Grasso’s $140 million pay package provokes outrage, scrutiny

Citizen Works 9/8/03
Executive Pay

Grasso's $140 million pay package provokes outrage, scrutiny

The news that New York Stock Exchange Chairman Richard Grasso had received $140 million in deferred pay, bonuses, and retirement benefits continues to provoke outrage and scrutiny from onlookers of all types last week.

At the Securities and Exchange Commission, chairman William Donaldson, who was Grasso's predecessor at the SEC, demanded to know how this could have happened. He dashed off an angry letter to the NYSE, asking why the board of directors there extended Grasso's contract to 2007 before an internal review of governance practices had been completed. He also wanted to know how much of Grasso's pay came from funds that could have been used for regulatory purposes. "In my view," Donaldson wrote, "the approval of Mr. Grasso's pay package raises serious questions regarding the effectiveness of the NYSE's current governance structures."

Meanwhile, roughly a third of the members of the stock exchange were reportedly planning to sue to force Grasso to renegotiate his pay package.

Citizen Works founder Ralph Nader called on Grasso to return the pay package: "He should just give it back," Nader said. "By accepting this pay package, Mr. Grasso is signaling to every corporate executive in America that outrageous executive compensation is perfectly acceptable and even desirable. As the leader of the nonprofit NYSE, Mr. Grasso should be setting an example for responsible behavior, not demonstrating the same runaway greed that has created many packages where executives earn several hundred times the average employee. Especially with executive greed at the heart of Enron, WorldCom, Tyco, Adelphia, and dozens of other scandals, the big question is: how can Grasso be an effective private regulator of corporate excess if he is the very embodiment of corporate excess?"

"Instead of spending $140 million on Mr. Grasso, the NYSE should be spending that money on protecting investors," Nader said. "Just imagine how far $140 million could go toward creating new safeguards for investors and curbing the abuses that have dominated Wall Street in recent years? The real loser in this deal is the small investor. Mr. Grasso missed a lot of bad behavior by listed companies and members of the NYSE under his watch and, if he knew about them, did very little to stop the fraud, looting, deception, and conflicts-of-interest of the corporate crime wave. For this quality of work he receives $140 million!?"

For more, see: "SEC probe escalates debate over Grasso pay," by Greg Farrell of USA Today: http://www.usatoday.com/money/markets/us/2003-09-03-grasso3_x.htm

Also see:

"It's a Living," a Washington Post editorial: http://www.washingtonpost.com/wp-dyn/articles/A17179-2003Sep2.html

"Rich Payout, poor example," a USA TODAY editorial: http://www.usatoday.com/news/opinion/editorials/2003-09-03-edit-usat_x.htm

For Ralph Nader's complete comments on the pay package, see: http://www.citizenworks.org/admin/press/grasso.php

For Chairman Donaldson's letter to NYSE Human Resources and Compensation Chairman H. Carl McCall, see: http://www.sec.gov/news/speech/spch090203whd.htm