In the first disclosure of an executive's pay in its 200-year history, the New York Stock Exchange said yesterday that Chairman Dick Grasso would receive $139.5 million in accrued retirement and other benefits this year, plus a salary and bonus of at least $2.4 million.
The compensation package was made public when the NYSE announced that it had extended Grasso's contract through 2007. The contract sets his annual base salary at $1.4 million and his target bonus at a minimum of $1 million.
The size of the package sparked criticism, as did the unusual provision in the contract allowing Grasso, 57, to pocket a huge sum in retirement money - more than four times the NYSE's income in 2002 - years before he might actually retire.
"Dick Grasso should be an example of how to properly structure compensation, he should not be a poster child of executive excess," said Brandon Rees, research analyst at the AFL-CIO office of investment. "This is really outrageous."
In an unusual public comment, the Securities and Exchange Commission said it was "looking into the details" of Grasso's package. SEC Chairman William H. Donaldson, Grasso's predecessor at the NYSE, has said the nation's stock exchanges must lead by example in setting standards for corporate governance.
Critics said Grasso's package failed to do that. They said Grasso, who is also the Big Board's chief executive officer, received too much in pay and incentives, especially given the stock market's recent decline and the corporate scandals that have rocked investor confidence.
"It is a pretty phenomenal amount. It is basically an entrepreneurial return for someone who works in a public capacity. He is a regulator," said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware.
A nonprofit organization owned by its 1,366 members, the NYSE sets disclosure requirements for 2,700 publicly traded companies.
Because the exchange itself isn't a public company regulated by the SEC, it isn't required to disclose what it pays executives. But, largely at the urging of the SEC, the NYSE board recently adopted corporate governance standards and pledged to reveal the pay of its top five executives, as the companies the NYSE helps regulate must do.
Making Grasso's employment agreement public was a first step in providing this information to investors, but it wasn't a complete step, said Paul Hodgson, senior research associate at the Corporate Library, a corporate governance Web site based in Portland, Maine.
Hodgson noted that although the exchange revealed that the NYSE board approved the five-year contract with minimum salary and bonus figures, the exchange didn't disclose what Grasso was paid in 2002. His salary has been reported to be as high as $12 million.
"Their announcement raised more questions than it answered," Hodgson said.
For instance, the exchange didn't reveal the size of Grasso's previous bonuses, or how much of his retirement savings came from his own contributions rather than contributions by the exchange. It also didn't say whether it paid above-market interest on his employee savings account, as many public companies do for their executives.
The NYSE said Grasso's 2002 pay would be released in March, when the exchange issues its 2003 annual report. Whether it will ever make public the other information isn't clear. The NYSE board will make that determination sometime before March, said Bob Zito, executive vice president of communications at the exchange.
Publicly owned companies, including those that trade on the NYSE, must in annual filings with the SEC disclose the salary and bonuses of their five most highly compensated officers for the current year and the previous two years.
"If the NYSE is going to set itself up as the standard bearer, it has to make sure that its house is exceptionally clean," Hodgson added. "They have tried to do the right thing here by disclosing this information, but to think that no one is going to bat an eyelid over $140 million in deferred compensation shows that they really haven't been listening."
Under the five-year contract, Grasso's deferred compensation, savings and retirement plan benefits were "restructured," the NYSE said, allowing Grasso to withdraw the benefits this year.
He will cash out $40 million from his employee savings account, $51.6 million in accrued retirement benefits, and $47.9 million in what the NYSE called "prior incentive awards."
The ability to take retirement and deferred compensation benefits before leaving a company is highly unusual at any firm, public or private, executive compensation experts said.
Grasso, who has worked for the NYSE for more than 30 years, was traveling and not available for comment yesterday. He said in a statement that he thought withdrawing his accumulated retirement and other benefits was "advisable in order to facilitate personal financial and estate planning."
The Los Angeles Times is a Tribune Publishing newspaper. The Associated Press contributed to this article.