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Grasso's huge compensation has even Wall Street gasping

Richard A. Grasso has succeeded at what some would think an impossible task: making Wall Street gasp in astonishment at someone else's compensation.

In interviews yesterday, a dozen Wall Street executives and bankers said unanimously that Grasso's yearly compensation of $10 million and above in recent years and the $140 million in deferred savings and retirement benefits that the exchange board awarded him Wednesday are drastically out of line for the chairman of the New York Stock Exchange.

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But every one of them asked not to be identified, as Grasso is one of their primary regulators.

Wall Street executives have long been flayed for the size of their own compensation, especially in the wake of the stock market decline. But now it is they who are incredulous that the chairman of the New York Stock Exchange should be paid a yearly amount that not only approaches their rich awards, but that is in cash, not stock -- in other words, risk free.

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This sentiment was shared even by the senior bank executives who sit on the exchange's board, according to one of those executives.

Grasso would not comment yesterday, but the chief spokesman for the exchange, Robert Zito, said it would be inappropriate to comment without knowing the source of the criticism.

Zito said the consultants who work with the exchange's compensation committee argue that Grasso's total compensation should be compared more with that of the chief executives of financial services firms than with that of the heads of other quasi-public regulatory institutions.

Bankers who know Grasso spare little praise in commending him for the job he has done during his term.

They note that he has successfully marketed the world's largest exchange globally and ensured that it continues to grow and prosper. With the help of the stock market boom, the exchange's market capitalization has doubled and the number of listed companies has soared. They note the brave public face he presented to the world in the aftermath of the September 2001 terrorist attacks. A number of top executives consider him a friend.

Multimillion-dollar pay packages are a dime a dozen on Wall Street. Citigroup's chairman, Sanford I. Weill, received a total package of more than $150 million in one year, and executives such as James E. Cayne at Bear Stearns, Henry Paulson Jr. at Goldman Sachs and Philip J. Purcell at Morgan Stanley each received total compensation exceeding $15 million in one year during the bull market.

Many bankers won't necessarily complain if someone on the Street makes more than they do. After all, "the general bias on the Street is if someone unworthy gets paid more than they deserve, then maybe I'll get paid more than I deserve, too," said one senior mergers and acquisitions banker at a major Wall Street bank.

But some on Wall Street find it unseemly that Grasso be paid as much, or in some cases more, than they are. The main reason has to do with risk.

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Many top Wall Street executives who have risen to the top are risk lovers, having proved their mettle doing deals and trading bonds. Unlike Grasso, they receive a large portion of their pay in stock option grants. It is indeed easy to criticize these sky-high numbers -- and many a Wall Street executive will acknowledge sotto voce that his group is in the end overpaid -- but the bottom line remains that significant chunks of these executives' salaries are tied to their stock prices; if the stock suffers, they all say, so will their bonuses.

And even while Grasso was paid yearly salaries commensurate with Wall Street executives', he received his pay all in cash. Even more galling, say bankers close to the exchange's board, is that his contract was structured so he was able to defer large components of his bonuses into a pool of savings that guaranteed 8 percent a year.

"Dick is an all-star; he is a strong, solid guy," said one chief executive who declined to be identified. "But he was never at risk."

These executives point, with pride, to their bottom lines: Last year Morgan Stanley earned $2.9 billion, and Goldman Sachs $2.1 billion. By contrast, the bottom line for the New York Stock Exchange last year -- a year in which Grasso was paid $10 million -- was $28 million.

The compensation committee of the exchange's board has historically had a number of Wall Street chief executives sitting as members. David H. Komansky of Merrill Lynch, Richard S. Fuld of Lehman Brothers and Deryck C. Maughan of Citigroup have sat on the board in the past, and Cayne and Paulson joined the committee last year.

Since then, as part of an effort by the exchange to improve its corporate governance practices, the compensation committee has been overhauled and Wall Street bankers are no longer allowed to be members.


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