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NYSE Reveals Big Pay for Its Chairman

Richard Grasso will be paid $139.5 million in accrued benefits, sparking criticism.

August 28, 2003|Kathy M. Kristof | Times Staff Writer

In its first disclosure of an executive's pay, the New York Stock Exchange said Wednesday that Chairman Richard Grasso would receive $139.5 million in accrued retirement and other benefits this year, plus a salary and bonus of at least $2.4 million.

The compensation package was made public when the NYSE announced that it had extended Grasso's contract through 2007. The contract sets his annual base salary at $1.4 million and his target bonus at a minimum of $1 million.

The size of the package sparked protests, as did the unusual provision in the contract allowing Grasso to pocket a huge sum in retirement money -- more than four times the NYSE's income in 2002 -- years before he might actually retire.

"Dick Grasso should be an example of how to properly structure compensation; he should not be a poster child of executive excess," said Brandon Rees, research analyst at the AFL-CIO office of investment. "This is really outrageous."

A nonprofit organization owned by its 1,366 brokerage members, the NYSE sets disclosure requirements for 2,700 publicly traded firms.

Because the exchange itself isn't a public company regulated by the Securities and Exchange Commission, it isn't required to disclose what it pays executives. But largely at the urging of the SEC, the NYSE board recently adopted corporate governance standards and pledged to reveal the pay of its top five executives, as the companies the NYSE helps regulate must do.

Making Grasso's employment agreement public was a first step in providing this information to investors, but it wasn't a complete step, said Paul Hodgson, senior research associate at the Corporate Library, a corporate governance Web site based in Portland, Maine.

He noted that, although the exchange revealed that the NYSE board approved the five-year contract with minimum salary and bonus figures, the exchange didn't disclose what Grasso, 57, was paid in 2002.

His salary has been reported to be as high as $12 million.

"Their announcement raised more questions than it answered," Hodgson said.

For instance, the exchange didn't reveal the size of Grasso's past bonuses, nor how much of his retirement savings came from his own contributions rather than contributions by the exchange. It also didn't say whether it paid above-market interest on his employee savings account, as many public companies do for their executives.

The NYSE said the chairman's 2003 pay would be released in March, when the exchange issues its 2003 annual report. The exchange disclosed his minimum contracted pay but not his actual pay.

Whether it will ever make public the other information isn't clear. The NYSE board will make that determination sometime before March, said Bob Zito, executive vice president of communications.

Publicly owned companies, including those that trade on the NYSE, must disclose in annual filings with the SEC the salary and bonuses of their five most-highly compensated officers for the current year and the previous two years.

"If the NYSE is going to set itself up as the standard bearer, it has to make sure that its house is exceptionally clean," Hodgson added. "They have tried to do the right thing here by disclosing this information, but to think that no one is going to bat an eyelid over $140 million in deferred compensation shows that they really haven't been listening."

Under the five-year contract, Grasso's deferred compensation, savings and retirement plan benefits were "restructured," the NYSE said, allowing Grasso to withdraw the benefits this year. He will cash out $40 million from his employee savings account; $51.6 million in accrued retirement benefits and $47.9 million in what the NYSE called "prior incentive awards."

The ability to take retirement and deferred compensation benefits before leaving a company is highly unusual at any firm, public or private, executive compensation experts said. No other employee of the NYSE has been given that ability, an exchange spokesman acknowledged.

Grasso, who has worked for the NYSE for more than 30 years, was traveling and not available for comment Wednesday. He said in a statement that he thought withdrawing his accumulated retirement and other benefits was "advisable in order to facilitate personal financial and estate planning."

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