Weakened NYSE Must Face Challenges
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P1JW26101D-9-C00100-1---XA AZ,CL,CX,DL,DM,DX,EE,FL,HO,MW, CMY K P1JW26101D-9-C00100-1---XA P1JW26101D-9-C00100-1---XA *********Composite 09/18/2003 s 2003 Dow Jones & Company. All Rights Reserved. ********* THURSDAY, SEPTEMBER 18, 2003 C1 Ahead Weakened NYSE Must FaceChallenges Of the Tape SEC Is Investigating Governance, Grasso, Who Wanted to Be a Cop, —Today’s Market Forecast— And Rivals May Seek to Capitalize; Highs and Lows for a NYSE Lifer In the End Showed That He Knew 77By JESSE E ISINGER After years spent working his way up the management chain at the New York Stock Exchange, and Delicate Framework in Question becoming the first member of management to be elected president, Dick Grasso finally became When It Was Time to Surrender the Big Board’s chairman in June 1995. His tenure was marked by a record-breaking market rally, Claim It and It Will Come structural change and scandal on Wall Street—and a sudden toppling over his high pay. By SUSANNE CRAIG By KATE KELLY n Economists yet again predict that And KATE KELLY And SUSANNE CRAIG weekly jobless claims will fall today. In- and Exchange Commission board, which he had much power stead, they’ve been rising for three T TOOK 36 YEARS for Dick Grasso to build his chairman. over—including the resignation of New York weeks now and have gone back over the prominent career at the New York Stock Ex- Martha Stewart t during her ICK GRASSO was exhausted when he 400,000 level, which economists consider I change. It took two hours for it to formally end. Outside Interests trading scan- stepped into Nino’s, an Italian restaurant significant. Late yesterday,at an emergency board meeting, Had served on the board of Home dal, and the D in Manhattan, late last Thursday on the Keep predicting it and one day you’ll the chairman and chief executive told directors Depot Inc., but was forced to give forced with- two-year anniversary of the Sept. 11 terrorist at- be right. Claims are seen falling by meeting by phone that he was willing to resign, if that up amid recent crackdown on drawal of tacks. The New York Stock Exchange chief soon 12,000 to 410,000, after last week’s rise of asked, because the furor over his $187.5 million com- corporate governance. Citigroup’s became energized when patrons cheered him and 3,000 to 422,000. (The rises have been un- pensation package, including $48 million he had Sanford Weill, Nino’s pianist launched into “God Bless Amer- derstated in the past few weeks because AP He also served as the vice chairman agreed last week to forgo under pressure from the In this 1989 photo, Mr. Grasso, whom Mr. ica.” Perched in front of the baby-grand piano, there’s been a pattern of the week-earlier of the National Italian American board, had become too much of a distraction for the then NYSE president (left) Grasso cham- Mr. Grasso, hand on his heart, joined in and led numbers being revised upward.) This Foundation and various other posts. Big Board. The Wall Street Journal reported the ex- poses with L.A. Gear Chairman pioned the crowd in a patriotic tribute. trend is disconcerting, even to the bulls, Reuters/NewsCom istence of Mr. Grasso’s pay package in May. Details Robert Y. Greenberg (center) during the Behind the scenes, however, others were join- but won’t change minds about the out- were made public by the Big Board in late August. His Best & Worst stock-research ing a different chorus—calls for Mr. Grasso to and NYSE floor-trading Moments look unless the job losses persist. Shortly before 4:15 p.m. Eastern time yesterday, executive J. Gregory Gavin. scandal as a representative of resign. A number of key con- The mood is more optimistic now, NYSE directors, including a number of Wall Street’s Best the “public.” stituencies were outraged partly because of the positive spin placed most powerful CEOs, logged on to a conference call. n over the disclosure of Mr. n Being named chairman, after Mr. Developed an adversarial on this week’s Man- They knew what was coming. As early as 2 p.m., Mr. His Roots Grasso’s large compensation Donaldson left, completing a relationship with the media. Was power survey on cor- Grasso and his advisers had begun calling board package in late August, in- Age 57 nearly 30-year trek through the criticized for banning reporters Jobless porate-hiring inten- members, telling them he planned to tender his res- cluding a retirement pack- NYSE’s management ranks from Arab TV station Al Jazeera Weekly jobless claims, tions. Despite some ignation at an emergency board meeting. Some ex- Grew up in Jackson Heights, from the trading floor. age of $139.5 million and a $5 four-week moving misleading conclu- pected the meeting to be as brief as a half hour. Queens in New York City n Reopening the exchange, four million bonus for his work to trading days after the Sept. 11, average; in thousands sions that the news William Harrison, the head of J.P. Morgan 1966–68 Served in the Army He Said It open the NYSE after the ter- 2001, terror attacks. Was among 500 was good, it actually Chase & Co., jumped directly into a discussion ror attacks. was mixed to weak. about Mr. Grasso’s leadership, running through the New York officials credited Late yesterday, Mr. At the NYSE with keeping calm. Even the great The percentage of an almost laundry-like list of reasons why Mr. Cy Young lost a few. Grasso—a legendary fighter 400 firms expecting to Grasso must resign. “This is about the integrity of 1968 Joined the exchange. who had climbed from a hire in the fourth the exchange,” he said, according to two directors Worst “ ±— Mr. Grasso, in June, clerk’s position to the very 1988 Named president and chief 300 quarter was down n reacting to intense criticism” Dick Grasso who were on the call. operating officer. While president, he $101.3 Criticized for top of the NYSE during a year over year, over the NYSE Several influential directors backed him up, in- would serve under William composition of 36-year career—heeded board’s governance 200 while the percent- cluding Henry Paulson Jr., the head of Goldman Donaldson, who now is the NYSE those calls and said he would resign as the NY- age of firms expect- Sachs Group Inc. and one of the Wall Street CEOs $86.1 and his pay. SE’s chairman and chief executive. 2000 ’01 ’02 ’03 Securities ing to reduce staff who over the past week has been discussing the possi- Mr. Grasso’s resignation caps one of the most Source: Thomson Datastream $75.2 increased. bility of Grasso’s resignation with his fellow direc- $74.4 $72.9 NYSE net income, gripping dramas in the 211-year history of the Big in millions If jobless claims tors. Andrea Jung of Avon Products Inc. also voiced Board. For more than two weeks, calls for his come in weak again, that will suggest concern about the damage to the exchange, as did Grasso’s total ouster spread from the floor of the NYSE to large that payrolls will drop again in Septem- Madeleine Albright, a former Secretary of State, $56.7 compensation, institutional investors, including the influential ber. who has been lobbying behind the scenes for change. in millions California public-employees pension funds. By yes- The bulls say that employment is But Mr. Grasso wasn’t without supporters. Sev- terday, politicians, including Senators John Ed- $31.8 about to turn and that since all the other eral spoke up, including Kenneth Langone, who wards and Joseph Lieberman, both Democratic good things they have been predicting was chairman of the 27-member board’s compen- $30.6 presidential hopefuls, were joining the chorus. $26.8 $28.1 have come true—among them the profits sation committee for many of the years Mr. For most of the NYSE board, the cacophony fi- recovery and the increases in capital Grasso received big payouts, and James Cayne, nally became too much, culminating in a vote to chairman and CEO of Bear Stearns Cos. One direc- $5.2 $6.0 $12.0 ask for Mr. Grasso’s resignation last night. spending—people should believe them on $2.2 $3.0 $11.3 this, too. tor even suggested the entire board resign and The upheaval at the NYSE comes at a pivotal Mr. Grasso remain because it was the board that 1995 1996 1997 1998 1999 2000 2001 2002 time for the financial markets, just as the nation Cheesestake awarded his compensation. Note: Totals for 2000 and 2001 include a $5 million special payment; Mr. Grasso relinquished the 2000 payment last week. Source: NYSE and investors emerge from an unprecedented pe- “I don’t want issues related to me to get in the riod of corporate fraud that has rocked the econ- n The Philadelphia Fed puts out its survey way of the exchange,” Mr. Grasso told directors at omy. A recovery has begun and financial markets on manufacturing activity, an early read one point during the meeting, according to a person have recorded solid gains since the beginning of on the last month of the third quarter. familiar with the matter. He said “he was prepared the year. But most strategists consider the invest- Economists are looking for a decline to tender his resignation, if the board were to ask for How Much Severance Pay Is Enough? ment climate still fragile.