NEW YORK (AP) First, it's revealed that New York Stock Exchange chairman Dick Grasso is getting a payout totaling $139.5 million, and that raises many eyebrows.
How does he cash in so big? The Securities and Exchange Commission, whose chairman preceded Grasso at the Big Board for a fraction of the money, wants to know. So the NYSE responds that Grasso's actually supposed to get even more, $48 million more, but he'll forgo that ''for the good of the institution.''
This certainly doesn't seem like the way the world's largest financial marketplace is supposed to operate in today's more responsible corporate climate. It should be upholding governance standards, not finding ways around them.
If the Grasso-pay matter were an isolated incident, then maybe it wouldn't warrant as much criticism. Unfortunately, it was one of many debacles to hit the exchange this year.
For some reason, the NYSE just can't seem to get much right lately, and its snafus come at a time when it has demanded better practices from companies that trade on its exchange in the wake of the rash of corporate scandals that shook investors' confidence.
The NYSE's annual report is littered with words like integrity and accountability, but the exchange doesn't seem to be practicing what it preaches.
Start with Grasso's pay. The NYSE didn't willingly release the details in its 200-year history, it has never before disclosed the chairman's pay but finally gave in under intense pressure.
Now it's clear why it held back.
His cashed-out benefits were valued at an astonishing $139.5 million. That includes savings, retirement funds and incentives and doesn't include his salary and bonus.
Grasso, who is generally considered a securities regulator, was making more money than most corporate executives.
The size of the payout grabbed the attention of SEC Chairman William Donaldson, who was Grasso's predecesor at the NYSE and earned far less. An internal memo showed he was paid a total of $1.65 million in 1992; the board paid him a $200,000 bonus in 1994 in recognition of ''the success of the organization.''
Donaldson sent a sternly worded letter to the NYSE in which he said the Grasso payout raised serious questions ''regarding the effectiveness of the NYSE's current governance structure.'' He demanded additional details on how the payout got that big.
The NYSE followed through, but as it pulled together its information, it discovered another $48 million owed to Grasso. The exchange said that hadn't been initially disclosed because it wasn't considered current compensation, but was to be paid out over the next four years.
And now it has come out that Grasso, who has said all along that he had no say in the size of his compensation, did have a hand in how his new contract would be structured.
The governance missteps don't stop there.
Last spring, Citigroup chairman and CEO Sanford Weill was nominated as a director to represent public investors on the NYSE's 27-member board.
Sure, he is a prominent leader in the financial community, but his firm had just agreed to pay $400 million in fines as part of a broader Wall Street settlement over conflicts of interest in stock research.
That set off a firestorm of criticism over whether he would really be the best representative for small investors. Weill ended up withdrawing his name from consideration.
Then there is the investigation that the NYSE is conducting of floor-trading firms known as specialists for possible improper trading activity. The exchange has also been criticized for allowing a handful of companies to still enjoy trading privileges even though they haven't recently filed audited financial statements a supposed trading requirement set by the Big Board.
Maybe the exchange's problem is that it is trying to be too many things to too many people a financial services company and a securities regulator at the same time.
The NYSE provides trading for about 2,800 companies, while serving as watchdog for the securities industry. It also self-regulates, so it sets standards for itself as well as for those companies that trade in its marketplace.
Still, its bad behavior can't be excused.
Its only option now is to make significant governance changes which it has touted that it is doing and truly live by its word.
Rachel Beck is the national business columnist for The Associated Press. Write to her at rbeck(at)ap.org
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