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Date Posted: 12:51:29 08/28/03 Thu
NYSE Gives CEO Grasso $140 Million
Lump Sum Includes Deferred Payments
By Ben White
Washington Post Staff Writer
Thursday, August 28, 2003; Page E01
NEW YORK, Aug. 27 -- The New York Stock Exchange today disclosed that it recently paid chairman and chief executive Dick Grasso a lump sum of almost $140 million, covering 20 years' worth of deferred compensation, retirement benefits and previously earned incentive awards.
The exchange, under pressure to disclose more about how it compensates top executives, also announced that it entered into a new contract with Grasso that will keep him at the helm of the NYSE until at least 2007 and pay him a $1.4 million salary and an annual bonus of at least $1 million. In making the $140 million payment, the NYSE said it was granting a request from Grasso that he receive the money now so he can pay taxes on it for estate planning purposes.
Today was the first time that the 211-year-old stock exchange has disclosed the pay of its top executive.
The NYSE, which is a "self-regulatory organization" charged with overseeing brokerage firms, has been under pressure from shareholder activists to adopt disclosure and other governance practices at least as strong as those required of its 2,800 listed companies. After a series of corporate scandals, investors and regulators have pressured public corporations to disclose more to investors, rein in executive compensation and appoint more independent directors.
The disclosure of Grasso's pay followed actions taken by the NYSE to address criticism of its governance policies. For example, in the past, executives from firms regulated by the NYSE dominated the exchange's compensation committee. The NYSE announced in June that it will prohibit securities industry executives from serving on the compensation committee. It also now bars senior NYSE executives from the boards of firms whose shares trade on the exchange.
As a result of the change, Grasso has said he will step down from the board of Home Depot Inc. Until June, Home Depot founder and board member Kenneth G. Langone chaired the NYSE's compensation committee.
Former New York state comptroller H. Carl McCall, the new chairman of the NYSE compensation committee, said in an interview that today's action is the latest step in an effort to put the exchange's governance policies at least on par with listed companies.
He said the compensation committee hasn't decided whether Grasso's pay should be comparable to that of other Wall Street chief executives or of top government regulators. Securities and Exchange Commission Chairman William H. Donaldson, for example, earns $142,500 a year.
"The compensation committee is still looking at that issue and trying to come up with what the appropriate benchmarks should be," McCall said. "The exchange is very much a major financial institution, but it is also a self-regulatory organization. It's very hard to come up with a direct comparison."
The SEC today broke with its tradition of not commenting on compensation packages for executives of self-regulatory organizations, with a spokesman saying the agency was "looking into the details" of the $140 million payment. Donaldson has asked the NYSE and other stock exchanges to come up with ways to improve their governance.
Carol Bowie, director of governance research at the Investor Responsibility Research Center, acknowledged that Grasso operates in a competitive environment different from the typical federal regulator. But she nonetheless called the NYSE chief's compensation "totally out of whack."
Other corporate governance advocates praised the NYSE for announcing the lump-sum payment and the new contract, but said the disclosure fell short. Paul Hodgson, senior researcher at the Corporate Library, said it was impossible to tell how much of the $140 million came from salary and bonus payments that Grasso elected to defer over the past 20 years and how much came from incentive and other payments from the NYSE.
The NYSE said in a news release that it paid Grasso a savings account balance of $40 million, a previously accrued retirement benefit of $51.6 million and a previously earned account balance of $47.9 million relating to prior incentive awards. NYSE spokesman Robert Zito declined to give further details.
© 2003 The Washington Post Company
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NYSE Gives CEO Grasso $140 Million