Stock Chief Departs Chastened NYSE

Dick Grasso is gone, and his millions with him, leaving a new, almost certainly less extravagant and likely more public era for the New York Stock Exchange.

The chairman's decision to resign late Wednesday, a response to furor over the $139.5 million payout he received last month, leaves the NYSE board of directors searching for a successor under the scrutiny of its members, critics and federal regulators, who want changes in how the world's richest market is run.

The exchange and its practices are now likely to become the target of intense scrutiny. Forceful calls for change are already being heard.

"When the institution that symbolizes the integrity of the U.S. financial markets is exposed as a conflicted, chaotic, cash machine for its leader, the only way to even begin to restore credibility is to completely clean house at the board level," David Callaway, editor-in-chief of CBS MarketWatch, said in a column written for the business and financial Web site.

"Richard Grasso has done the right thing. He's fallen on his sword," said New York State Comptroller Alan Hevesi. "However, the issue is not just Mr. Grasso. The issue is making fundamental reforms at the stock exchange to restore investor confidence."

Hevesi and other state finance officials and pension managers had called for Grasso's resignation, joining an increasingly noisy chorus of politicians, investor advocates and traders who said his lavish salary undermined the credibility of the exchange, a not-for-profit, member-owned institution that also serves as a regulatory watchdog.

"In an era of corporate scandals, you can't have the regulator of the world's largest stock exchange take tens of millions of dollars in remuneration from the people he's regulating," Hevesi said. "That's a conflict of interest."

Grasso is the latest prominent figure in the business world to fall in a three-year storm of public uproar over outsized pay and questionable practices in corporate boardrooms and executive suites. That anger was fueled by the collapse of stock prices in 2000 and a string of scandals, starting with Enron Corp.

No one has suggested Grasso is guilty of the sort of wrongdoing that led to criminal charges against executives at Enron, WorldCom Inc. and other companies. But some saw conflicts of interest among board members and too much influence from the chairman, both in selecting directors and naming them to committees.

Grasso insisted he did nothing to influence his pay. At a Sept. 9 news conference, he said that each year, when informed of his compensation, his response was: "I'm blessed. Thank you."

Grasso called an emergency meeting of the NYSE board shortly after the market closed Wednesday. He offered to resign as chairman and chief executive, and after some discussion the board accepted, said H. Carl McCall, chairman of the compensation committee.

The vote was 13 to 7, according to a source familiar with the meeting, which was held by teleconference. Among those who thought Grasso should step down were CEOs of the nation's largest investment banks, the source said.

Grasso is entitled to keep the $139.5 million in benefits and savings accumulated over his three decades with the exchange — mostly since he became chairman in 1995 — and he could get another $10 million in severance pay, according to his contract.

Widely praised as a smart and savvy diplomat, the 57-year-old Grasso started out as a floor clerk in 1968 and became the NYSE's biggest promoter and cheerleader, transforming the opening and closing bells into public happenings. After the Sept. 11 terrorist attacks, he turned the resumption of trading into a tribute to the dead and a first step toward recovery of the financial district.

Critics say now it's time to take a hard look at the NYSE directors.

Grasso's departure is but "one small step for shareholders," said Nell Minow, editor of the Corporate Library, a private research group that studies business governance. "The CEO took the money, now we need to look at the people who paid the money."

Said CBS MarketWatch's Callaway, "The NYSE needs to set a new course and there's no time to waste."