Richard Grasso
Encyclopedia
Richard A. "Dick" Grasso (born July 26, 1946 in Jackson Heights
, Queens
, New York City
) was chairman and chief executive of the New York Stock Exchange
from 1995 to 2003, the culmination of a career that began in 1968 when Grasso was hired by the Exchange as a floor clerk. After the September 11, 2001 terrorist attacks, Grasso became the public face of the Exchange and was praised for his role in helping restart operations. He later became embroiled in controversies and lawsuits about his excessive pay package and $140million golden parachute
.
since his father left the family when Richard was an infant. He graduated from Newtown High School
, and attended Pace University
for two years before enlisting in the Army
. Two weeks after leaving the Army in 1968, Grasso became a clerk at the New York Stock Exchange.
Richard moved up rapidly in the ranks, becoming president of the exchange and then CEO in the early 1990s. As CEO, he was widely credited with cementing the New York Stock Exchange's position as the preeminent U.S. stock market. Grasso also served as an advisory board member for the Yale School of Management
.
reported that Grasso met with Colombia
n rebels, the FARC
, in an article entitled "NYSE Chief Meets Top Colombia Rebel Leader". The FARC is considered a terrorist organization by the U.S. State Department (on its list of Foreign Terrorist Organizations
) and is allegedly responsible for kidnappings and narcotics trafficking in order to bankroll their revolutionary activities (see: narcoterrorism
).
The article quoted Grasso as saying, "I invite members of the FARC to visit the New York Stock Exchange so that they can get to know the market personally." Some found the meeting inexplicable, considering the FARC supports anti-capitalist
ideals and has no officially recognized financial clout. Grasso told reporters that he was bringing "a message of cooperation from U.S. financial services."
Following criticism of the deal from U.S. Securities and Exchange Commission chairman William H. Donaldson
, who preceded Grasso as Chairman of the NYSE, and several pension fund heads (who control some of the largest pools of equity
investment capital in the U.S.), the Exchange board met and in a 13-to-7 vote asked Grasso to leave. He stepped down on September 17, 2003.
On May 24, 2004 Grasso was sued by New York state Attorney General Eliot Spitzer
demanding repayment of the majority of the $140 million pay package. Prior to being dismissed Grasso had been in line to receive an additional $48 million over the $139.5 million he had already received; he was not paid the additional funds. Grasso has sued to be awarded those funds. According to the suit, Grasso, along with former NYSE director Kenneth Langone
, misled the NYSE board about the details of his pay package. It was allegedly well beyond that of comparable chief executives. The NYSE was a non-profit institution during Richard Grasso's reign, and as such was governed by State of New York rules governing executive compensation for same. That the NYSE was NON-profit goes to the heart of the matter of Grasso's compensation. This is because FOR-profit companies have traditionally received much greater leeway in executive compensation matters, even when the compensation might appear to be excessive to stockholders. In addition, there were issues concerning premature withdrawals of Grasso's retirement compensation. Retirement packages often have strict timetables as to when withdrawals can be made.
On May 26, 2004 Grasso responded with a counter-suit against the Exchange and its chairman John Reed
. The counterclaim was twofold; It sought restitution of unpaid portions of his retirement package and further accused certain individuals at the Exchange of "besmirching his name". Grasso went on to place a 1500-word op-ed
article in the Wall Street Journal detailing this counter-suit as well as his grievances against Spitzer.
The lawsuit against Grasso continued to move toward trial in 2006 with neither side showing any interest in settling.
On October 19, 2006 it was reported that the New York State Supreme Court issued a summary decision ordering Grasso to repay a significant amount of excess compensation in an article entitled "Ex-NYSE chief ordered to return part of $188M". Although Grasso will appeal, the same article reports that Spitzer's office has disclosed the amount of restitution to be in the tens of millions of dollars. In his ruling Judge Ramos wrote that Grasso's failure to disclose the true extent of his total compensation prevented the compensation committee from exercising its fiduciary duties. The above CNN article also reported that Grasso's counterclaim of defamation was dismissed.
The suit against Grasso has come under criticism from some commentators, with journalist Charles Gasparino lambasting it in the epilogue to his book Blood on the Street. He is the subject of a book by Gasparino, King of the Club.
On July 1, 2008 the New York State Court of Appeals dismissed all claims against Grasso. The majority opinion stated that since the NYSE was now a subsidiary of a for-profit multinational corporation the State of New York had no oversight over the affairs of the company in this matter and that prosecution was "not in the public interest." Current Attorney General Andrew Cuomo
stated that he had no intention to appeal this decision any further and that the case was effectively over. The court ruled that Grasso was entitled to the entirety of his compensation. The court also dismissed Grasso's actions against the NYSE and other parties as related to this matter.
According to the Washington Post, during a SEC investigation Grasso invoked his fifth amendment rights against self-incrimination in refusing to answer questions regarding his conduct during an NYSE investigation into possibly improper activities by Exchange specialist firms. The specialist firms paid $242 million in settlements with the SEC, and the NYSE itself was censured for failing to properly supervise the specialist firms.
Jackson Heights, Queens
Jackson Heights is a neighborhood in the Northwestern portion of the borough of Queens in New York, New York, United States. The neighborhood is part of Queens Community Board 3...
, Queens
Queens
Queens is the easternmost of the five boroughs of New York City. The largest borough in area and the second-largest in population, it is coextensive with Queens County, an administrative division of New York state, in the United States....
, New York City
New York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
) was chairman and chief executive of the New York Stock Exchange
New York Stock Exchange
The New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...
from 1995 to 2003, the culmination of a career that began in 1968 when Grasso was hired by the Exchange as a floor clerk. After the September 11, 2001 terrorist attacks, Grasso became the public face of the Exchange and was praised for his role in helping restart operations. He later became embroiled in controversies and lawsuits about his excessive pay package and $140million golden parachute
Golden parachute
A golden parachute is an agreement between a company and an employee specifying that the employee will receive certain significant benefits if employment is terminated. Sometimes, certain conditions, typically a change in company ownership, must be met, but often the cause of termination is...
.
Background
Grasso was raised by his mother and two aunts in Jackson Heights, New York Citysince his father left the family when Richard was an infant. He graduated from Newtown High School
Newtown High School (New York City)
Newtown High School is a high school in Elmhurst, a neighborhood in the New York City borough of Queens. Its multinational student body consists of approximately 4,030 students, mostly Spanish-speaking. Newtown High School celebrated its 110th anniversary in 2007...
, and attended Pace University
Pace University
Pace University is an American private, co-educational, and comprehensive multi-campus university in the New York metropolitan area with campuses in New York City and Westchester County, New York.-Programs:...
for two years before enlisting in the Army
United States Army
The United States Army is the main branch of the United States Armed Forces responsible for land-based military operations. It is the largest and oldest established branch of the U.S. military, and is one of seven U.S. uniformed services...
. Two weeks after leaving the Army in 1968, Grasso became a clerk at the New York Stock Exchange.
Richard moved up rapidly in the ranks, becoming president of the exchange and then CEO in the early 1990s. As CEO, he was widely credited with cementing the New York Stock Exchange's position as the preeminent U.S. stock market. Grasso also served as an advisory board member for the Yale School of Management
Yale School of Management
The Yale School of Management is the graduate business school of Yale University and is located on Hillhouse Avenue in New Haven, Connecticut, United States. The School offers Master of Business Administration and Ph.D. degree programs. As of January 2011, 454 students were enrolled in its MBA...
.
FARC controversy
On June 26, 1999 ReutersReuters
Reuters is a news agency headquartered in New York City. Until 2008 the Reuters news agency formed part of a British independent company, Reuters Group plc, which was also a provider of financial market data...
reported that Grasso met with Colombia
Colombia
Colombia, officially the Republic of Colombia , is a unitary constitutional republic comprising thirty-two departments. The country is located in northwestern South America, bordered to the east by Venezuela and Brazil; to the south by Ecuador and Peru; to the north by the Caribbean Sea; to the...
n rebels, the FARC
Revolutionary Armed Forces of Colombia
The Revolutionary Armed Forces of Colombia – People's Army is a Marxist–Leninist revolutionary guerrilla organization based in Colombia which is involved in the ongoing Colombian armed conflict, currently involved in drug dealing and crimes against the civilians..FARC-EP is a peasant army which...
, in an article entitled "NYSE Chief Meets Top Colombia Rebel Leader". The FARC is considered a terrorist organization by the U.S. State Department (on its list of Foreign Terrorist Organizations
U.S. State Department list of Foreign Terrorist Organizations
"Foreign Terrorist Organization" is a designation of non-United States-based organizations declared terrorist by the United States Secretary of State in accordance with section 219 of the U.S. Immigration and Nationality Act...
) and is allegedly responsible for kidnappings and narcotics trafficking in order to bankroll their revolutionary activities (see: narcoterrorism
Narcoterrorism
Narcoterrorism is a term coined by former President Fernando Belaúnde Terry of Peru in 1983 when describing terrorist-type attacks against his nation's anti-narcotics police...
).
The article quoted Grasso as saying, "I invite members of the FARC to visit the New York Stock Exchange so that they can get to know the market personally." Some found the meeting inexplicable, considering the FARC supports anti-capitalist
Anti-capitalism
Anti-capitalism describes a wide variety of movements, ideas, and attitudes which oppose capitalism. Anti-capitalists, in the strict sense of the word, are those who wish to completely replace capitalism with another system....
ideals and has no officially recognized financial clout. Grasso told reporters that he was bringing "a message of cooperation from U.S. financial services."
NYSE compensation controversy
On August 27, 2003 it was revealed that Grasso had been given a deferred compensation pay package worth almost $140 million. This caused immediate controversy, as the hand-picked compensation committee consisted mainly of representatives from NYSE-listed companies over which Grasso had regulatory authority as head of the Exchange.Following criticism of the deal from U.S. Securities and Exchange Commission chairman William H. Donaldson
William H. Donaldson
William Henry Donaldson was the 27th Chairman of the U.S. Securities and Exchange Commission , serving from February 2003 to June 2005...
, who preceded Grasso as Chairman of the NYSE, and several pension fund heads (who control some of the largest pools of equity
Ownership equity
In accounting and finance, equity is the residual claim or interest of the most junior class of investors in assets, after all liabilities are paid. If liability exceeds assets, negative equity exists...
investment capital in the U.S.), the Exchange board met and in a 13-to-7 vote asked Grasso to leave. He stepped down on September 17, 2003.
On May 24, 2004 Grasso was sued by New York state Attorney General Eliot Spitzer
Eliot Spitzer
Eliot Laurence Spitzer is an American lawyer, former Democratic Party politician, and political commentator. He was the co-host of In the Arena, a talk-show and punditry forum broadcast on CNN until CNN cancelled his show in July of 2011...
demanding repayment of the majority of the $140 million pay package. Prior to being dismissed Grasso had been in line to receive an additional $48 million over the $139.5 million he had already received; he was not paid the additional funds. Grasso has sued to be awarded those funds. According to the suit, Grasso, along with former NYSE director Kenneth Langone
Kenneth Langone
Kenneth Langone, is a venture capitalist, investment banker and financial backer of The Home Depot, and a former director of the New York Stock Exchange. He was elected as director of Yum! Brands effective October 7, 1997, and is a member of the Audit Committee. Langone is also a trustee of New...
, misled the NYSE board about the details of his pay package. It was allegedly well beyond that of comparable chief executives. The NYSE was a non-profit institution during Richard Grasso's reign, and as such was governed by State of New York rules governing executive compensation for same. That the NYSE was NON-profit goes to the heart of the matter of Grasso's compensation. This is because FOR-profit companies have traditionally received much greater leeway in executive compensation matters, even when the compensation might appear to be excessive to stockholders. In addition, there were issues concerning premature withdrawals of Grasso's retirement compensation. Retirement packages often have strict timetables as to when withdrawals can be made.
On May 26, 2004 Grasso responded with a counter-suit against the Exchange and its chairman John Reed
John S. Reed
John Shepard Reed is the former Chairman of the New York Stock Exchange. He previously served as Chairman and CEO of Citicorp, Citibank, and post-merger, Citigroup. He is currently the Chairman of the Massachusetts Institute of Technology's Office of Corporation. He was born in Chicago, Illinois,...
. The counterclaim was twofold; It sought restitution of unpaid portions of his retirement package and further accused certain individuals at the Exchange of "besmirching his name". Grasso went on to place a 1500-word op-ed
Op-ed
An op-ed, abbreviated from opposite the editorial page , is a newspaper article that expresses the opinions of a named writer who is usually unaffiliated with the newspaper's editorial board...
article in the Wall Street Journal detailing this counter-suit as well as his grievances against Spitzer.
The lawsuit against Grasso continued to move toward trial in 2006 with neither side showing any interest in settling.
On October 19, 2006 it was reported that the New York State Supreme Court issued a summary decision ordering Grasso to repay a significant amount of excess compensation in an article entitled "Ex-NYSE chief ordered to return part of $188M". Although Grasso will appeal, the same article reports that Spitzer's office has disclosed the amount of restitution to be in the tens of millions of dollars. In his ruling Judge Ramos wrote that Grasso's failure to disclose the true extent of his total compensation prevented the compensation committee from exercising its fiduciary duties. The above CNN article also reported that Grasso's counterclaim of defamation was dismissed.
The suit against Grasso has come under criticism from some commentators, with journalist Charles Gasparino lambasting it in the epilogue to his book Blood on the Street. He is the subject of a book by Gasparino, King of the Club.
On July 1, 2008 the New York State Court of Appeals dismissed all claims against Grasso. The majority opinion stated that since the NYSE was now a subsidiary of a for-profit multinational corporation the State of New York had no oversight over the affairs of the company in this matter and that prosecution was "not in the public interest." Current Attorney General Andrew Cuomo
Andrew Cuomo
Andrew Mark Cuomo is the 56th and current Governor of New York, having assumed office on January 1, 2011. A member of the Democratic Party, he was the 64th New York State Attorney General, and was the 11th United States Secretary of Housing and Urban Development...
stated that he had no intention to appeal this decision any further and that the case was effectively over. The court ruled that Grasso was entitled to the entirety of his compensation. The court also dismissed Grasso's actions against the NYSE and other parties as related to this matter.
According to the Washington Post, during a SEC investigation Grasso invoked his fifth amendment rights against self-incrimination in refusing to answer questions regarding his conduct during an NYSE investigation into possibly improper activities by Exchange specialist firms. The specialist firms paid $242 million in settlements with the SEC, and the NYSE itself was censured for failing to properly supervise the specialist firms.