IN his ruling last Thursday requiring Richard A. Grasso to return as much as $100 million in compensation to the New York Stock Exchange, Justice Charles E. Ramos opined colorfully and unequivocally that Mr. Grasso had breached his fiduciary duties by failing to disclose how mountainous his pay had become during his years as the Big Board’s chairman.
Mr. Grasso’s lawyer, Gerson A. Zweifach, said he would appeal the ruling as quickly as possible. “We are confident that the appellate division will set this right,” Mr. Zweifach said.
But the message of Justice Ramos from State Supreme Court in Manhattan is a clear warning to corporate directors everywhere: The days of pouring other people’s money into the pockets of C.E.O.’s without justification are over.
Of course, the Grasso case, brought in 2004 by Eliot Spitzer, the New York attorney general, involved a nonprofit institution and not a public company. But the transfer of wealth from the New York Stock Exchange’s seatholders to Mr. Grasso is markedly similar to what occurred at many public companies in recent years. As a result, directors who decide on compensation matters had best consider their obligations to their company’s shareholders as they make those decisions. (emphasis added)
Sunday, October 22, 2006
A new day in boardrooms for exec comp
Gretchen Morgenson today, "The Shot Heard Round the Boardrooms," on the likely fallout from the Grasso decision this past week: