Richard Grasso

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Richard Grasso

Richard A. Grasso (born 1946 in Jackson Heights, Queens, New York City) usually known by the nickname 'Dick', was chairman and chief executive of the New York Stock Exchange from 1995 to 2003, the culmination of a career that began in 1968 when Grasso was hired by the Exchange as a floor clerk. After the September 11, 2001 Terrorist Attacks, Grasso became the reassuring public face of the Exchange, and was praised for his role in helping restart operations.

[edit] Youth

Grasso was raised by his mother and two aunts in Jackson Heights in New York City ^[1] since his father left the family when Richard was an infant. He graduated from Newtown High School, and attended Pace University for two years before enlisting in the Army. Just two weeks after leaving the Army in 1968, Grasso became a clerk at the New York Stock Exchange.

Grasso moved up rapidly in the ranks, becoming president of the exchange and then CEO in the early 1990s.

As CEO, he was widely credited with firming the NYSE's position as the preeminent U.S. stock market.

[edit] FARC controversy

On June 26, 1999, Reuters reported that Grasso met with Colombian rebels, the FARC, in an article entitled "NYSE Chief Meets Top Colombia Rebel Leader". The FARC is considered a terrorist organization by the U.S. State Department (on its list of Foreign Terrorist Organizations) and is alledgedly responsible for kidnappings and narcotics trafficking in order to bankroll their revolutionary activities (see: narcoterrorism).

The article quotes Grasso, "I invite members of the FARC to visit the New York Stock Exchange so that they can get to know the market personally." Some find the meeting inexplicable, considering that the FARC has anti-capitalist ideals and has no officially recognized financial clout. Grasso told reporters that he was bringing "a message of cooperation from U.S. financial services."^[2]

[edit] NYSE compensation controversy

On 27 August 2003, it was revealed that Grasso had been given a deferred compensation pay package worth almost $140 million. This caused immediate controversy, as the hand-picked compensation committee consisted mainly of representatives from NYSE-listed companies over which Grasso had regulatory authority as head of the Exchange.

Following criticism of the deal from U.S. Securities and Exchange Commission chairman William H. Donaldson and several pension fund heads (who control some of the largest pools of equity investment capital in the U.S.), the Exchange board met and in 13 to 7 vote asked Grasso to leave. Grasso stepped down on 17 September 2003.

On 24 May 2004, Grasso was sued by New York state Attorney General Eliot Spitzer, demanding repayment of the majority of a nearly $140 million pay package. Prior to being dismissed, Grasso had been in line to receive an additional $48 million over the 139.5 million he had already received; he was not paid the additional funds. Grasso has sued to gain those funds. According to the suit, Grasso, along with former NYSE director Kenneth Langone, misled the NYSE board about the details of his pay package, beyond that of comparable chief executives. The NYSE was a non-profit institution during Grasso's reign, and as such was governed by State of New York rules governing executive compensation for non-profits. That the NYSE was a non-profit, goes to the heart of Grasso's compensation, as for-profit companies have traditionally received much greater leeway in executive compensation matters, even when the compensation might appear to be excessive to stockholders. In addition, there were issues of premature withdrawals of Grasso's retirement compensation. Retirement packages often have strict timetables as to when withdrawals can be made.

On May 26, Grasso responded with a countersuit against the Exchange and its current chairman, John Reed, seeking payment of unpaid portions of his pay package, as well "besmirching his name". Grasso went on to place a 1500-word editorial article in the Wall Street Journal, detailing this countersuit, as well as his grievances against Spitzer.

The lawsuit against Grasso continued to move toward trial in 2006, with neither side showing any interest in settling.

On October 19th, CNNMoney.com reported that the New York State Supreme Court issued a summary decision ordering Grasso to repay a significant amount in excess compensation in an article entitled "Ex-NYSE chief ordered to return part of $188M" [1]. Although Grasso will appeal, the same article reports that Spitzer's office has disclosed the amount of restitution is in the tens of millions of dollars. In his ruling, Judge Ramos wrote that Grasso's failure to disclose the true extent of his total compensation prevented the compensation committee from exercising its fiduciary duties. The above CNN article also reported that Grasso's counterclaim of defamation was dismissed.

The Grasso suit has come under criticism from some commentators, with journalist Charles Gasparino lambasting it in his book Blood on the Street. Journalist and author Gary Weiss, in his critical 2006 book Wall Street Versus America, contends that Grasso earned his pay by preserving the NYSE's floor-trading model despite its obsolescence. Weiss argued that Grasso was fairly paid because he kept "alive, and thriving, an institution that should have been dead and interred in a marble crypt a long time ago."