The MSM is atwitter today with news about the release of a previously confidential report that details former New York Stock Exchange CEO Richard Grasso‘s compensation and perks as head of the NYSE and paints the Big Board’s directors as clueless as to how much compensation they were approving for Mr. Grasso during his eight years as Big Board CEO. New York attorney general and Governor-in-waiting Eliot Spitzer — who has sued Mr. Grasso and Wall Street financier and former NYSE compensation committee chairman Kenneth Langone over Mr. Grasso’s compensation issues — is quite pleased with the publicity, thank you.
Of course, the MSM is self-righteously indignant with the corpulent details of Mr. Grasso’s perks, including $193 million in annual pay, early pension payouts and estimated interest earned on those payouts from 1995 through 2003, as well as the $240,000-a-year secretary, two $130,000-a-year drivers, access to a private plane, and club memberships. Relying on compensation experts, the report — which was commissioned by the Big Board directors only after they had approved all this compensation for Mr. Grasso and Mr. Spitzer started snooping around — opines that the compensation represented about $100 million in “excessive” pay for Mr. Grasso.
Interestingly, the report notes that former NYSE director Carl McCall, the former New York state comptroller who headed the NYSE board’s compensation committee in 2003 when it approved Mr. Grasso’s most lucrative contract, signed the document without reading the damn thing. Despite this rather amazing disclosure and the fact that Mr. Spitzer has sued Mr. Langone (who was Mr. McCall’s predecessor as NYSE compensation chairman), Mr. Spitzer did not name Mr. McCall as a defendant in his lawsuit against Messrs. Grasso and Langone. I’m sure the fact that Mr. McCall, like Mr. Spitzer, is a prominent New York Democrat, while Mr. Langone is a prominent Republican, had nothing to do with that decision.
As expected in such misguided squabbles, both Mr. Spitzer and Messrs. Grasso and Lagone stated publicly yesterday that the report supports their respective positions in the lawsuit.
Alas, what is completely lost in the MSM treatment of Mr. Grasso’s pay and Mr. Spitzer’s Robin Hood lawsuit is the real issue, which is the failed corporate governance model of the NYSE. For insightful analysis of that issue, check out Professor Bainbridge here and Professor Ribstein here. Although arguably not be as entertaining as gossiping about how Mr. Grasso’s country club buddies lined his pockets or how Mr. Spitzer is going to be the next “Peoples’ Lawyer,” their recommendations have a much better chance of remedying the problem of oblivious directors and overpaid executives than a hundred Spitzer-type lawsuits would ever have.