Grasso Resigns From NYSE

The latest to speak out over its governance policies was William Donaldson, the Securities and Exchange Commission chairman, who said in Washington on Wednesday that the compensation system raises "serious concerns." Donaldson preceded Grasso as NYSE chairman.

The 27-member NYSE board now faces an immediate succession issue, since there is no obvious internal candidate to replace him. In fact, most critics think the board almost certainly will to look outside the institution for a new leader to help restore its reputation after this incident.

The board itself could also be in turmoil because it's likely a number of directors could be forced out, including Ken Langone, who led the compensation committee at the time Grasso's big pay package was negotiated.

Indeed, the SEC believes Grasso's departure does not put an end to governance issues at the exchange.

"The SEC will continue its review of governance standards and will work closely with the new leadership at the exchange to put an appropriate structure in place that will ensure the credibility and integrity of the governance of the exchange," the agency said in a statement.

Already people are beginning to speculate about some possible successors. The names include former Federal Reserve Chairman Paul Volcker and former New York Fed President William McDonough. Another possibility is former Securities and Exchange Commission Chairman Arthur Levitt. A darkhouse candidate might be former Secretary of State and current NYSE board member Madeline Albright. Sources say she is well liked by other board members and would help the institution by making it the first U.S. stock exchange to be led by a woman.

On the Floor

Frustration with Grasso was greatest among the rank-and-file floor brokers who technically own the NYSE through their membership. In a letter to Donaldson, exchange member James Rutledge said Grasso should step down and called the board's performance "indefensible."

"The repeated closing of their eyes to mounting criticism and expressions of concerns reflects poorly on everyone associated with 11 Wall Street," he wrote, referring to the NYSE's address in Manhattan.

Michael LaBranche, who runs the LaBranche(LAB) specialist firm at the NYSE, said Grasso's resignation is "in the interests of the New York Stock Exchange."

"The New York Stock Exchange needs for Mr. Grasso to leave in order for it to move forward and restore investor confidence," he said. LaBranche was fined $150,000 and censured by the NYSE last month for failing to turn over employee emails in an investigation of its trading practices. The company is appealing.

In the News

Sonsini's firm, Wilson Sonsini, represented many Silicon Valley companies during the Internet's heyday. The big San francisio based firm created a stir in the legal community by taking equity positions in some of their corporate client in lieu of fees. The firm did this with many tech start-ups.

In 2001, Sonsini was appointed to the board of the New York Stock Exchange. He was a member of the NYSE's Corporate Accountability and Listing Standards Committee and the NYSE/NASD IPO Advisory Committee.

Sonsini has also served on a number of advisory boards and committees, including the SEC's Advisory Committee on Capital Formation and Regulatory Processes; the ABA Committee on Federal Regulation of Securities; the Legal Advisory Committee to the Board of Governors, New York Stock Exchange; and the Legal Advisory Board of the NASD.

In 2000, Wilson Sonsini held stock in 33 of the 53 companies it represented through initial public offerings, according to ABA Journal, a legal publication.

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