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Investigators demand grasso resign Original Source Link: (May no longer be active)
http://www.bayarea.com/mld/mercurynews/business/6791538.htmhttp://www.bayarea.com/mld/mercurynews/business/6791538.htm
Posted on Wed, Sep. 17, 2003
Investors demand Grasso resign
Mercury News Staff and Wire Reports
The backlash over the $140 million pay package paid to Richard Grasso as head of the New York Stock Exchange intensified Tuesday, with leaders of giant pension funds in California and elsewhere demanding that he step down.
California pension officials sent an open letter to the stock exchange, which regulates the nation's most powerful stock market.
The officials -- who help steer the nation's No. 1- and No. 3-biggest state pensions, CalPERS and CalSTRS -- said Grasso's pay package had ``shocked'' investors and raised doubts that the NYSE has the ``requisite moral authority'' to oversee corporate reforms needed to restore confidence in the nation's stock markets.
``Today we're trying to pull the pig from the trough,'' said CalPERS President Sean Harrigan, who was flanked at a Sacramento news conference by State Treasurer Phil Angelides and Jack Ehnes, who heads CalSTRS. ``The next thing is to try to find out who filled the trough.''
CalPERS is the California Public Employees' Retirement System, which is the pension fund for state public employees; CalSTRS is the California State Teachers' Retirement System. The two California pension funds, with $245 billion in combined assets, were the first institutional investors Tuesday to call for Grasso to step down -- but they weren't the last.
By day's end, they were joined by New York Comptroller Alan Hevesi, who oversees the nation's second-biggest public pension fund for New York state, and North Carolina Treasurer Richard Moore, the sole trustee of his state's $56 billion public pension fund.
Getting some support
Grasso and the NYSE declined to comment. But Kenneth Langone, who headed the NYSE's compensation committee when much of Grasso's compensation was awarded, said Grasso can run the Big Board as long as he wants.
``Dick is going to be fine,'' Langone told Reuters. ``Dick is going to be there as long as Dick wants to be there.''
Grasso and the NYSE have been under attack since it was revealed last month that he was due nearly $140 million in deferred compensation and benefits. Soon after, it was revealed that Grasso was due an additional $48 million in compensation, which he said he would give up.
That didn't satisfy critics, however, and now the NYSE is scrambling to control the damage on its own trading floor, on Capitol Hill and in Silicon Valley.
On Thursday, the board of the exchange will dispatch three directors with close ties to the trading floor to hold an ``unofficial meeting'' with many floor members in hopes of quelling the rising tide of dissent.
Today in Congress, U.S. lawmakers plan to grill the nation's top watchdog over the stock markets -- Securities and Exchange Commission Chairman William Donaldson -- when he testifies before the House Financial Services Committee. Donaldson, who once headed the NYSE, has been critical of Grasso's compensation.
Handling raises questions
The NYSE's handling of the pay package ``leaves a lot to be desired,'' Rep. Harold Ford, D-Tenn., told Reuters. ``It really raises questions about the judgment of many on Wall Street today.''
Frustration was evident in Silicon Valley, too. In the face of a backlash from investors and the Sarbanes-Oxley legislation to reform corporations, companies have been forced to overhaul how they dole out executive pay and stock options. This summer, the NYSE implemented a rule requiring companies to win shareholder approval of options plans.
Scott Spector, a partner with the high-tech law firm of Fenwick & West, says Silicon Valley executives are privately angry at the NYSE for setting such a poor role model as a regulator. He fears that the outrage over Grasso's pay will overshadow the tech industry's strides to overhaul corporate boards, rein in option grants and ease the reliance on traditional options.
``It's just a new round of compensation on the front page,'' Spector said. ``The law of unintended consequences is that this will be hanging around, and there's a risk that other companies will get caught up in this new round of concern about compensation. . . . You can imagine all the people putting their hands to their heads, saying, `Not again.' ''
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The Associated Press, Bloomberg News, Reuters and Mercury News staff writer Mark Schwanhausser contributed to this report.
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