A New York State appeals court has ordered claims of excessive pay leveled at former NYSE chairman Richard Grasso to be dismissed. Grasso rose to infamy in 2003 when it was reported that he had been granted a deferred compensation package of $140 million. The SEC criticized the deal, Grasso was asked to leave, Eliot Spitzer sued, and much publicity was had by all.
The court ordered the claims dismissed on the grounds that the attorney general's office no longer had the authority to pursue the claims because the NYSE restructured itself as a for-profit corporation in 2005.
As egregious as Grasso's pay was, this is not a matter that should have ended up in court. It's a corporate governance issue. If the board is inept and captured enough to throw money down the toilet, it's up to the people they represent to revolt. True: Grasso probably exerted undue influence over the board but ultimately the directors are responsible for maintaining their independence.
If regulators want to improve executive compensation practices, they should do it by making it easier for shareholders to hold directors accountable -- no wasting taxpayer money necessary! Gary Weiss chimed in that "it struck me and many others as an odd use of public resources to pursue a case on behalf of the millionaire seatholders of the NYSE.
New York Court lets Dick Grasso off the hook
Posted Jul 1st 2008 5:44PM by Zac Bissonnette
Filed under: Law
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Reader Comments (Page 1 of 1)
7-02-2008 @ 9:57AM
al coholic said...
Gary Weiss actually wrote something that didn't relate to Overstock?
But seriously, wasn't the real point of the Spitzer suit to address the obvious lack of fiduciary responsibility by the board of directors? I don't feel sorry for the "millionaire stockholders" of the NYSE, but it is sad that boards of directors seem seldom vote to restrain ceo pay and merciless perks. Grasso isn't the only one who was guilty of (in my opinion) a form of larceny. There are plenty of ceo's that have boards in their pocket to the detrement of many small shareholders.
Maybe it's time to consider some changes in corporate structure?
7-02-2008 @ 11:18AM
W Lanzen said...
What a political witch hunt this was. In Grasso's early years with the Exchange he left bonus money and perhaps salary money in the Exchange because cash flow was tight. Not unlike any CEO in any early stage business. One can only hope that he received decent interest on what amounted to working capital loans to the Exchange. The Board negotiated his contracts in what one hopes was good faith. In my opinion Grasso is due legal costs and damages. And the moralizing by Spitzer, indeed. What crap.
7-02-2008 @ 2:27PM
al coholic said...
I never realized the NYSE only survived because Grasso floated them a loan. I'm just wondering though, was he reimbursed? Wtih interest?
Why don't we add up the amount you claim he selflessly didn't take and compare it to his criminally high salaries.
As for Spitzer he may have screwed some high priced call girls, but I doubt he could lay claim to screwing as many people (like the stockholders for example) as Grasso did by whacking off $140 to $170 million a year for a job that a lot of experts consider to be worth about 10 to 15 million a year.