Grasso Resigns From NYSE

Updated from 7:36 p.m. EDT

Richard Grasso, the New York Stock Exchange chairman whose $140 million pay package outraged Wall Street, ran out of friends Wednesday night and was forced to resign from a post he held for eight years.

Grasso stepped down during an emergency session of the NYSE board, at which an increasingly vocal group of angry directors decided the exchange couldn't withstand further controversy over Grasso's outsize payday.

According to Carl McCall, the head of the board's compensation committee, Grasso -- who called the meeting -- offered to resign if the directors felt it was in the exchange's best interest. They did.

"Throughout my career and on behalf of all exchange constituents, I have worked with great partners to build and enhance the value and brand of the NYSE," Grasso said in a statement. "I look forward to supporting the board and the Exchange in bringing about a smooth transition to a successor. I believe this course is in the best interests of both the Exchange and myself."

The move caps an extremely difficult month for both the Big Board and Grasso, a career employee of the nation's premier stock exchange whose tireless work in the aftermath of the Sept. 11 terrorist attacks elevated him to hero status.

Recent revelations that he received a $5 million bonus for that performance -- along with word that he nearly collected another $48 million on top of the deferred compensation he did pocket -- helped cement his fate. Whether Grasso must give any of the money back isn't known.

Big Boys

Grasso's ouster was said to be supported by some of the same Wall Street leaders whose pay package his most resembled: Goldman Sachs(GS) Chief Executive Henry Paulson, J.P. Morgan Chase(JPM) Chief Executive William Harrison, Credit Suisse First Boston Chief Executive John Mack and Morgan Stanley(MWD)Chief Executive Philip Purcell.

The issue of who might succeed Grasso remained unclear, although board member Larry Sonsini of the law firm Wilson Sonsini Goodrich & Rosati has been asked to take the post on an interim basis while a permanent head is sought. A spokeswoman for Sonsini has not made a decision about whether to take the job.

Grasso had hoped to mollify his critics at an NYSE board meeting he called for next week to discuss the controversy over his massive pay package and review the exchange's governance policies.

But the steady hum of controversy turned to a roar this week after some of the nation's public pension funds called for him to resign, forcing Wednesday's meeting. Although critics never accused Grasso or the board of any legal wrongdoing, they found the appearance of impropriety discredited the exchange, particularly at a time when the nation is so focused on corporate ethics.

California State Treasurer Paul Angelides, who issued a critical call for Grasso's resignation Tuesday, urged the NYSE and the Securities and Exchange Commission to thoroughly investigate the decision-making behind Grasso's controversial pay package. Grasso's departure was a necessary first step for that examination, Angelides said.

"Clearly this is not something that just happened by the act of one person. I think the responsibility has to be fairly placed, assessed, then dealt with," Angelides said.