How on earth did the 27 members of the board of directors of the New York Stock Exchange allow the now-fired chairman, Richard Grasso, to obtain a $187.5 million deferred-compensation plan?
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These 27 alleged directors include Bill Clinton's secretary of state, Madeline Albright, broadcasting powerhouse Mel Karmazin, the former comptroller of the state of New York, H. Carl McCall, plus officials of J.P. Morgan Chase, Merrill Lynch, Goldman Sachs and Morgan Stanley.
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Every one of these 27 directors should not only be fired immediately ("One Resignation Is Not Enough") they should be punished severely – fined or sued for substantial damages – for dereliction of duty, since they appear to have in no way learned anything or done anything after the horrendous scandals and enormous losses at Enron, WorldCom and Global Crossing (which so enriched the chairman of the Democratic National Committee).
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How is it that these directors allowed this chairman and supposed regulator to pick his own compensation committee, who ordered tens of millions of dollars to be paid to the man who was supposed to be policing them?
The New York Times reports:
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Big Board governance has also been undermined for years by secrecy. With a small group of people running the board – most with backgrounds in the clubby, moneyed world of finance – an objective assessment of the appropriateness of Mr. Grasso's compensation would have been even harder to come by.
"When you get people on the board who are controlling the decisions on things like this, who have hundreds of millions of billions of dollars, they seem to lose perspective on reality," said Russell Reynolds Jr., chairman of The Directorship Search Group Inc., a corporate consulting firm.
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"They probably don't realize that instead of paying the guy $30 million, they could hire a guy who could do the job just as well for 3 percent of that."
At the exchange, directors approved a pay package that provided Mr. Grasso with $139.5 million in deferred pay and retirement benefits. Directors now say they did not understand how much money they were actually committing to Mr. Grasso.
They did not understand?
What on earth were they doing as directors? Shouldn't they be made to understand, with fines or lawsuits large enough to cover all that this 219-year-old institution – so important to our economy – has lost in overpayment to the fired Richard Grasso?
By way of full disclosure, my only owned stocks are in the Washington Post and New York Times companies – which total of 16 shares enable me to attend annual shareholders meetings. I am able to ask one or two questions of the chairmen of these two companies – who do not allow shareholder resolutions.
Post chairman Donald Graham never has to deal with the kind of questioning that his army of reporters level at people all over our nation's capital – except on Shareholders Day. Neither did Times chairman Arthur ("Pinch") Sulzberger – until the Jayson Blair scandal. That led him to fire editors Howell Raines and Gerald Boyd. It really ought to lead him to resign as well, as detailed so voluminously in the new book "Journalistic Fraud: How The New York Times Distorts the News and Why It Can No Longer Be Trusted," by Bob Kohn.
