Richard Grasso did more than invite the wrath of Eliot Spitzer by receiving $140-million (U.S.) in pay as head of the New York Stock Exchange. The outrage over his compensation forced the 213-year-old Big Board on a course that has ended with its transformation into a public company.
Mr. Grasso, a high school graduate who worked his way up from clerk to chairman and chief executive officer of the world's biggest stock exchange, wasn't there to celebrate. Lawyers for Mr. Spitzer, the New York State Attorney-General and candidate for governor, yesterday deposed Mr. Grasso, 59, to gather evidence for a lawsuit that seeks to recover most of his pay.
Without Mr. Grasso's ouster, the NYSE might have remained a member-owned institution, reluctant to abandon the open-outcry system of floor trading. Instead, his departure paved the way for CEO John Thain, the MIT engineer and former Goldman Sachs Group president who accelerated the Big Board's push into electronic trading by acquiring Archipelago Holdings Inc.
"This has worked out to benefit the NYSE, but totally by chance," said John Coffee, a securities law professor at Columbia University in New York. The Archipelago purchase, which Mr. Thain announced last April, closed yesterday. NYSE shares, trading under the ticker NYX, make their debut today. The company will be known as NYSE Group Inc.
Mr. Spitzer is suing both Mr. Grasso and Kenneth Langone, 70, the billionaire co-founder of Home Depot Inc. and former chairman of the NYSE's compensation committee.
The May, 2004, suit claims Mr. Grasso's pay was "unreasonable" and violated New York law covering not-for-profit institutions. Mr. Grasso, who says he did no wrong, backs Mr. Thain's efforts to modernize the exchange. "It's the most important event in the 200-plus-year history of the institution," he said yesterday.Mr. Grasso's trial is scheduled to begin Oct. 30. Eight days later, New York votes in the election that may put Mr. Spitzer in the governor's office.