New York Stock Exchange
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Authors
Authors: Sanjib Dutta, K Subhadra,
Faculty Member, Faculty Associate,
ICMR (IBS Center for Management Research).
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The Final Assault-CEO Compensation Contd...
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Refuting the allegations about the executive compensation, NYSE said that it acted on the advice of HR consultants. It was reported that NYSE took advice from Hewitt Associates12 regarding Grasso's compensation and the exchange had hired an independent consultant - Vedder Price13 to assess the compensation of Grasso. Analysts felt that Grasso's pay package should be in lines with the salary drawn by the chief of SEC and cited that SEC chief earned around $142,500 per annum. But some felt that there was nothing wrong in NYSE chief earning on par with the top financial services industry executives. However, analysts considered Grasso's pay package high even when compared to the salary earned by the top executives in the financial services industry. Grasso's pay package even attracted criticism from the NYSE insiders. The members of the exchange were furious that while the operating income and volume of trade on the exchange were declining; Grasso was rewarding himself with such hefty amount. It was reported that the cost of operating on NYSE had increased by over 30% during 2000-2003. The public resentment against Grasso further increased with two large pension funds in the US criticizing his pay package and demanding his resignation. With mounting pressure, Grasso resigned in September 2003. |
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The Clean Up Exercise
Gerald Manuel Levin, the CEO of Time Warner, was an "unprepossessing figure stalking the hallways of the great empire". He had ascended to the position of CEO by staging a coup against his boss and benefactor Nick Nicholas, while Nicholas was on a skiing vacation with his family. Levin was generally disliked by the countless people he had fired, passed over, or ignored in his climb to power. If the silent, stolid, Steve Case was called
"The Wall", Levin was called Caligula.
On November 5 2003, Reed announced his proposed reforms in governance methods of the NYSE. It was proposed that the board would have independent directors with responsibility of supervising regulation, governance, compensation and internal administration.
Reed also announced that the BOD would be appointing an executive board (BOE) comprising of representatives from broker/dealer members, listed companies and the general public. Further, it was stated that BOE would be meeting regularly to discuss issues related to marketplace operations, membership, listed-companies, market structure and performance. The exchange would also have a Chief Regulatory Officer who would be appointed by the board of directors and he would be reporting to the Regulatory Oversight Committee.
12] Established in 1940, Hewitt Associates is a global outsourcing and consulting firm delivering a complete range of human capital management services.
13] Founded in 1952, Vedder, Price, Kaufman & Kammholz, P.C is a law firm. The firm advices organizations on the corporate responsibility and other relating matters.