Grasso, Richard (1946–)

Richard A. (Dick) Grasso, born in 1946, is wellknown as the former chairman and chief executive of the New York Stock Exchange (NYSE) from 1995 [Page 1030]through 2003 before being asked by the NYSE board of directors to resign in a high-profile compensation controversy.

Grasso overcame an improbable background to rise to one of the most powerful positions in the financial world. After dropping out of college and spending 2 years in the U.S. Army, Grasso was hired by the NYSE in 1968 as a floor clerk making $82.50 per week. Working primarily in customer service and marketing, Grasso (who first became interested in the stock market as a teenager and purchased his first shares of stock with money earned working in a pharmacy) immersed himself in the history, operations, and traditions of the NYSE, gaining a reputation of a quick study, hard worker, and outstanding marketer in spite of his modest education. After spending 27 years rising through the ranks, the NYSE named Grasso chairman and chief executive of the NYSE on June 1, 1995. Grasso became the first staff member in the NYSE's more than 200-year history to rise to the top position, a feat made even more surprising with Grasso's lack of a college degree.

During Grasso's tenure at the NYSE, the stock market experienced a period of unprecedented growth that dramatically enhanced the relevance of the NYSE in American business society. As chairman and CEO, Grasso pushed relentlessly to improve and expand the NYSE. He focused on bringing state-of-the-art technology to the NYSE trading, regulatory, and administrative operations and increased the visibility of the NYSE by increasing the number of the companies (especially international companies) whose shares were listed on the “Big Board” at the NYSE. In 2001, in the aftermath of the September 11, 2001, terrorist attacks, Grasso became a reassuring public face for the American stock market and successfully led the restart operations of the NYSE.

Despite his personal success story and recognized strong leadership of the NYSE, Grasso is best known for a scandal involving his compensation. In September 2003, it was revealed that Grasso had been given a deferred compensation package worth reportedly between $140 and $187.5 million by the board of directors of the NYSE. This compensation package caused immediate controversy because the handpicked members on the compensation committee came from NYSE-listed companies over which Grasso had regulatory authority as head of the NYSE. After criticism of the deal by the chairman of the Securities and Exchange Commission and several pension funds, the NYSE board voted to ask for Grasso's resignation, which he submitted on September 17, 2003.

Subsequently, on May 24, 2004, Elliot Spitzer, the New York attorney general, sued Grasso (along with the NYSE and one of its directors) citing violations of New York's Not-for-Profit Corporation Law in awarding Grasso an excessive compensation package. The suit asked a state court judge to rescind the pay package and to determine a “reasonable” level of compensation for Mr. Grasso. The suit alleged that (1) the NYSE board of directors was misled on various aspects of the Grasso's compensation package; (2) the compensation formula that resulted in the $187.5 million compensation package was flawed and under Grasso's control; (3) the compensation was not reasonable under New York state law for a nonprofit organization; and (4) Grasso's dual role as a regulator and NYSE employee raised an impermissible conflict of interest. On May 26, 2004, Grasso, in turn, sued the NYSE and its Chairman John Reed seeking payment of unpaid portions of his pay package, as well as damages for “besmirching his name.” Both these cases are still pending.

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