NYSE Chief
Will Collect
$139.5 Million

In its first public disclosure of the pay package of its top executive, the New York Stock Exchange said Chairman and Chief Executive Dick Grasso will collect $139.5 million in deferred retirement benefits and a pay package of at least $2.4 million this year.

The NYSE board's approval of the pay package, as well as its decision to extend Mr. Grasso's employment contract to 2007, reflect a vote of confidence in Mr. Grasso amid an unusually contentious season for the stock exchange. The exchange is investigating the trading practices of some of its biggest floor traders, known as specialist firms -- one of whom, LaBranche & Co., has publicly clashed with the exchange over its request for corporate e-mails. The dispute was resolved Wednesday. See related article.¹

Mr. Grasso's compensation, especially the large accumulated deferred retirement-related portion, sparked sharp reactions from both the Securities and Exchange Commission and from compensation experts.

However, H. Carl McCall, chairman of the NYSE's compensation committee, said the NYSE board clearly felt that Mr. Grasso was worth the money. "I feel good about the fact that Dick Grasso has provided some excellent leadership over a number of years, and we wanted to retain him," he said. "And to do so, we extended his contract."

Mr. McCall added that the release of the pay figures was part of a broader NYSE effort to improve transparency and strengthen its corporate governance.

At the SEC, which regulates the NYSE, officials said Chairman William Donaldson -- himself a former NYSE chairman -- was concerned about the size of Mr. Grasso's pay package.

"The commission will fully review this issue and compensation practices [at self-regulated organizations like the NYSE] very carefully," one commission official said. "Given that we expect [such organizations] to set the example for all the listed companies, there's some concern here."

Compensation experts also expressed surprise at the size of Mr. Grasso's compensation package.

"Those are some meaningful amounts there," said Steven Hall, president of Pearl Meyer & Partners Inc., a New York based executive compensation consultancy. "I'm not sure that there are a lot of CEOs that leave with lump-sum payouts in excess of $100 million."

While the gist of the pay package was approved by the NYSE's full board at its early-August meeting, final details weren't set until Tuesday, Mr. McCall said, when representatives of Mr. Grasso and the exchange, along with Mr. McCall, signed off on them.

Mr. Grasso's annual pay will be $2.4 million, including a base salary of $1.4 million and a bonus of at least $1 million.

The executive also is withdrawing $139.5 million in savings he has acquired during his career of more than three decades at the NYSE. That payout is a combination of $40 million in a savings account, a previously accrued retirement benefit of $51.6 million, and a previously earned balance of $47.9 million that is the result of prior incentive awards. His employment contract was extended to May 2007 from 2005.

"When you look at what [Mr. Grasso] has done for 36 years at the NYSE...Every decision has been the right decision, every step the right step," said Robert Zito, executive vice president for communications at the NYSE. "I can't speak for the board, but I think previous boards have acted in a way that they feel is commensurate with his results."

Earlier this year, The Wall Street Journal reported that Mr. Grasso's annual compensation in recent years had ranged as high as about $20 million -- figures that surprised many Big Board members (See article²).

Recent speculation about Mr. Grasso's pay, including bonuses, has touched a nerve among traders on the exchange's Manhattan floor, where many firms are struggling with the effects of a down market and diminished stock-trading volume.

In a statement Wednesday, Mr. Grasso said his decision to withdraw his accumulated compensation was made "to facilitate personal financial and estate planning" and that the money was subject to income tax, which he will now pay.

Write to Kate Kelly at kate.kelly@wsj.com⁴

Updated August 28, 2003