Sep 20, 2003 By Rachel Beck Ap Business Writer 4 min read

NEW YORK (AP) – Maybe we should thank Dick Grasso. Had he not made so much money, many problems at the New York Stock Exchange would never have come to light. Sure, the NYSE has spent much of this year touting how it is stepping up its own standards and practices to meet demands in today’s more responsible corporate culture.

But it took news that its leader was entitled to $187.5 million in accrued pay and benefits – which was approved by a board that wasn’t fully aware of how much the total package was worth – to show that the world’s leading stock market still needs to improve its own governance.

The furor over Grasso’s pay erupted in late August, when the NYSE revealed that its chairman and CEO’s cashed-out benefits, including savings, retirement funds and incentives, totaled a whopping $139.5 million. That didn’t include his salary and bonus.

Two weeks later, after the Securities and Exchange Commission requested details into how his pay had grown so large, the NYSE said Grasso was also entitled to another $48 million in compensation.

Besides just the size of his pay – which topped what most corporate leaders take home – it had been determined by a board packed with executives from the same firms the NYSE regulates. And on top of that, some board members acknowledged they didn’t know exactly how much he was due to receive.

Resentment over all that swept through the exchange, and calls came from all over – from investor groups to a former NYSE chairman to a presidential candidate – for Grasso to resign.

So now he is gone, just the first step in what needs to be a major reformation of the NYSE.

Already there have been calls to separate the chairman and chief executive roles, something being considered at companies across corporate America.

That would allow the chairman to focus more on the NYSE’s regulation of itself and those companies that trade in its marketplace. The CEO, meantime, could handle the financial services end of the business, wooing new companies to list on the exchange and overseeing those that work on its trading floor.

There’s also been talk of actually dividing the NYSE into two institutions, one to regulate the exchange and one to manage it. The SEC may have a hand in changing that.

Then there is the issue of its board. Packed with too many insiders and too few representatives of investor interests, it must be diversified with independent directors.

The NYSE also should start listening to some of its own best advice. Just as it has demanded greater transparency and accountability from companies that trade on its exchange, it has to do the same.

For instance, while it wasn’t required to disclose its chairman’s pay because it’s a quasi-private organization, the NYSE should have done so long ago and more willingly, given its regulatory responsibility.

One thing is certain after all of this: Grasso’s successor will make considerably less money, and that will leave some big money available for better use.

Think how many more staffers could be hired to work on the exchange’s enforcement staff – that’s right, hiring more cops to police the companies that trade stocks on the NYSE. That could surely help avoid future corporate scandals like the ones that have shaken investors’ confidence over the last year.

And that’s not the only place the money could be put to use. Everything from investor education to new technology for trading systems needs extra dollars.

Still, after all the controversy of recent weeks, it’s hard to cheer Grasso’s resignation. His actions weren’t illegal; his judgment and that of the NYSE board were just way off.

He was the consummate company man, dedicating his entire 36-year career to the exchange and working his way up from a clerk in the stock-listing department to the executive suite at the top. It’s the classic rags-to-riches story.

He was also a tireless leader. He helped the NYSE gain global prominence. He put a face on the NYSE, and it is hard to imagine the ringing of the exchange’s opening bell without him.

But ultimately, his greatest fault may be that he got swept up in the greed that came over this nation in the recent past. He – and the NYSE – should have known better.

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Rachel Beck is the national business columnist for The Associated Press. Write to her at rbeck@ap.org.