Grasso gave new meaning to the term 'not-for-profit'

If the New York Stock Exchange wants to pay Richard A. Grasso or any successive CEO a billion dollars, it is perfectly free to do so -- once it removes itself from the ranks of New York state's not-for-profit corporations.
Until then, the action by New York Attorney General Eliot L. Spitzer to recover more than $100 million that had been paid to Grasso, the exchange's former CEO, is perfectly proper.
And while Grasso complains that Spitzer's action is politically motivated -- designed to burnish Spitzer's image as a potential gubernatorial candidate -- there is an equally valid argument that Spitzer is performing a valuable public service.
Some background
In a lawsuit filed Monday, Spitzer named Grasso, as well as the exchange and a former NYSE board member, as defendants following a four-month investigation into the $187 million compensation package Grasso received before retiring last fall.
The lawsuit portrays Grasso as stacking the NYSE's board of directors with allies, then misleading them about the extent of his compensation.
Grasso, who became chairman and chief executive of the world's largest stock exchange in 1995, was forced out in September after it was revealed that a month earlier he had been paid $139.5 million in bonuses and retirement benefits accumulated almost entirely since 1999, and that he was owed $48 million more.
Grasso has defended his compensation package, claiming that the board voted unanimously on every aspect of it. Spitzer claims that the board was misled on some matters and that at least one NYSE board member who privately questioned Grasso's pay in a conversation with an exchange employee was confronted by Grasso and intimidated into supporting that year's pay package.
The key to Spitzer's suit as a provision in state law that requires that pay for executives at not-for-profit organizations be "reasonable" and "commensurate with services performed." Spitzer's suit asks the court to determine what would be a reasonable amount.
Renewed focus
While the not-for-profit status of the stock exchange gave Spitzer an opportunity to challenge Grasso's pay package in court, the arguing of the case promises to shed light on the phenomenon of exaggerated -- some might say obscene -- pay packages in the nation's top board rooms.
While Spitzer argues that some board members may not have been given all the facts about Grasso's compensation package and others may have been pressured by the powerful chairman to go along, the fact remains that all of them knew Grasso was being paid millions atop millions of dollars.
He was the beneficiary of a corporate culture that has seen golden parachutes made obsolete by platinum parachutes and in which the top executives of companies that are losing money continue to command millions in compensation.
The Grasso case may be one of several being played out in criminal and civil courtrooms that serve as a reality check for corporate America.