How many millions should this man make?

The Trump-sized compensation package for the chief of the New York Stock Exchange has left investor confidence even more jittery.

TRIGAUX E-mail: Click here Archive

Is the New York Stock Exchange a quasi-regulatory body built to oversee proper stock market trading? Or an entrepreneurial corporation driven to spread capitalism? Is NYSE chief Richard Grasso a marketplace cop watching for rule breakers, or some hotshot CEO who deserves to jump aboard the wild Wall Street compensation ride?

Recent disclosures that friendly NYSE directors paid Grasso $12-million last year - and this month granted him a Trump-sized lump sum of $140-million in deferred compensation, retirement benefits and bonuses - has turned the investment world upside down.

As if jittery investor confidence needs more kicking.

The fortune bequeathed Grasso, 57, makes him either one of the richest corporate chieftains or, as of this week, Wall Street's least credible watchdog. At the least, he is the world's highest-paid regulator, by an astronomical margin.

Securities and Exchange Commission chairman William Donaldson, the top federal securities regulator and a former NYSE chairman, earns just $142,500 a year.

Grasso earns more than that in four days. Toss in the extra $140-million, and Grasso wins automatic membership in the corporate Hall of Shame for out-of-control compensation. He's got plenty of fellow members (see examples below).

No surprise, the SEC's Donaldson sent the NYSE a letter this month demanding just how the organization came up with a pay package for Grasso that seems more befitting a king of old.

"In my view, the approval of Mr. Grasso's pay package raises serious questions regarding the effectiveness of the NYSE's current governance structure," Donaldson wrote. It's about time. Long plagued with inaction and seemingly adorned with blinders, the SEC should have recognized the NYSE's board conflicts long before now.

There's talk that the diminutive and bald Grasso - best known to America for inviting celebrities in to ring the NYSE's opening bell - may not last much longer there. But whether he stays or goes may not solve the exchange's deeper problems.

Something's terribly wrong and incestuous here. Somewhere in the bowels of the privately run NYSE, somebody decided that to be a contender, Grasso's pay should be benchmarked to the salaries of CEOs at big Wall Street firms. Somehow, while preaching fair play and financial transparency, the exchange became mired in a host of good ol' boy conflicts that would seem obvious to grade school kids.

Maybe the NYSE should stand for the New York Surreal Exchange.

Here's why.

By its own definition (on its own Web site), the New York Stock Exchange is the "leading self-regulatory organization in the U.S. securities industry." The NYSE calls itself the designated examining authority for major U.S. securities firms. The exchange is "committed to strong and effective" regulation of its member firms "to protect investors, the health of the financial system, and the integrity of the capital-formation process."

Hey, if it quacks like a marketplace regulator, it's a regulator. It's time the NYSE and Grasso stop deluding themselves - and investors - that they are one of Wall Street's masters of the universe.

Grasso's pay is all the more outrageous because the NYSE's' financial performance is mediocre at best. From 1998 to 2002, revenues increased modestly to just over $1-billion. In the same period, net income dropped from $101-million to a paltry $28-million.

Sure, the NYSE has grown substantially as a trading market for major corporations. It's taken business away from the supposedly hipper Nasdaq market. Yes, Grasso helped bring the stock market back into operation quickly after the attacks on Sept. 11, 2001. But does his overall performance merit $12-million in annual pay and a $140-million fortune?

Which brings us to NYSE's cozy board members. Grasso's enormous pay package, negotiated in 1999, was blessed by NYSE director Kenneth Langone, who until May served as chairman of its compensation committee. Langone, rich enough to rank in the Forbes 400 list of the richest, was one of the founders of Home Depot and still serves as a director.

Langone helped make Grasso a Home Depot director in 2002, though Grasso has since resigned. Meanwhile, Grasso's paychecks from 1995 to 2002 climbed to slightly more than $87-million on Langone's watch.

That's not all. Langone and his current company, Invemed, are being investigated by the National Association of Securities Dealers for allegedly receiving millions of dollars in inflated commissions after allocating shares of hot IPOs to preferred customers.

In yet another credibility blow, Grasso tried earlier this year to name Sandy Weill, chairman of Citigroup, as a "public representative" on NYSE's board. That means Weill, whose company owns the giant Salomon Smith Barney brokerage firm, was supposed to - get this - represent investors on the board.

Talk about the fox watching the henhouse. Worse, Weill's nomination came while Citigroup was being investigated by New York Attorney General Eliot Spitzer. Citigroup eventually paid $400-million to settle conflict of interest charges. And Weill withdrew his nomination.

Because the NYSE is not a public corporation, disclosure of Grasso's pay extravaganza would not have emerged without a public outcry. His compensation would have been released once a year, showing only annual pay. The outsized pay package may never have been recognized.

Does an absolute paycheck corrupt absolutely? Yes, Grasso's recent shenanigans suggest.

The NYSE needs to stop the masquerade and decide what it wants to be - detached watchdog or cheerleader of the stock market. Then it should tell investors, one way or the other.

-Robert Trigaux can be reached at trigaux@sptimes.com or 727 893-8405.

Jack Welch, retired GE CEO: Once touted as the nation's best CEO, he suffered a backlash after details leaked in 2002 of his $9-million annual pension, plus perks including the use of a $15-million apartment.

Sandy Weill, chairman of Citigroup: For all his Wall Street skill and drive, he's still grossly overpaid. From 1988 to 2002, Weill earned $1.1-billion, or an average of $71.2-million a year.

Dennis Kozlowski, deposed CEO of Tyco International: He's about to face criminal trial for allegedly looting $600-million from Tyco. In 2002 alone, he pocketed $71-million from Tyco before being forced out.

Steve Jobs, CEO of Apple Computer: Sure, Jobs worked for $1 a year after rejoining Apple in 1997. But Apple's board went off the deep end when it approved an option grant covering $872-million in Apple stock.

Dick Korpan, retired CEO of Florida Progress: Compared to the other guys, he's small potatoes. He got rich selling off the St. Petersburg utility, netting $17.4-million plus $828,845 a year for life.

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