SEC Wants Exchanges to Spell Out Pay
Expanding his agency’s corporate governance probe beyond the New York Stock Exchange, Securities and Exchange Commission Chairman William H. Donaldson has written to the other U.S. self-regulating stock markets seeking information about the makeup of their boards and how their executives are paid.
In response to the inquiry, made public Wednesday, and to the public outcry over former NYSE Chairman Richard Grasso’s pay, a number of exchanges that traditionally have kept such information private now have begun disclosing it.
Spokespeople for several of the exchanges said that they would cooperate with Donaldson’s request.
Meanwhile, the flap over Grasso’s pay has yet to subside. On Wednesday, a delegation of state treasurers and pension executives called on Grasso to give back some of the pay he has received, in the name of arriving at a “more rational and appropriate compensation package.”
California state Treasurer Phil Angelides, speaking at a news conference after the delegation’s meeting with 11 NYSE directors, declined to specify an appropriate amount for Grasso to give back.
“We’ll all know it when we see it,” he said.
Grasso did not respond to a request for comment.
The 10-person delegation, representing seven states, also asked the SEC to select a “credible, independent person” to review the NYSE’s operations, including the circumstances surrounding the approval of Grasso’s pay package.
The group’s recommendations also included shrinking the size of the NYSE board, increasing its investor representation and splitting the exchange’s regulatory and business functions.
Also Wednesday, Rep. Michael G. Oxley (R-Ohio), chairman of the House Financial Services Committee, announced a series of hearings on the structure of American capital markets. Oxley, coauthor of last year’s landmark Sarbanes-Oxley corporate reform legislation, said the hearings before the subcommittee on capital markets, insurance and government-sponsored enterprises would focus on such issues as self-regulation and the NYSE style of stock trading, which relies heavily on the use of specialists.
John S. Reed, the former Citigroup Inc. co-chairman named Sunday as the NYSE’s interim chairman and chief executive, remained on vacation in France on Wednesday. However, in an interview with Bloomberg News, he said he agreed that the exchange’s board should be cut to 10 or 12 people, from the current 27, and should give investors a greater voice.
“Of course you need fresh blood,” Reed said. “You can’t run the NYSE like a club, or you won’t have the confidence of the public.”
Reed added that he would return to New York as early as today to meet with exchange employees before starting work Monday. He said he expected to be in the job for as little as three months and had no interest in being the permanent chairman.
Reed said a report on corporate governance changes at the NYSE, initially due Oct. 2, probably would have to be delayed for one or two weeks.
The revelation of the details of Grasso’s pay -- plus the fact that many of the NYSE directors who approved it run companies that are regulated by the Big Board -- ignited a controversy that led to Grasso’s ouster on Sept. 17.
Grasso received a $139.5-million lump-sum payment this year representing deferred salary and pension benefits. He also received $12 million in salary and bonus for 2002 and more than $30 million for 2001.
Moreover, Grasso was entitled under a recent contract renewal that runs through 2007 to receive an additional $57 million in salary, bonus and pension, although he agreed to forgo $48 million of that amount.
Some details of Grasso’s pay came to light after the SEC’s Donaldson demanded that the NYSE fully disclose Grasso’s compensation.
New York state Comptroller Alan G. Hevesi said Wednesday that it was “very appropriate” for the SEC to expand its review to the other securities markets.
Other stock market officials enjoy healthy pay packages, but few approach the size of Grasso’s.
Salvatore F. Sodano, chairman and chief executive of the American Stock Exchange, received 2002 salary of $1 million and a bonus of $1.4 million, spokesman Bob Rendine said Wednesday. Sodano also received a $2-million payout last year under a retention deal signed in 1999 when NASD Inc. (formerly the National Assn. of Securities Dealers) bought the exchange and wanted to keep Sodano in place for at least three years, Rendine said.
Sodano also has a pension and severance package totaling about $22 million and payable during his retirement, Rendine said. About $2 million of that represents severance that would be paid only in the event of a termination or change of control of the exchange, the spokesman said.
Robert R. Glauber, chairman and chief executive of NASD, earned $2.1 million in salary and bonus in 2002, plus a $6.67-million payment into his retirement account, about $3 million of which was withdrawn to pay taxes due at the time the payment was made, spokeswoman Nancy Condon said.
Sodano’s and Glauber’s pay details have been made public for years through annual filings that NASD, as a nonprofit corporation, makes to the Internal Revenue Service.
Robert Greifeld, president and chief executive of Nasdaq Stock Market Inc., earned base pay of $790,000 plus a bonus of $1.75 million, plus 2 million Nasdaq stock options with varying values, according to SEC filings. Because Nasdaq is publicly traded, its executive salaries are reported annually to the SEC.
At the Pacific Stock Exchange, Chairman and Chief Executive Philip DeFeo received a 2002 base salary of $700,000 and a bonus of $450,000, spokesman Dale Carlson said.
At the Philadelphia Stock Exchange, Chairman and Chief Operating Officer Meyer S. Frucher got a salary of $600,000 and a bonus of $300,000 last year, spokeswoman Barbara Sorid said.
The Pacific and Philadelphia exchanges, along with several others, traditionally have kept executive pay information private but are disclosing it amid the clamor for greater openness in the securities exchanges.
