July 26, 1946 |
Jackson Heights, New York
|Known for||former chairman & chief executive of the NYSE (1995–2003)|
Richard A. "Dick" Grasso (born July 26, 1946 in Jackson Heights, Queens, New York) 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 allegedly excessive pay package and $140 million golden parachute. On July 1, 2008 the New York State Court of Appeals dismissed all claims against Grasso.
Grasso was raised by his mother and two aunts in Jackson Heights, New York City 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.
On June 26, 1999 Reuters reported that Grasso met with Colombian 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 since 1997) 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."
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, 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, and several senior officials followed, in the same month. Law firm Winston & Strawn carried out an investigation, on behalf of the NYSE, and a comprehensive report analyzing Grasso's alleged excessive compensation and benefits, and the governance failures behind it, was completed in December.
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.
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.
Grasso is currently residing in New York with his wife Lorraine and his four children: Jennie, Christine, Richard and Catherine.
- Who's Who In Finance and Business - 2004-2005 (34 ed.). 2004.
- Thor Valdmanis (September 18, 2003). "NYSE faces Thursday without Richard Grasso". USA Today. Retrieved 2006-06-16.
- Koppel, Andrea (2001-09-10). "U.S. to classify Colombian group as 'terrorist'". CNN. Retrieved 2012-01-02. "FARC and ELN were both designated as Foreign Terrorist Organizations by the secretary of state in October 1997."
- "NYSE Chief Meets Top Colombia Rebel Leader". Reuters. 1999-06-26. Retrieved 2006-02-27.
- "International chief Georges Ugeux resigns from NYSE". marketwatch.com. September 2003.
- "Report to the NYSE on investigation relating to the compensation of Richard A. Grasso". Winston & Strawn LLP. 15 December 2003.
- "Grasso Ordered to Return NYSE Pay". NPR.
- "Grasso Took the Fifth In SEC Trading Probe". Washington Post. March 17, 2006.
- "SEC charges the New York Stock Exchange with failing to police specialists". SEC. 2005.
- Ackman, Dan (May 7, 2003). "Dick Grasso And The Company He Keeps". Forbes.
- Weiss, Gary (September 15, 2003). "The $140,000,000 Man". BusinessWeek.
- White, Ben (September 18, 2003). "NYSE Ousts Grasso as Chairman: Size of Pay Package Drew Wide Criticism". The Washington Post. p. A01.
- Surowiecki, James (2004). The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations. Doubleday. ISBN 0-385-50386-5.
- Albrecht, Karl (2005). Social Intelligence: The New Science of Success, Economies, Societies and Nations. Pfeiffer Publishing. ISBN 0-7879-7938-4.
- Gasparino, Charles (2007). King of the Club: Richard Grasso and the Survival of the New York Stock Exchange. HarperCollins.