Grasso Case Summary

As a chairman and CEO of the New York Stock Exchange (NYSE), Richard A. Grasso was earning beyond a reasonable compensation. At the time, Grasso was receiving a far greater salary, than the median salary of various CEOs from other major corporations. His pay consisted of a base salary of $1.4million, along with a bonus that had progressively increased. Grasso was also in control of the compensation committee, which consisted of individuals that he had selected himself, as well as those he had previous relations with. In 2000, Grasso was approved of a bonus award that had allegedly exceeded the benchmark by $15.7 million. Grasso had made $26.8 million that year, far beyond any justifiable salary.
Grasso’s compensation was noticeably excessive, as he had the means and power to control his pay range. Although he was known to have been an overall great leader, Grasso did not have the right to act upon greed and his selfish needs. It would have been understandable if Grasso’s overall pay had exceeded the average salary by a few thousands, but his pay had nearly doubled that of someone in his position. For instance, after the devastating event of September 11, 2001, Grasso total pay accumulated to $30.6 million.

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The board of NYSE did not act responsibly, as they were the committee to approve the package that granted Grasso to transfer $140 million to his personal account before he retired. Though at the time, the board claims to have no recollection of Grasso’s deceitful ways, the board of NYSE should have been more cautious about the situation. It is their job to make sure that everything is up to par, such as compensations that are up for approval. The New York Stock Exchange had not used good practices, such as allowing Grasso to be actively involved in the process that calculated his pay and benefits. Though they approved Grasso’s retirement package and bonus based on what they believed was the truth, the amount should have still ignited
warning.
The alleged conflicts of interests were very apparent, as Grasso position with the NYSE, gave him authority on companies and CEOs that were in charge of approving his pay. Grasso had easy access to people that were not only keen on him, but that he had established close ties with. Evidence showed, that Grasso had also personally selected which individuals served on the compensation committee.
3. Grasso was simply a victim of his own character flaws, as Greed and Selfishness became his main primary motivation. He enabled himself to an excessive amount of corporate funds, as he became more of a leading figure on the NYSE. During the time of Grasso’s trial, there were many corporate scandals that were beginning to surface. Some which were far worse than the one that Grasso was involved in, such as the one involving Bernie Madoff. Although Grasso’s case had involved corruption and deceitfulness, his case was not nearly as bad as the one that had begun to come to light. Grasso’s actions are still inexcusable, but in comparison to other corporate scandals, such as Enron, it was not as costly.