See Dick run

Wednesday, July 02, 2008 | | 0 comments »


Richard Grasso, or 'Dick' as friends (and enemies) call him, is back in the news. The case against him has been thrown out by the New York State Court of Appeals. An entertaining background is in this Fortune article.

The case was about whether or not Mr Grasso's job at the New York Stock Exchange (NYSE) was worth $188m. In other words, the public wanted a case brought because they thought his package was unjust.

Although the answer is morally obvious to most it is expecting much that a legal action would rule thus in a context where the money was already voted by the board of the NYSE, had been paid (except for $48m in pension benefits) and did not involve any public funds. Nor would the NYSE have done anything particularly admirable with the difference had a smaller salary been settled on instead.

As it happened, the judges did not have to rule on the "fairness" question. From the NY Times link above:

"The decision means the case was not decided on whether Mr. Grasso’s pay had been unreasonable but rather was thrown out because the exchange merged with Archipelago Holdings in 2006, becoming a public company. The appeals court concluded that the attorney general has no standing to sue Mr. Grasso since the exchange has been converted from a nonprofit entity to a for-profit corporation, negating the attorney general’s ability to sue on behalf of the public rather than for private shareholders."
The irony of Archipelago's role in the technical victory will not be lost on Mr Grasso. Pre-NYSE, Archipelago (an electronic trading-platform company) was 15% owned by Goldman Sachs. Goldman pushed hard for the merger with the NYSE but encountered resistance from Mr Grasso. His departure paved the way for the transaction.

At the time Goldman was run by Hank Paulson who was on the NYSE board that voted Mr Grasso's compensation. However, Mr Paulson also led the charge to get rid of Mr Grasso (having missed the board meeting where the final package was approved) - a constellation of events that led to the Grasso side nursing a conspiracy theory against Goldman/Paulson.

Still, hard for the victim to complain of a conspiracy that inadvertently ends up paying him $188m.

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