The multi-million-dollar compensation package of former New York Stock Exchange chairman Richard Grasso was calculated in part using an average of the compensation of some of the most highly compensated chief executives in the United States, a report said yesterday.
The Webb report, which has been declassified by the exchange, has shed some new light on Grasso's pay package and the culture of largess that prevailed at the exchange during his tenure.
The report, prepared for the NYSE by former federal prosecutor Dan Webb, said Grasso was paid US$193 million ($271 million), and that sum was calculated using a complex formula called a "comparator group" that employed as its benchmark the pay of some of the most richly compensated CEOs.
The process underscores one of the more problematic themes of the scandal that drove Grasso from his office in September 2003. Many critics felt that as a regulator and the head of what is technically a not-for-profit organisation, he should have been paid according to that standard.
However, some of the former chairman's supporters have said that Grasso's leadership was so integral to the exchange's success that it was appropriate he be remunerated at a level commensurate with the leaders of listed companies. They also argue that paying Grasso such a large sum was necessary in order to retain his services, and keep executive salaries competitive with other organisations.
"Every dime of compensation was voted on unanimously by a compensation committee that, working with its consultants, decided that Dick Grasso was worth a great deal to the NYSE," said Eric Starkman, a spokesman for Grasso.
The report said the process of benchmarking dated back to before Grasso's tenure as the big board's chairman and CEO. During 1995 and 1996, the NYSE's compensation committee agreed that the exchange should not pay its executives "at levels commensurate with what investment bankers and others were making on Wall St".
Despite that decision, the report said that for unknown reasons, "the committee did not follow through on that decision". Moreover, an idea that was floated that would have incorporated the compensation of other exchange CEOs in the formula was also discarded.
After 1999, some of the companies used in Grasso's comparator group included the executive pay of the heads of Citigroup, American Express, Wells Fargo, Merrill Lynch and American International to name a few.
The report also disclosed that Grasso kept a personal secretary who was paid US$240,000 a year, as well as two drivers who were paid a salary of US$130,000 each annually.
In addition, Grasso's top lieutenants, co-presidents Robert Britz and Catherine Kinney, received retirement packages of at least US$19 million each.
The big board's compensation committee members viewed Grasso as a top performer.
* Morgan Stanley paid its chief executive officer, Philip Purcell, US$22 million in salary, bonus and restricted stock last year, a regulatory filing shows.
Purcell received a base salary of US$775,000, a cash bonus of US$7.4 million and restricted stock units valued at US$13.8 million. The investment bank said it took into consideration when determining his pay that Purcell earned less than his Wall St peers in the past three years.
- REUTERS
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