Stock exchange doings don't spark confidence

Stock exchange doings don't spark confidence

Stock exchange doings don't spark confidence
Saturday, February 05, 2005


For more than a year, the New York Stock Exchange held onto a report on the doings of former NYSE chief Richard A. Grasso. Then on Wednesday, on a judge's orders, the exchange released the internal report.


One could see immediately why the market had been sitting on the document.

In it, everyone comes off looking bad. Grasso, the report says, received between $144 million and $156 million in excessive compensation - and then tried to hide that fact from the board of directors.


The report, prepared by Dan K. Webb, a former federal prosecutor and the NYSE's lawyer, has been the subject of widespread speculation on Wall Street for the past year. Its official release did not disappoint.


In his eight years at the top of the New York Stock Exchange, Grasso received $192.2 million in compensation or paid pension benefits. His executive assistant was paid $240,000 annually. His two drivers each got $130,000.


What's most revealing is the relationship that Grasso had with the NYSE board of directors. Grasso not only had undue influence over who was chosen to serve on the board, he alone had the authority to pick the members of the compensation committee.


When the chief executive names the people who are going to decide his salary, its a safe bet that he is going to pick people who are already well paid. Big numbers, after all, won't seem outsized to them. And he is likely going to pick people who are his friends, too.


Grasso, the Webb Report says, did both.


The New York Stock Exchange is a quasi-public institution. It is also a not-for-profit entity.

One can only wonder what Dick Grasso and members of the board of directors and the compensation committee were thinking. New York's attorney general, Eliot Spitzer, believes that Grasso was plundering the public trust and wants him to repay much of what he received.


Several years back, when the doings at corporations such as Enron and WorldCom and Global Crossing became known, investors understandably began to wonder about the scope of corporate malfeasance. While they are rightly pondering those questions, they need to be able to have faith in the exchange at which stock in those corporations is traded.