Editorial: Outrageous pay just tip of the iceberg

Tuesday, Sept. 16, 2003 | 8:47 a.m.

The public outrage over excessive compensation for corporate executives, especially during the economic downturn, is understandable. But at least those executives, as a New York Times story pointed out Sunday, ran a company -- something that can't be said for New York Stock Exchange CEO Richard Grasso. It was the Wall Street Journal that first reported that Grasso had a $140 million retirement-pay package -- and that stunning revelation was just the beginning. Last week it was disclosed that Grasso's compensation package actually totaled $188 million. Grasso has since given up the extra $48 million that recently came to light, but that isn't extinguishing the controversy.

Grasso's compensation was set by the board of the New York Stock Exchange (NYSE), which is allowed to establish and enforce its own regulations. What makes this excessive compensation even more egregious is that a number of NYSE board members are Wall Street CEOs, executives of the very corporations that Grasso is supposed to regulate in his job. Now, because the controversy has hurt the NYSE's reputation, there is increasing pressure from some of its board members for Grasso to step down. Even if Grasso does resign, that won't address the core problem here: self-regulation.

The federal Securities and Exchange Commission (SEC), in the wake of the corporate accounting scandals, already had begun reviewing the value of self-regulation. Investor confidence was shaken terribly by the accounting scandals, and the last thing the markets need are more problems. As the debacle over Grasso's pay illustrates, the NYSE should stop policing itself and the SEC should take over.