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Posted on 09/19/2003 4:01:21 PM PDT by RealEstateEntrepreneur
Grasso’s Sin of Success The NYSE’s now-former CEO was devoured by an anti-market wolfpack.
A kangaroo court of liberal-leaning journalists and Democratic state treasurers charged and convicted former New York Stock Exchange CEO Dick Grasso with an unpardonable sin — success.
This collection of class-envy warriors put such relentless pressure on the NYSE that Grasso was finally forced by his board to resign. Grasso, of course, was the man whose Herculean efforts were behind the reopening of the stock exchange only four business days after the terrorist bombing of downtown New York. But the so-called titans of finance who sit on the NYSE board were so mau-maued by the media and political onslaught that they actually sided against the man who inflicted the first major blow on Osama's terrorism. There was no scandal here. Dick Grasso accepted a big pay package endorsed on two occasions by the NYSE board in return for 35 years of successful service. What is scandalous is that key Big Board officials — like Hank Paulson of Goldman Sachs, Philip Purcell of Morgan Stanley, and William Harrison of JP Morgan Chase — succumbed to the pressure of newspaper headlines and abandoned Grasso.
Not only did Grasso start America's economic recovery immediately after 9/11, he also saved the NYSE from a late-1990s assault by the Nasdaq. At the time, the technology stock market threatened to induce numerous Big Board companies to switch their listings, and at one point cautioned that it might even take over the NYSE. But it was the diminutive son of Italian immigrants who defended NYSE floor brokers and retail investors from a new era of impersonal electronic trading. Some thanks he got: Many of these same floor brokers helped push Grasso over the edge.
Let's be very clear about this: Grasso has done nothing wrong. Nothing, that is, except believe his own board when they offered him a large pay package for his long-term service.
Grasso did not fraudulently cook the books, steal from the corporate cookie jar, lie to federal prosecutors, or engage in insider trading. He is no Worldcom Bernie Ebbers, Enron Kenneth Lay, or Tyco Dennis Kozlowski. In fact, a Grasso-led decision to embark on full compensation disclosure as a way of hastening corporate-governance reform put him in this pickle in the first place.
The announcement of a one-time payment of $140 million probably did the former CEO in. A longer-term smoothing out of his pay plan would have avoided the media killing field. But it was seldom reported that the payment covered 35 years of service, including pension, savings, and other deferred incentives. Discounted properly, this sum comes to roughly $2 million a year over the entire three-decade period Grasso served — a modest amount by Wall Street standards.
The talented Grasso could have been lured away as CEO of another company. That's precisely why the NYSE board re-upped his pay package beginning in 1995 and extended his tenure through 2007. They were rewarding success and loyalty.
In recent years, techie CEOs like Lawrence Ellison of Oracle, John Chambers of Cisco, Scott McNealy of Sun Microsystems, and Irwin Jacobs of Qualcomm received billions of dollars in stock-option-based pay packages. Grasso could have signed on with any of these companies, but he chose to stay with his long-time employer. For that he was devoured by a wolfpack of anti-market journalists.
No one really knows what pay is proper for successful management skills. But the example of the Chicago Mercantile Exchange — where 1.5 billion in daily trading of interest-rate, currency, and stock market futures is directly comparable to the NYSE — shows that Grasso's pay was in the right ballpark.
The Merc recently went public, and today it has $900 million of enterprise value with a market cap of $3.1 billion. Merc CEO Jim McNulty receives annual pay and benefits totalling about $1.5 million. But for his longer-term service he owns a one-time grant of stock options now valued at $66 million, according to a Merc spokesperson.
In a piece of bitter irony, NYSE board members talked Dick Grasso out of a Big Board public offering in 1999. But Grasso was right — only full privatization will enable the NYSE to resolve all of its pay, disclosure, regulatory, and modernization issues.
Since Grasso resigned without cause, he will take all of his compensation chips off the table. Perhaps he will retire. Maybe he'll run another company. But the big lesson is this: Our free-market American system of entrepreneurial capitalism must never be Europeanized by punishing success or delinking effort from reward. We must never wage war against the smart investments or talented people that made our economy the most inventive and prosperous in all history.
Grasso was one of our successes. He earned his pay. For both his economic value and moral inspiration, he deserved a better fate.
— Mr. Kudlow is CEO of Kudlow & Co.
(Excerpt) Read more at nationalreview.com ...
Talent costs money to attract, and leading an institution such as NYSE requires talent. Grasso was SUPERB in doing that and has succeeded by objective measures. Assault on him is made by the same leftists that have been dismantling American institutions for the last 50 years. They are successful because our population is uneducated and ignorant, as manifested by the fact that even the self-proclaimed conservatives are anti-corporate.
Who ultimately paid the tab? The same people who pay YOUR salary. What is so mysterious to you?
Just like you, Grasso was HIRED. His salary, just as yours, is an expense that reduces profits. This expense is covered by the revenue that the organization gets from its customers --- people and firms that trade stocks.
The only difference between you and him is the amount: you do not get $40/year like M. Jordan (I presume). Why? 'Cause you are not Michael Jordan (you know what I mean). Well, you are no Grasso either.
In any event, you should not be mystified: it's just a salary.
I doubt that the tens of thousands of investors and those who lost their 401-Ks and savings during this market
You are wrong. There is and was not market mess. There were some companies, in which management committed fraud. Indeed, tens of thousands of investors --- their employees mostly --- have lost their savings.
This has nothing to do with the stock market, nor with the NYSE in particular.
mess when stocks were manipulated, Stocks were not manipulated. Read up.
financial advisers were being bribed and accounting houses were cooking corporate books
Again, you are defaming tens of thousands of honest workers. This is false.
Just like among janitors and technicians, programmers and engineers, there are some that are dishonest in the corporate world. I believe that we have less scrupulous management now because our culture has lost respect for civility and age-old American virtues. Managers are selected from that pool, and the pool is worse (in terms of morals) than 50 years ago.
Nevertheless, we are still talking about a small minority. Most work hard and do their utmost best to create wealth for the shareholders.
are going to shed crocodile tears over Grasso.
My tears for Grasso are not crocodile: their real. I see a classic success story -- the kind in which we pride ourselves usually. Not a privileged kid at all, Grasso started as a clerk. He rose by hard work, tenacity, and talent. This amount he got for ten years of work. Are you telling me this is too much if you consider that a moron Adam Sandler received this much for four movies that tool 25 weeks to shoot? Incidentally, how many newspaper articles have you read calling Adam Sandler, Jay Leno, or Michael Jordan "fat cats?" How many are outraged and call their incomes "obscene?" For crying out loud: Jay Leno tells penis and flatulence jokes; corporate managers create jobs and wealth.
As I said, it is very unfortunate that even conservatives are ignorant about the functioning of our institutions. They fall prey to the leftist media that agitates them to be angry at "corporations" -- the bastion and the last battleground of capitalism.
What makes this compensation package preposterous was that it was provided to him by a board of directors comprised of some of the very people that this board was intended to oversee!
Ig you are a conservative, stand on principles. I abhore Grasso's political views, and have questions about some of the measures he instituted. You further pointed (alleged) a character flaw: a man who started as a clerk he called the people who work on the sixth floor of the exchange his underlings..yuuck.
If ture, yuck indeed.
The managers are paid for their services and not their views or saintliness. My point was that he worked for the money, and the money is made look unreasonable by the media that exploits the ingorance and envy of the masses. You said nothing that relates to that.
the board of directors as obscene, Forgive but this is silly: they are throwing a bone (Grasso) to angry dogs (masses) --- of course that is what the'll say.
I hope you realize the seat holders of the NYSE own the exchange. Yes. This too is irrelevant to the issue.
Fine, Dennis. It's none of my business whom people choose as their sexual partners.
But I hate to disappoint you:
Now I'm double glad my money earns interest and isn't skimmed off by the scum who run the exchange.
You don't know how that intereset comes about: some of it may be going through NYSE, in which case you are still paying commision.
Shana Tova. I hope you'll have a good year.
The measure of perfomance may or may not be revenue. The measure of performance on that exchange is, and always has been, the price of a seat. Another is the number of companies listed (since it is related to teh volume and hence reveues of the members). Both skyocketed under Grasso.
You speak in haste and your wording is unjustifiably strong. This does not help your argument and seriously damages the credibility. Certainly, by calling Grasso a thief you only reveal envy as well as your ability to defame without reservations.
OK, we are on common ground. If you work on NYSE, I am sure that you have specific things that you want improved. You may also have serious disagrements with certain actions Grasso took (even I do, and I do not work there).
In this world it matters, however, is not only what you do but also for what reason yo do it, as well the consequences thereof. I objected to the reasons you gave (and I still stand by my previous statements: as stated they were false). I objected also to your calling someone a thief so easily.
More importantly, however, you may be persuing an altogether different objective, but by your tactic and your choice of words you aligned yourself with the leftists.
Now that you have stated your objective, I have no problem with that. But you may want consider the unintended consequences of your choices.
Best of luck to you in your work and otherwise.
P.S. I am, I admit, nervous when people mess with an instutution like NYSE: it has done a marvelous job over the centuries, and tinkering with what has worked well may create more problems than benefits.
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I am a bond trader $140 million is nothing. Chump change. I trade 3 times that amount every single day. Schwarzenegger made $30 million + a cut of the gross for 7 weeks work on T3. 7 freakin weeks! I despise Grasso for his left-wing views. And I am overjoyed that his remarkable tin ear cost him big here. But his compensation is well in line with comparable corporate execs and WAY below that for atheletesm celebrities, and Katie Couric in particular, whom I believe is now making $70 million per year.
dennisw- As Kudlow noted, the head of the Chicago Merc, which is dwarfed in size by the NYSE, pocketed $66 million worth of stock options, in addition to a $1.5 million annual salary. Proportionately, Grasso should have had nearly a billion in stock/options. He IS worth it. MANY companies would have gladly paid him well over $20 million per year. The (retiring) Chairman of Citigroup made something like $125 million last year alone.
I have a SERIOUS problem with that. And with the fact that the board, which is now sacrificing Grasso to protect itself, approved this scheme. Thank you for letting me know.
I never sided with Grasso --- side with principles. Grasso is attacked by the massed not for the reasons you mentioned but out of shear envy and as part of the leftis agenda. It does not matter for them whether it's Grasso or Jack Welsh, or Gerstner: you are wealthy --- I hate you. That is what I spoke about.
As I said earlier, I did not know that things instituted by Grasso were that, let's say, questionable. I still have a (unaslwered) question about what was he doing meeting with Colombian underworld. I appreciate your telling me some new information and assure you I was not siding with Grasso.
I know. That was inevitable as a result of (i) technological innovations, and (ii) NASDAQ formation, which happened at about the time you mentioned.
But the price of a seat did beat inflation handsomely during Grasso's reign, didn't it? Is my info wrong on that?
I would definitely appreciate learning any and all facts about him that you care to describe.
I am surprised you would use such language after all we've been through, dennis. You know me better than that. I don't think Grasso is a genius and never said so. I agree he benefited along with a great market upleg. I actually despise him.
But your assertion that he would never be paid $20 million by any company had to be refuted because it is simply untrue. He could have named his price + options at any number of Fortune 100 companies. This is indisputable, whether you like it or not.
I certainly understand that. Frankly, I don't trust people that climb so fast anyway... but that's another matter.
DWC, I am sorry to hear about that incident, and I hope it did not affect you very much. But, at the same time and with all due respect, that hardly qualifies as "reign of terror" as you described it. He played a heavy --- too heavy for the circumstances, perhaps --- that happens in corporate America all the time. Managers have limited time and often are not "people's" types. That happens all the time: someone is fired and, in retrospect, he could've been transferred, etc. In this case if he underplayed his hand, he'd be accused of not policing the exchange properly. And, just because trust is everything there, measures had to be harsh and quick. Perhaps, in doing so, he went too far. Yet, this one incident does not qualify as "reign" of terror --- in my opinion.
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