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NYSE's Grasso to Forgo Extra Pay Amid Furor

He says he would give up $48 million to quell the controversy over his compensation package.

September 10, 2003|Walter Hamilton | Times Staff Writer

New York Stock Exchange Chairman Richard Grasso, roundly criticized for his nearly $140-million pay package, said Tuesday that he would forgo an extra $48 million this year in hopes of quelling the mounting controversy over his compensation.

The previously undisclosed $48 million was owed from a 1999 employment contract. With it, Grasso's total 2003 payout would have been about $188 million -- far more than that of other securities regulators.

At a hastily called news conference at NYSE headquarters in lower Manhattan, Grasso, 57, said the furor over his pay had eclipsed the workings of the world's largest stock exchange.

"Focus is so important for this institution, and my leadership, I think, was in many respects being questioned," Grasso said. "This institution should not be preoccupied with talking about the compensation of its leader."

However, the pay concession seemed to stoke the controversy. Two weeks after the NYSE kicked up a storm of protest by revealing that it paid Grasso $139.5 million to cover retirement benefits and incentive awards that he previously had earned but deferred taking, some outsiders were outraged anew Tuesday when they learned that he was to have been paid even more.

"I was flabbergasted by the announcement today that there were even more pots of money stored away waiting for Dick Grasso," said Nell Minow, editor of the Corporate Library, a corporate-governance Web site, who called for Grasso's resignation.

The NYSE disclosure came after the Securities and Exchange Commission demanded extensive details about Grasso's pay. SEC Chairman William Donaldson, who preceded Grasso as NYSE chief, was said to be incensed over his successor's compensation. Donaldson earns $142,500 a year at the SEC.

Grasso's compensation has angered some of the NYSE's 1,366 members. In a letter sent this week to the SEC, longtime NYSE seat holder James Rutledge criticized the exchange's board for approving Grasso's pay package.

H. Carl McCall, the chairman of the NYSE's compensation committee, said Tuesday that the board remained firmly behind Grasso and that "there wasn't any discussion" of Grasso's resigning at an NYSE board meeting earlier in the day.

The exchange gave the SEC 1,200 pages of information on Grasso's pay, including the minutes of meetings at which the NYSE board decided Grasso's compensation. The exchange also released a 12-page cover letter written by McCall that contained new disclosures about Grasso's pay.

The letter revealed that in 2001, a year in which the stock market was tumbling, Grasso earned almost $25.6 million. He took home $21.8 million in 2000 and $12 million last year.

Grasso's earnings came from a variety of bonus and incentive pools. Large chunks came from a bonus pool that was initiated in 1998 solely for senior executives, the letter shows.

This pool, known as the Capital Accumulation Plan, was open to "specific senior executives." The plan awards appear to be based solely on the amount handed out from another bonus pool, known as the Incentive Compensation Plan. Grasso's Capital Accumulation Plan awards were 50% of what he received from the incentive plan.

In 2001, for example, Grasso received $16.1 million from the incentive plan and half that amount, $8.05 million, from the Capital Accumulation Plan.

The unvested portion of Grasso's Capital Accumulation Plan awards paid a guaranteed annual 8% interest rate. That essentially risk-free benefit has been blasted by critics, who say that even corporate executives who receive gargantuan pay get much of it in the form of stock options, which can be made worthless by a falling stock price.

Grasso said he had no role in setting his pay, which was proposed by the NYSE's compensation committee and set by the board. However, the letter says that until three months ago, he recommended committee members to the board.

That system was changed as part of a reform effort in which a special committee now reviews Grasso's recommendations.

Even after forgoing the extra payment, Grasso will remain well compensated. His recently extended contract specifies a $1.4-million annual salary and annual bonuses that are likely to be at least $1 million. Grasso hinted at the news conference that he may retire when his contract expires in mid-2007.

The SEC's Donaldson told Bloomberg News that he would study the information from the NYSE "before we make any judgments."

Times staff writer Kathy M. Kristof in Los Angeles contributed to this report.

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