NYSE Likely to Address Grasso in Oct. 2 Meeting

WASHINGTON – The fate of Dick Grasso's (search) 35-year career at the New York Stock Exchange (search) will likely be decided over the next 17 days.

Grasso, NYSE chairman since 1995, is facing an ever-growing backlash over his pay bonanza, while the directors who approved the $140 million pay-out distance themselves in media reports from the contract's lucrative fine print.

Like the reaction to the pay package itself, the predictions of Grasso's future range widely, but the subject is likely to be addressed at the NYSE's next monthly board meeting, set for Oct. 2.

Ahead of the meeting, one of the next key dates is Thursday, when the board of the exchange will dispatch three directors with close ties to the trading floor to hold an "unofficial meeting" with many floor members, where they are expected to try to quell the rising tide of dissent.

"I think that Grasso has really undermined his credibility," said Laura Unger, a former commissioner of the U.S. Securities and Exchange Commission. "I think that there's going to have to be something in order to restore that credibility.

"I have a feeling that he would resign before he would diminish his role as chairman and CEO," she added, referring to a possible split of the positions among two people.

NYSE members, who typically shy away from publicly addressing business at the exchange, have begun speaking out.

James Rutledge, an NYSE member, asked the SEC to investigate Grasso's compensation package, saying in a letter addressed to SEC Chairman William Donaldson the NYSE board's performance "is indefensible."

"The repeated closing of their eyes to mounting criticism and expressions of concerns reflects poorly on everyone associated with 11 Wall Street," he wrote, referring to the exchange's address in lower Manhattan.

Former New York Stock Exchange Chairman James Needham, who made $500,000 a year during his tenure in the early 1970s, thinks the board and Grasso should step down.

"I think he (Grasso) has done an outstanding job," Needham said in a telephone interview with Reuters. Yet he added Grasso was let down by his board when members agreed to his pay packet without knowing the details of how much money was involved.

William Higgins, an owner of a NYSE seat since 1974, said members made a mistake in not being more active in monitoring the board.

Higgins, organizer of The Association of New York Stock Exchange Equity Members (search), said the 1,366 seat owners could have done more to participate in the governance of the exchange. But he stopped short of calling for Grasso to step down and said he expects Grasso to weather the storm with his position intact.

"We have 61 officers at the exchange. I want to know what we are paying all of them. We can lay the blame for this directly on ourselves. We are the owners," said Higgins, who has restarted a campaign to get two board seats to represent the seat owners who lease them out to other traders.

Higgins said his group will meet on Thursday around the corner from the exchange in the early afternoon and then plans to attend the formal meeting between the three NYSE directors and the trading floor community.

Piling On

Others are astonished at the doings in lower Manhattan, at the corner of Broad and Wall streets.

"He's rocked the credibility of the New York Stock Exchange," said Francis Maglio, a long-time member of the exchange, referring to Grasso. "He's rocked its integrity. And those cracks and fissures have to be repaired and quickly. And I don't know if that's happening right now.

"I think he's been a great leader, but I believe that we were all lulled into believing that the (exchange's) constitution was followed," he added, arguing the governing document states salaries shall be fair and reasonable.

At the end of August, the NYSE extended Grasso's contract by two years, until 2007, and paid him nearly $140 million in accrued savings, benefits and incentives.

Two weeks later, it said Grasso was entitled to an additional $48 million in benefits, but he would forgo the sum.

An informal poll of CNBC viewers conducted by the cable television channel on Monday showed 74 percent of respondent said Grasso should resign and 26 percent said he should not.

Also, former SEC chairman Harvey Pitt said Grasso should not have to resign, in an interview on CNBC.

"The NYSE has been a very vigorous enforcer of all the rules and regulations that it has," Pitt said.

Telephone inquiries made to the two dozen board members who are not exchange employees were either not returned or if they were, the directors declined to comment.