Grasso forced out as chief of NYSE

Chairman quits after losing support of powerful Wall St figures over his $188m pay package

Richard Grasso resigned as chairman and chief executive of the New York stock Exchange yesterday after a controversy over his $188m (£117m) pay package that caused one of the worst crises n the exchange’s 211-year history.
He quit after losing the support of some of Wall Street’s most powerful executives, who sit on the 27-member NYSE board and who have been struggling for days to extract the world’s largest stock market from the turmoil.
Among the director who requested Mr Grasso’s resignation at a hastily convened board meeting after the close of trading yesterday were Hank Paulson and Stan O’Neal, the heads of Goldman Sachs and Merrill Lynch, two giant investment banks that are among the NYSE’s largest customers.
The meeting was called as Michael LaBranche, head of the largest specialist trading firm on the NYSE floor, joined the three largest public pension funds and two Democratic presidential hopefuls in calling for Mr Grasso to resign. They said the controversy had damaged public trust in the NYSE.
LaBranche & Co, Mr LaBranche firm, was censured and fined $150,000 last month for failing to co-operate with an NYSE investigation into trading practices. It is now appealing. Mr LaBranche denied that his call for Mr Grasso’s resignation was related to the dispute with the NYSE. “We [the NYSE] need a fresh start, and to send a signal to our customers that we’re being responsive,” he said in an interview.
Mr Grasso was paid $139.5m three weeks ago, much of it in deferred pay, pension and benefits earned since he became chairman in 1995. His contract was also extended to 2007. It emerged later that he was owed a further $48m, which he said he would forgo.
The three largest US public sector pension funds have already called for Mr Grasso’s resignation, saying his pay was incompatible with his role as a regulator.
Traders have been circulating as petition calling for Mr Grasso’s resignation while owners of NYSE seats are gathering support for new directors to be added to the exchange board.
Earlier Mr Grasso had insisted that he would not resign.
Among the proposals that directors are understood to be considering are splitting the roles of the chairman and chief executive, and the separation of the stock market from the NYSE’s regulatory function, as part of an attempt to get the exchange out of its crisis.
These proposals are likely to be discussed next week in a wider review of the NYSE’s corporate governance.
William Donaldson, chairman of the Securities and Exchange commission, said the chief US market regulator would ask the NYSE for additional information the $188m pay package and how the board of directors come to approve it, some of them apparently unaware of how much Mr Grasso was entitled to under the terms of his contract.
Mr Donaldson would not comment on the calls for Mr Grasso’s resignation. But he told a hearing of the House financial services committee in Washington: “We will be asking the NYSE some further questions, based on the information we have received.” The NYSE has sent the SEC documents and minutes of board meetings related to Mr Grasso’s contracts and compensation. The SEC is already investigating corporate governance at the stock exchange, and Mr Donaldson said the controversy over Mr Grasso’s pay raised questions about corporate governance procedures.