Ex-Chairman Says Grasso, NYSE Board Should Quit
Former New York Stock Exchange Chairman James Needham called for the resignation of Chairman Richard Grasso and the entire board after directors approved a $140-million payout to Grasso this month.
“It’s time to clean house,” said Needham, 77, a retired accountant who headed the NYSE from 1972 to 1976 and who also served on the Securities and Exchange Commission. “I feel the board just didn’t step up to the plate and run that operation properly.”
Needham said Grasso’s pay creates a perception that board members at the world’s biggest exchange are as negligent as the directors of Enron Corp. or WorldCom Inc., which sought bankruptcy protection after accounting scandals.
He said he has expressed his views to both Grasso and SEC Chairman William Donaldson in the last week.
Needham is the first former regulator and NYSE chief to call for the resignation of Grasso and the board, which includes Wall Street chief executives such as Goldman Sachs Group Inc. CEO Henry Paulson, Merrill Lynch & Co. CEO Stanley O’Neal and Morgan Stanley CEO Philip Purcell. Several NYSE traders, including LaBranche & Co.’s James Maguire have called for Grasso to resign.
Board member Robert Fagenson, vice chairman of Van der Moolen Specialists USA, shrugged off Needham’s call for the board to resign. “Jim was one of the worst chairmen the New York Stock Exchange ever had,” Fagenson said. “Thank God my future doesn’t rest on what he thinks.”
NYSE spokesman Ray Pellecchia declined to comment on Needham’s remarks.
Traders and seat holders were said to be circulating at least one petition seeking big changes in top management at the NYSE. The matter was expected to be discussed at a meeting of active seat holders Thursday, and at a general meeting next month.
Several directors have privately expressed strong views as well, particularly newer members who were said to have been unaware of how much was promised to Grasso in contracts negotiated during the stock market’s giddy rise in the late 1990s.
Even after Grasso announced he would forgo an additional $48 million disclosed last week, opinions seemed mixed as to whether he should be ousted.
Board member Larry Sonsini, head of the Silicon Valley law firm Wilson Sonsini Goodrich & Rosatia and a member of the NYSE’s special governance committee, said he supported Grasso.
In other developments Monday, California State Treasurer Phil Angelides said he and representatives of the California Public Employees’ Retirement System, the biggest U.S. pension fund, and the California State Teachers’ Retirement System, the third-largest, would make an announcement today about “Grasso’s leadership of the New York Stock Exchange.”
In addition, Jay Peake, former vice chairman of the National Assn. of Securities Dealers, a Wall Street self-regulatory organization, said the controversy surrounding Grasso’s pay would make it difficult for him to stay in the job.
“Grasso more than represents the NYSE; he is the NYSE,” Peake said. “He defines it. I just don’t see how he can emerge from that.”
