Stock Chief Resigns Under Fire

New York Stock Exchange chairman Dick Grasso resigned Wednesday amid rising fury over his $139.5 million pay package, his 36-year career ruined by cries that he made too much money running the world's richest financial market.

Grasso called an emergency meeting of the NYSE board where he offered to resign if the board asked, said H. Carl McCall, chairman of the NYSE compensation committee, who chaired the meeting.

"The board did so and accepted that resignation," McCall said.

Grasso, in a statement, said, "I believe this course is in the best interest of both the exchange and myself."

The board was to reconvene later in the evening to discuss a replacement.

Grasso said he was stepping down "with the deepest reluctance."

"Throughout my career and on behalf of all exchange constituents, I have worked with great partners to build and enhance the value and brand of the NYSE," he said. "I look forward to supporting the board and the exchange in bringing about a smooth transition to a successor."

The meeting, which included chief executives from Wall Street's largest investment banks, began shortly after the market closed.

Resentment over the multimillion-dollar pay package was coming to a head on the exchange floor, as well, as active seatholders planned to gather after the market closed Thursday to discuss the issue with three directors who are also NYSE members.

The NYSE revealed its top executive's pay for the first time last month as it announced Grasso's contract had been extended through 2007. News that he would receive a lump sum payment of $139.5 million in accrued benefits and tax-deferred savings sent jaws dropping across Wall Street. The funds accumulated over his 36-year career with the exchange, mostly during his eight years as chairman.

Grasso has insisted he did nothing to influence his pay. At a Sept, 9 news conference, when he announced he would forgo another $48 million promised to him under his contract, he said each year when informed of his compensation he responded by saying, "I'm blessed. Thank you."

Critics, from investor advocates to politicians and traders, say the lavish pay undermines the credibility of the exchange, a not-for-profit institution that is owned by its members and also serves as a regulatory watchdog.

"The stock exchange with this revelation has become a symbol, I think, of greed. And it's the wrong symbol," Jim Grant, a veteran Wall Street observer, told CBS News Correspondent Anthony Mason.

Others agreed. "We had no idea we had a fox in the chicken coop," one board member told CBS' Mason.

And in a letter to the exchange, SEC Chairman Bill Donaldson, Grasso's predecessor said, "Grasso's pay package raises serious questions about the NYSE's governance structure."

Michael LaBranche, the head of LaBranche & Co., one of the NYSE's largest stock-trading specialist firms, had come out earlier in the day in favor of a change.

"We are calling for Grasso's immediate resignation in the interest of the New York Stock Exchange. We think Dick Grasso has to leave now in order for the exchange to move forward and restore investor confidence in the marketplace," he said.

Traders have reportedly circulated one or more petitions calling for a special meeting to discuss changes at the top of the NYSE. Many have also been critical of the board for approving the hefty pay package.

Born in the Jackson Heights neighborhood of Queens, Grasso joined the exchange in 1968 after dropping out of Pace University and serving in the U.S. Army as a clerk. Within a few years, Grasso was on the road pushing for new exchange business.

Grasso became chairman in 1994. In the nine years he has served in that position, the exchange has pounded the competition and compiled a track record that even his critics concede is remarkable.

Since mid-1995, the exchange more than doubled its roster of listed companies to 2,783, adding 1,549. More than 400 companies have moved to the NYSE from the Nasdaq, and 113 companies have defected from the American Stock Exchange, according to NYSE data from early August.

The market value of the exchange's listed companies has jumped to $13.4 trillion from $9.2 trillion in 1996.

Grasso also turned away from the exchange's historical practice of waiting for newly listed companies to mature before listing them. Since 1998, the NYSE has captured 90 percent of proceeds from initial public offerings, including a record $17 billion in 2002.

Despite the rapid growth, Charles Geisst, a professor at Manhattan College and author of two books on Wall Street history, said in an interview with CBS Marketwatch in August that the NYSE has failed to shed its image as a clubby enclave.

"The perception hasn't changed a whole lot," despite Grasso's influence, he said. "He's one of the few I can think of who was born and raised on the exchange. He's a little too close to that organization. He owes them everything he's got."