Board" to regulate its members.

"The recent facts coming to light about compensation policies put us in a position where we can't support pay levels at the exchange," said LaBranche, chief executive officer of LaBranche & Co, the NYSE's biggest market maker. LaBranche's family has traded stocks at the NYSE since 1903.

The exchange released details of Grasso's pay for the first time earlier this week. His paycheck got the biggest boosts in 2000 and 2001, when the New York Stock Exchange Composite Index rose 1 percent and fell 10 percent, respectively.

His total compensation was US$21.8 million in 2000. In 2001, he made US$25.5 million, his highest pay ever, in a year when the Standard & Poor's 500 Index fell 13 percent and Wall Street securities firms fired 24,000 people. The US$140 million represented deferred compensation and retirement funds.

The majority of the money in both years came from several incentive bonuses and a guaranteed return on his deferred pay.
This story has been viewed 2007 times.