Updated from 5:29 p.m. EDT
New York Stock Exchange
Chairman Richard Grasso said today he would forgo $48 million in additional compensation benefits that weren't previously disclosed. But the exchange said it stands by its decision to award the Big Board chief $139.5 million.
In a conference call, Grasso said he was forfeiting vested and unvested payments worth $48 million in an attempt to put the issue to rest.
"This institution should not be preoccupied talking about the compensation of its leader but rather the policies and programs and initiatives of its leader," he said.
The announcement came as H. Carl McCall, chairman of the NYSE's human resources and compensation committee, submitted a 12-page response to
Securities and Exchange Commission
Chairman William Donaldson, who had raised concerns about Grasso's compensation last week.
"The compensation committee and the board as a whole want to emphasize that we ... engaged in a deliberate process to determine appropriate compensation for Dick Grasso, and this board stands behind all of those decisions that were made in the past," said McCall.
On Sept. 2, Donaldson, himself a former chairman of the NYSE, sent a letter to the exchange, demanding answers to nine questions about Grasso's compensation bonanza. In his letter, Donaldson said the deferred compensation package raised "serious questions" about the NYSE's corporate governance procedures. The letter was addressed to McCall, who had until today to respond to Donaldson's questions.
In his response, McCall defended the $139.5 million payout, saying that without Grasso's leadership, the success of the exchange would have been "significantly diminished."
"This leadership of the New York Stock Exchange has exceeded any goal or expectation of the board," said McCall, "whether it's system reliability, new listings, market share, seat prices or inspiring leadership in times of great competitive challenge or during grave national tragedy."
McCall said he has been "very pleased" with new governance practices, and said a final report due on Oct. 2 will outline further changes in this regard. He also noted that Grasso's compensation had no impact on the exchange's earnings or revenues "because all the funds were accrued as they were earned."
While one NYSE member had recently been calling for Grasso's resignation, McCall said "there wasn't any discussion about resignation" in a board meeting Tuesday.
As to why the board hadn't disclosed the additional $48 million worth of benefits previously, McCall said the exchange's policy was to publish whatever payments Grasso received that year "so since these were payments that would be provided to him in the future, they would be disclosed as they were made available to him."
The NYSE said last month that it would extend Grasso's contract through May 2007, and it agreed to maintain his annual base salary of $1.4 million with a target bonus of $1 million a year. The exchange also said Grasso would take a lump sum of $139.5 million that he had accumulated over the course of his tenure at the NYSE. Grasso said he wanted the money now for philanthropic reasons.
"Of course, a very large chunk goes to the federal, state and city governments, so it's not $139 million coming into my possession, it's probably somewhere around 65% of that at most," he said.
Despite Donaldson's anger over Grasso's huge compensation package, the SEC chief has thus far refused to disclose exactly how much he earned when he had Grasso's job from 1991 to 1995. Grasso, who has worked for the NYSE for more than three decades, succeeded Donaldson as Big Board chairman.
An SEC spokesman said a number of media outlets have requested information about Donaldson's compensation as NYSE chairman, but Donaldson's office had not yet provided a figure.