Grasso Not Backing Down
In an act of defiance against the
New York Stock Exchange
, former chairman Richard Grasso said he won't give back any of his $139.5 million pay package and threatened to sue the Big Board for an additional $50 million that is owed to him.
In a letter sent to NYSE interim chairman John Reed, attorney Brendan Sullivan said Grasso "has no intention of returning any portion of his compensation to the Exchange," adding that "Nothing ... will cause Mr. Grasso to capitulate."
Earlier this month, Reed sent a letter to Grasso asking him to return $120 million in "excessive" pay. Grasso was forced to resign from the NYSE last year amid a storm of criticism over his enormous pay package.
Experts were divided about what the former chief should do. Jacob Zamansky, a lawyer who often opposes Wall Street firms in arbitration proceedings, believes Grasso should return the money.
"His compensation was excessive for someone who had a position as a regulator and it would be in his best interest to resolve this without having a huge public fight," he said.
The NYSE declined to comment on the matter and Sullivan did not return a phone call seeking comment.
Grasso would spare himself "and the stock exchange, which he claims to love," a lot of anguish by simply agreeing to return some or all of the money, Zamansky said.
Alan Bromberg, a securities law professor at Southern Methodist University, disagrees. "I just find it hard to see any justification legally for saying he's not entitled to what he's got now," he said.
Sullivan argued in his letter that Grasso's leadership was key to the Big Board's successes in the 1990s and that his remuneration was unanimously approved by an "all-star team" of U.S. executives from companies like
Goldman Sachs
(GS) - Get Report
,
Merrill Lynch
(MER)
and
Ford Motor
(F) - Get Report
.
"Who was it that decided Mr Grasso's compensation? It wasn't Mr. Grasso," Sullivan said. "These directors were well-familiar with the market for senior executives of successful institutions. Their own median compensation over the period of Mr. Grasso's tenure as CEO of the exchange was several hundred million dollars."
Although Grasso didn't determine his own pay, he did make appointments to the compensation committee, and New York attorney general Eliot Spitzer is reportedly considering a lawsuit to force Grasso to return part of the money.
Zamansky said Grasso could have violated his fiduciary duty to the board and to the NYSE by accepting the money granted to him. "The question is: did he go easy on some of these companies because of his compensation," he said.
Still, Michael Gray, employment law partner at Jones Day, said it would be a waste of time for the NYSE to attempt to recoup any of the money it has paid out. "It is unusual for any company to pursue reimbursement for monies, at least through litigation, from former employees or former executives," he said. "Frankly, it's not often practical in light of the high costs of litigation."
Sullivan accused the Big Board of "conducting a campaign through the press and intermediaries" to pressure Grasso to surrender his pay. The former chief is entitled to receive more than $50 million in severance on top of the $139.5 million he has been paid. Sullivan has threatened to sue for the $50 million.
"Not your and Thain's statements to the press, not your efforts to encourage federal or state agencies to investigate the matter, and certainly not the filing of a completely baseless lawsuit will cause Mr. Grasso to capitulate," Sullivan said.