Declan's week: Grasso's Brasso?

Declan: shareholders are more willing to question salaries

Would you turn down a pay offer of $140m? The boss of the New York Stock Exchange didn't either. But in the resulting fuss, Dick Grasso ended up resigning. Breakfast's business presenter Declan Curry ponders what happened

Have we seen the last of the fat cats?

It's the simple question that always throws you.

"So why has that guy at the stock exchange in America packed it in?" asked my mate in the pub.

I told him what I told you on the programme on Thursday morning: it was all down to the scandal provoked by his $140 million (yes, million) pay packet.

"Yeah, but why did he resign over that?"

And that was the question that stumped me. Because on one level, there was no reason at all for Dick Grasso to resign as chairman of the New York Stock Exchange.

There was no wrong-doing or impropriety. The man was simply taking the money his bosses had agreed to pay him to run the richest, busiest and biggest stock market on the planet.

Shed-loads of money

I'm sure some people will find it offensive that he was being paid these astonishing amounts.

Mr Grasso's pay-out this year would pay for malaria shots for more than 4.5 million African children. (That's based on figures from Oxfam.)

It could provide a full week's life-saving medicine for the 700,000 HIV sufferers in the Ivory Coast. (Based on figures from the World Health Organisation,)

But the New York Stock Exchange decided this was what it needed to pay one man to do its top job. Grasso's bosses negotiated the deal with him, they agreed to hand over the money, and shareholders were willing to pay for it. And remember, it was their money they were spending.

Questions

That said, there are plenty of questions about the whole affair.

There are questions about who runs the New York Stock Exchange. Mr Grasso admits he's had some input when the exchange picked the directors who are meant to keep an eye on him.

There are questions about the stock exchange's role as Wall Street watchdog. Many of the banks the stock exchange oversees are also its own shareholders: should Mr Grasso really have his pay check decided by the companies he's meant to supervise?

And there are questions about the strings attached to Mr Grasso's pay deal.

This $140 million wasn't Mr Grasso's annual salary. The figure included back pay - salary he hadn't claimed in years gone by. Under his pay deal, the stock exchange was keeping this for him, and paying him interest on top.

Fuss

These questions still need answers. But none of them are the reason Dick Grasso quit.

He resigned because of the fuss he caused.

Regular Americans have a lot of their savings tied up in shares. They put far more money into the stock market than we do.

And many of them are much poorer because of the fall in share prices. Some will have seen their family savings wiped out. Others may have had to put off their retirement, or tell their kids they can't afford the college education they'd planned.

So they're pretty mad with the stock market.

They were furious when they heard the man who runs it was richer this year to the tune of $140 million.

And in an election year, there are plenty of American politicians ready to give voice to that fury.

Fat cats

So why do we care?

Well, that fuss could make Mr Grasso the last of the big fat cats.

American business is changing. The scandals at Enron, WorldCom and Xerox - to name just a few - have destroyed trust in bosses and in the companies they run.

Shareholders want to know how much of their money is going into bosses' pockets - and what they're doing to earn it.

Fat cat bosses don't cut the mustard could see their cream cut off.

And the public stink over Dick Grasso's pay could stop them asking for extra helpings in the first place.

The irony is that if he had asked for the money a few years ago, hardly anyone would have known about it. His pay details were all secret then.

But now, because of the scandals, companies in the States have to be more open about their boardroom dealing - and this year is the first year Mr Grasso had to own up.

And this was the year he decided to take his money. Now he's taken the money and run.

Declan Curry presents the business news for Breakfast live from the London Stock Exchange, each week-day morning from 6am