Published: March 24, 2004 in Knowledge@Wharton It’s today’s $139.5 million question: Why doesn’t Richard Grasso, former chairman of the New York Stock Exchange, give back at least some of the nearly $140 million in compensation that he was granted by the NYSE’s board of directors? That the question is even being raised, of course, speaks to the sudden change in thinking about such issues as corporate governance and executive compensation. While some say that the New York Stock Exchange should be held as accountable as Grasso, right now it’s the former chairman who is facing the most outrage. The sentiment among corporate governance experts at Wharton is that Grasso should a) give some of the money back, or b) at least start talking about giving it back.

 

“I can understand why the public would think he is greedy,” says Wharton legal studies professor Thomas W. Dunfee. “No question but that social norms are changing in this area. One of the charges brought by the dissidents against Michael Eisner is that he received a $5 million bonus in a year in which the market value of Disney declined substantially.”

 

There’s no agreeement, however, on whether returning some of the money will help quell the barrage of criticism that Grasso has faced over the past few months. “Some actual give-back beyond the cancellation of the amount he claims to still be owed to him would probably suffice,” Dunfee suggests. “I don’t think it would have to be a large sum. The dumbest thing would be for him to sue the exchange for the amount still owed.”

 

Yes, but it may be too late for Grasso to win back his reputation, even if he returns the money or a substantial portion of it, according to Wharton accounting professor David F. Larcker, an expert in the design of executive compensation plans.
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