• Can you be too greedy?
Can you be too greedy?
Richard Grasso was booted from his lofty perch as head of the New York Stock Exchange because his $140 million retirement package struck many on Wall Street as a tad greedy.
Amazing. This implies that there might actually be an upper limit to acceptable greed on The Street. Until now, the limit has been the wild blue yonder.
Mr. Grasso built a fat retirement package over a 35-year career in which he rose from clerk to chairman. His take for 2001 was a measly $30 million.
Until now, a salary like that would have earned an executive serious bragging rights down at the yacht club. But in the wake of the corporate governance scandals, Mr. Grasso got a thrashing from public opinion and then a pink slip.
It’s easy to see why NYSE’s board offered Mr. Grasso the money. Look what board members are earning. For instance, former Merrill Lynch Chief Executive David Komansky slurped up $115 million in his last five years, according to Dow Jones News Service. He and other such lucky fellows served on the compensation committee that sets Mr. Grasso’s salary. Far be it from them to nickel and dime a fellow lion of Wall Street.
CEO salaries have gotten completely out of hand all across corporate America because the system for setting them is rigged. These days, even lousy performance brings spectacular rewards. Disney CEO Michael Eisner averaged $127 million in pay over the past five years, while shareholders lost an average of 5 percent a year.
Mr. Grasso has done better than that. He ran a major institution and ran it rather well. He modernized the NYSE and fought off high-tech competition from the NASDAQ. He kept a Neanderthal of a stock market, which insists on using human beings to handle orders, on top of the competitive heap.
Mr. Grasso gained his gargantuan pay (note that we didn’t say he earned it) the old-fashioned way – through good performance combined with lots of luck, deft politicking, behind-the-scenes influence and mutual back-scratching with board members. The head of the NYSE board’s compensation committee was Kenneth Langone of Home Depot. Mr. Grasso sat on Home Depot’s board. Scratch, scratch, scratch.
In other words, Mr. Grasso got his ticket to the gravy train the same way that many corporate CEOs get theirs.
Some of the outrage stems from Mr. Grasso’s role as cop. The NYSE regulates the behavior of companies and brokerage houses on the exchange. The heads of some of those firms sit on the NYSE board and vote on Mr. Grasso’s salary.
One solution would be to separate the jobs of regulator from chairman, and have the regulator report to a board representing shareholders, rather than the brokerage and corporate elite.
Mr. Grasso’s timing was truly lousy. His pay had been secret. The exchange revealed it as part of a new policy of openness. But it hit the headlines while the nation was still in a snit over last year’s spate of corporate scandals. The pay revelation put the SEC in a huff and politicians demanded a human sacrifice.
Even though Mr. Grasso was ordered to bail out of the executive suite, his $140 million parachute will soften his landing.
St. Louis Post-Dispatch
