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Grasso Says He Won't Resign

NYSE chairman appears to have the support of his board even as criticism mounts.

September 11, 2003|Walter Hamilton and Thomas S. Mulligan | Times Staff Writers

NEW YORK — Richard Grasso said Wednesday that he would not resign as chairman of the New York Stock Exchange despite ballooning criticism of his compensation and leadership.

"Would I voluntarily, after having just committed four more years of my life to this institution, step down? The answer is clearly not," Grasso, 57, told reporters after an appearance in Washington.

The comments came a day after the exchange shocked outsiders by revealing that it owed Grasso $48 million on top of the nearly $140 million it already had paid him this year. Grasso said he would not take the extra money, but the gesture did little to quiet critics who were angered that the $48 million had not been previously disclosed.

"I am amazed that Grasso thinks this is a concession that could possibly end this debate," said Benn Steil, senior fellow at the Council on Foreign Relations. "It's going to be very difficult at this point for him to keep his job."

In addition to the $139.5 million he has received in accrued retirement pay and other benefits, Grasso's salary and bonus this year will be a minimum of $2.4 million.

At the least, the pay flap shines a spotlight on a series of recent NYSE controversies that have soiled Grasso's carefully managed image and forced him into an uncharacteristically defensive crouch.

Two years ago, Grasso garnered national acclaim for overseeing the rapid reopening of the world's largest stock exchange after the attacks on the nearby World Trade Center.

Earlier this year, the NYSE was forced to reveal that it was investigating whether some "specialists," who handle the daily trading of stocks, were engaging in improper practices.

That followed Grasso's failed nomination of Sanford Weill, the chairman of Citigroup Inc., to be a member of the NYSE board representing the interests of individual investors. After a public outcry over the wrongdoing of Citigroup stock analysts, Weill withdrew from consideration.

And now the NYSE, which imposes corporate-governance rules on corporate America, is being pressured by the Securities and Exchange Commission to improve its own standards.

"It's just another example of how much of a country club atmosphere they've had all along," said John Wheeler, head of equity trading at the American Century mutual fund group. "Their rules are set up to benefit the members of the exchange at the expense of the investing public."

While some of the exchange's 27 board members appear to have been caught off-guard by the $48-million disclosure, the NYSE board at the moment seems to stand behind Grasso.

Veteran NYSE board member William B. Summers Jr., chairman of McDonald Investments Inc. in Cleveland, said Wednesday that Grasso continued to have "broad, enthusiastic support on the board."

"Until the time his pay was disclosed, everyone thought he was great," Summers said in an interview. "But now, apparently, people who thought he was really good at one price think he's not so good at another price."

Could the rancor over the pay package become such a distraction that Grasso would be forced to step down? "I can't contemplate that at all," Summers said.

Though some floor brokers and specialists are grumbling about the size of Grasso's pay package, particularly after their own compensation was sapped by the bear market, it's unclear whether widespread calls for his ouster will emerge.

One market professional who works at the Big Board said the disclosures about Grasso's pay had dented the chairman's support on the trading floor.

"It embarrasses the exchange," said the professional, who spoke on condition of anonymity. "We're supposed to wear the white hats, but this has given us a black eye that may take years to get over."

At the same time, he acknowledged that Grasso has nimbly kept such competitors as Nasdaq and the new electronic markets at bay while balancing the sometimes conflicting interests of the Big Board's various constituencies -- floor traders, brokerage houses, specialists and investors.

However, there were hints that Grasso's backing among the NYSE's membership may be slipping. George Morris, an NYSE member since 1985, told SEC Chairman William Donaldson that he should void Grasso's contract because it was arrived at by "fraud and deception."

In a recent letter to Donaldson, Morris criticized the NYSE board for approving Grasso's pay and not revealing the $48 million.

Morris is the second exchange member to publicly criticize Grasso and the board about the compensation. James Rutledge, a seat holder for 30 years, said in a letter to Donaldson that Grasso should step down and the board should be changed.

Yet some NYSE seat holders remained firmly behind Grasso.

William J. Higgins of Pine Beach, N.J., who has owned an NYSE seat for many years and at times has battled the exchange over its policies, said it would be a shame if the pay controversy ended the tenure of Grasso, whom he called "the best chairman we've ever had."

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Bloomberg News was used in compiling this report.

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