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NYSE Chairman Finally Speaks Out

Richard Grasso gives his first extended interview since the controversies surrounding the exchange.

May 16, 2003|Walter Hamilton | Times Staff Writer

New York Stock Exchange Chairman Richard Grasso is in what he calls a "slump" -- and Thursday he began to try to fight his way out of it.

In his first extended interview since the recent controversies that engulfed the NYSE, Grasso acknowledged some missteps and discussed measures he hopes will quell the criticism.

"I've had a slump," he said. But he defended his long-term track record. "Dick Grasso will be judged by a lot more than the last six weeks."

It has been a tough six weeks. The NYSE revealed that it was investigating possible wrongdoing by specialists on its trading floor. The exchange, and Grasso personally, drew criticism for its corporate governance practices. The chairman had to contend with questions about his reported $10-million salary and was blasted for his nomination of Citigroup Inc. Chief Executive Sanford I. Weill to be a public representative on the NYSE board.

Grasso said Thursday that he regretted nominating Weill, whose company has been at the center of the recent furor over the conduct of Wall Street stock analysts. Weill withdrew his name from consideration after a storm of protest, including a jab from New York Atty. Gen. Eliot Spitzer.

"Do I wish that we had never nominated Sandy? I'm probably only second in terms of the strength of that wish to Sandy himself," Grasso said. "It was a mistake to nominate [him]. It was a mistake for him to accept it."

In the interview, Grasso said he wouldn't join anymore corporate boards. His role as a director at two NYSE-listed companies has sparked concerns about conflicts of interest, but he said he had no immediate plans to depart from Home Depot Inc., the only board on which he now serves.

Accepting another board membership would be like saying to critics "go ahead and take your shot," he said. "You only have one reputation to lose."

One of the thorniest issues for the NYSE has been its corporate governance procedures, such as how it selects board members. Indicating that he is open to reforms, Grasso said he has told an internal committee reviewing the exchange's rules that "everything is on the table."

Grasso also said he supported a proposal by William H. Donaldson, chairman of the Securities and Exchange Commission, to reconsider the pricing of stocks in decimals.

Grasso's comments came during an interview with reporters from The Times and Washington Post.

The gritty Grasso, the only person in NYSE history to rise from clerk to chief executive, is unaccustomed to blemishes on his record.

Through the late 1990s, and especially in the aftermath of the September 2001 terror attacks, Grasso won high marks for his stewardship. He was credited with using technology to modernize the exchange and with fending off encroachment from the Nasdaq Stock Market.

Grasso's determination to quickly reopen the stock markets after the attacks established him as an eloquent spokesman for Wall Street and the city of New York.

But in addition to the failed Weill nomination, Grasso has faced questions recently about his salary, which at a reported $10 million a year towers over the paychecks of fellow market regulators. Grasso refused Thursday to comment on the details of his salary, saying it was set by the board. Thirty-five years ago, he started as a clerk earning $81 a week, he said. "Anything above that is perfectly fine."

Larger complaints about the exchange itself also have surfaced. The NYSE is investigating the trading practices of some of its specialist firms, the professionals who handle the trading of NYSE stocks.

The probe focuses on whether some specialists involved themselves in certain trades in which they should have matched buyers and sellers directly.

Grasso has said anyone found to have cheated customers would be banished from the industry.

On Thursday, Grasso gave few new details of the probe. Edward Kwalwasser, who oversees NYSE regulation, said the exchange is taking testimony from traders "as fast as we can," but that the investigation could last a couple of months.

Kwalwasser also revealed that the probe began when the head of a listed company complained about volatile trading in his stock. Exchange officials found that the specialist wasn't responsible for the volatility, but that led them to examine whether the trader was matching orders properly.

The move to decimalization -- the pricing of stocks in penny increments -- in recent years was done in part to help small investors. But lately it has been criticized by institutional investors, and Grasso said he supports replacing it with a nickel pricing system. However, he said he realized that might open him up to criticism that he is catering to large investors at the expense of individuals.

"From a distance," he said, "it would look like you're going backward rather than forward."

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