Originally created 09/22/03

Paid too much



Imagine being fired for doing a good job. That just happened to Dick Grasso, the New York Stock Exchange chairman who was ousted by the NYSE Board of Directors.

Everyone agreed the 57-year-old Grasso had done a fine job during his eight-year tenure - popularizing the exchange and getting it quickly back in business after the 9-11 tragedy.

What brought about his downfall is that he was paid too much money - including a $139.5 million retirement package he built up over 36 years at the NYSE, most of it since he became chairman in 1995.

But Grasso didn't pay himself that fortune - he simply accepted it from the board of directors. "Each year when I learn of the amount I am receiving," Grasso said at a news conference, "I respond with the same four words: 'I'm blessed. Thank you."'

If you were offered more than $140 million for doing a good job, would you turn your bosses down? No; it would be natural to react just as Grasso did. Why look a gift horse in the mouth?

There's also irony in that it was on Grasso's recommendation - in the interests of transparency and credibility - that the NYSE published what it paid its executives. When his huge pay package became known, it set off a cacophony of criticism from state finance officials, pension managers, politicians, investor advocates and traders who charged that the extraordinary salary undermined the credibility of the exchange, a not-for-profit, member-owned institution that also serves as a regulatory watchdog.

Basically, the payouts looked bad, really bad. As New York State Comptroller Alan Hevesi put it, "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."

Indeed. And it was an obscene amount of money. But again, it's the NYSE Board of Directors that OK'd the regulatory structure as well as the payouts. Grasso was simply doing the board's bidding. Now he's been made the fall guy.

But isn't it the board that really needs restructuring? Shouldn't it be walking out right behind Grasso? Smart Wall Street observers are starting to think so. There's reason to believe a lot more NYSE changes are on the way.