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Grasso faces contraversy { September 12 2003 } Original Source Link: (May no longer be active)
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2003/09/12/BU308693.DTL&type=businesshttp://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2003/09/12/BU308693.DTL&type=business
Grasso faces controversy
Pay package could lead to NYSE reforms
Harry Berkowitz, Newsday
Friday, September 12, 2003
©2003 San Francisco Chronicle | Feedback
New York -- When Dick Grasso led the reopening of the New York Stock Exchange just six days after the Sept. 11 terrorist attacks, he was hailed as a Wall Street hero.
"Today, America goes back to business, and we do it as a signal to those criminals who inflicted this heinous crime on America," the blunt and defiant NYSE chairman said to applause at that opening.
Thursday, on the second anniversary of the attack, Grasso once more presided over moving rituals: ringing of the opening bell by relatives of exchange members who died and the closing bell, rung by a firefighter, a paramedic and two police officers.
But the challenges Grasso faces now are vastly different from the task of rousing the financial markets two years ago because of intense controversy over his $139.5 million pay package.
Grasso has said he will not quit and is committed to another four years in his new contract, through 2007. And experts on the NYSE said he will likely survive the controversy, aided by the very confidence and management style that helped win him a string of huge bonuses.
"He is a survivor," said James Bradford Jr., who was a member of the NYSE board from 1986 to 1993.
But the Securities and Exchange Commission and other critics are likely to use the uproar to force the 211-year-old exchange to radically overhaul its corporate governance procedures, which are already in line for reform, the experts said.
SEC chairman William Donaldson has criticized the pay package for Grasso and two NYSE members have publicly complained about it.
"What the SEC wants out of this is not his scalp, but rather they are likely to use this embarrassment over his compensation as a lever by which to try to compel a re-examination of the governance structure of the New York Stock Exchange," said John Coffee, director of the Center on Corporate Governance at Columbia University School of Law.
Some say that even if Grasso withstands the initial criticism, the controversy may have long-lasting effects.
"Given the atmosphere of corporate governance these days it's definitely out of line," Charles Geisst, a market historian and finance professor at Manhattan College, said of the Grasso pay package. "He is a tenacious guy. He will do anything to keep business and get more business. But I don't think anyone can justify that amount of money."
"Most of the floor traders have found that their revenues, their incomes, their livelihoods are down . . . and all of a sudden here comes Grasso with an astonishing pay package," Geisst said. "That's bad news."
However, the unusual nature of the NYSE, which is partly regulator and partly a financial services organization, has made it difficult to judge the executive and his compensation and compare the pay levels to revenue and profits.
Documents released by the NYSE this week show that Grasso's $139.5 million in accrued benefits and deferred compensation was the result of a concerted effort to raise the pay of all the Big Board's top managers to compete with soaring corporate salaries, according to exchange documents.
At a news conference Tuesday, Grasso insisted he'd had no role in determining the level of his compensation and announced that he was turning down an additional $48 million in future payments. The documents show, however,
that he had taken a firm hand in how his new contract would be structured.
Reports from consultants Vedder Price and Mercer Human Resources outlined contract changes proposed by Grasso to extend his employment by at least three years, cap growth of his pension and transfer funds to his savings plan. The proposals led directly to the $139.5 million payout and the revised contract extending Grasso's employment through 2007.
The Associated Press contributed to this report.
©2003 San Francisco Chronicle | Feedback
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