Grasso Money Grab Torches Grass-Roots Tinderbox

Investors find an issue -- money -- that finally galvanizes their long-simmering angst.
Author:
Publish date:

If public outrage is what you're after, nothing stirs it up quite like a $139.5 million paycheck.

Most of the time, neither investors nor regulators seem able to work up much interest in dry-sounding issues such as corporate governance and quasi-governmental oversight.

No, as former

New York Stock Exchange

Chairman Dick Grasso is only the latest executive to learn, what really crystallizes outrage is something that hits much closer to home: Seeing someone get rich while you remain, by comparison, poor. The market retreat and the jobless recovery of recent years have only brought such anger closer to the surface.

What former

Tyco International

(TYC)

Chairman Dennis Kozlowski, former

Citigroup

(C) - Get Report

telecom analyst Jack Grubman and countless former

Enron

executives discovered more than a year ago still holds true: On Wall Street, people don't begrudge you your salary when the rising tide is raising all boats. But things do have a way of turning ugly when dinghies start running aground.

And just as the juxtaposition of investor losses with executive gains inspired passage of the Sarbanes-Oxley legislation to clean up corporate America, it appears that anger over Grasso's pay -- and the NYSE board's approval of the compensation -- will finally overcome the inertia that has slowed previous attempts at making major changes at the NYSE, and by extension the whole U.S. stock market setup that has become such an object of derision in some quarters.

Had Grasso's pay not been so large, or had it not popped up in huge lump-sum payments, it might have been years before people talked about rejiggering the board of the NYSE, or making fundamental changes to the organization to separate its regulatory and self-promotional functions. Complaints that can be reduced to the size of a bumper sticker -- whether they are "$139.5 million is excessive" or "It's the economy, stupid!" -- are crude yet effective catalysts for more sweeping changes.

Not all moneymakers inspire quite the compensation-based anger that Grasso et al. have done.

Microsoft

(MSFT) - Get Report

titan Bill Gates, who

Forbes

reminded us again this week is the wealthiest man in America, certainly inspires loathing, especially in the technology field. But no one but the most die-hard

Apple

(AAPL) - Get Report

fan would argue he didn't earn his wealth, having gained it by founding the company that put the software on most computers in the known universe.

Warren Buffett, head of

Berkshire Hathaway

(BRKA)

and fellow

Forbes

honoree, isn't an executive compensation-rage magnet either, though his contributions to American commerce are a little harder to pin down. One suspects that the avuncular-imaged Buffett is beloved because as he became wealthy, so did his loyal shareholders. Imagine if Buffett were to sell shares while Berkshire Hathaway stock fell from $76,000 to a mere $760 per share. The next time he and his trusted associate Charlie Munger called an annual meeting, once-gushing shareholders would show up with torches and pitchforks.

Losing money is a fine way to help form strong opinions about how the financial markets should be run. The billions lost by investors and employees of the company now called

MCI

and formerly known as WorldCom, for example, explain why regulators want to be certain that executives at publicly traded companies don't enjoy the loans once handed out to executives like Ebbers. And those vaporized billions explain why few folks are running to Ebbers' defense following his arrest in Oklahoma for fraud, despite the myriad legal complications raised by the possibility of all 50 states filing charges against Ebbers alongside federal investigations.

These losses also explain the sudden interest in corporate governance issues at the NYSE. Why, all of a sudden, are people outraged at the process by which the exchange selects board members? Why are they questioning whether the NYSE can effectively regulate stock traders at the same time it seeks to increase their business? Is it because people have strong opinions about selection processes for board members -- opinions that would be equally strong if, say, the

Dow

were roaring past 12,000?

Of course not. It's because Dick Grasso is making money and many, many others aren't. With the aforementioned jobless recovery in full swing, people's rightful suspicion is that there are plenty of other qualified candidates who would do Dick Grasso's job just as well for a fraction of $139.5 million.