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CNN Live Saturday

Should Richard Grasso Have Resigned?

Aired September 20, 2003 - 18:40   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


CAROL LIN, CNN ANCHOR: Well, Richard Grasso has been feeling the heat of fire. He resigned this week as chairman of the New York Stock Exchange, forced out by disclosure of his $140 million pay package.
Robert Lenzner of "Forbes" magazine joins us now to talk about what happens next. Robert, good to see you and thanks for being here.

ROBERT LENZNER, "FORBES" MAGAZINE: Yes. I think there's not all that much wrong with the New York Stock Exchange. And his pay package was actually $188 million. They didn't divulge $48 million of it. And he offered to give that $48 million back in order to keep his $140 million.

I think people were really outraged by the obscene amount of money that he got. I think that that won't happen again. He was paid $5 million just for reopening the New York Stock Exchange after 9/11. That was play money.

He got to name his own compensation committee. His contract, which was misunderstood by most of the people on the board, was approved by the chairman of the largest investment banks in America who get paid that way. But the head of the New York Stock Exchange should not be paid as if he's the chairman of Merrill Lynch of Goldman Sachs.

Whether there's going to be -- there's going to be some talk about reforming the New York Stock Exchange. They need to overhaul the board. They need to get an independent chairman and CEO who is not obliged to do what the Wall Street firms want them to do. Then they may decide to split up -- you see, the chairman of the New York Stock Exchange is supposed to regulate the New York Stock Exchange, not just run the Exchange.

You never saw Grasso stand out and talk about the corruption that went on in Wall Street over the last five years. So that was what was wrong with this situation.

LIN: Well, Robert...

LENZNER: They may decide to change that.

LIN: ... let me join this conversation here.

LENZNER: Yes.

LIN: I mean, what exactly can change now? I mean, do you fundamentally see the basic structure of the New York Stock Exchange changing?

LENZNER: I myself think there's going to be a lot of talk about it. I don't think they're going to change it that much. I think they need an independent chairman.

I think they need to overhaul the board and put more people from the outside, maybe the big institutional investors on the board. OK? Then, three, they're going to consider dividing up the function of chairman into two parts: running the Exchange for its members, and, two, regulating the member firms.

Then there's this other issue about the specialist system, the way stocks are traded on the New York Stock Exchange, which is not by automation, but by individuals actually buying and selling the stocks. I think there's going to be a call to change that as if there's something unfair about it.

I think it's archaic, but I'm not sure that there's anything egregious happening as a result of that. Maybe in the end the New York Stock Exchange will go public and the people that own seats on the New York Stock Exchange, which are now worth around $2 million, will be able to cash in their shares, and they'll feel that if they do automate the trading there that that's a fair exchange. I think those are the possibilities, but...

LIN: OK. Even...

LENZNER: ... I don't think that we need a major overhaul of the New York Stock Exchange.

LIN: All right. Well, as -- go ahead.

LENZNER: Sorry. Because this is an issue about compensation for Grasso. It's not an -- Grasso did not get ousted because there's something rotten at the New York Stock Exchange. That's my position on it.

LIN: Well, in the meantime, as these reforms were being discussed, who would even want the job or jobs that you're talking about?

LENZNER: I think that there are people. I mean, I wouldn't be surprised if Arthur Levitt, the former chairman of the SEC, didn't want it. But I'm not sure that they would give it to somebody who was the former chairman of the SEC.

I think there will be people who want to be the chairman of the New York Stock Exchange. It's a very high-prestige, high-image job. But I think that he's not going to -- most of this compensation that Grasso got he was paid for, for the last four years, when it was a bare market, when investors were losing a lot of money. That won't happen again.

LIN: So what do you think that job should be paid?

LENZNER: Oh, I would say somewhere between maybe $2 to $3 million a year, perhaps something like that. I don't know. What they did here was that they hired the great compensation experts of America, who compared the pay -- what they thought the chairman of the New York Stock Exchange should get to the chairman of CitiGroup and the Chairman of AIG and other publicly-owned, hugely profitable financial institutions.

But the New York Stock Exchange is a non-profit quasi-public institution. Not like the chairman of the Federal Reserve Board, but similar to that. He shouldn't have been paid the way the chairman of Goldman Sachs, Merrill Lynch, Morgan Stanley and J.P. Morgan Chase were paid. That's all.

LIN: All right.

LENZNER: And that's what was happening. He became a player equal to them, but he's supposed to be regulating them. So it wasn't going to work. But is an image that we'll remember about this year, that's all.

LIN: Right.

LENZNER: It's about a certain kind of greed that got translated into the New York Stock Exchange.

LIN: Yes, we clearly saw that. Thank you very much, Robert Lenzner, for joining us from "Forbes" magazine.

LENZNER: Not at all.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com







Aired September 20, 2003 - 18:40   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAROL LIN, CNN ANCHOR: Well, Richard Grasso has been feeling the heat of fire. He resigned this week as chairman of the New York Stock Exchange, forced out by disclosure of his $140 million pay package.
Robert Lenzner of "Forbes" magazine joins us now to talk about what happens next. Robert, good to see you and thanks for being here.

ROBERT LENZNER, "FORBES" MAGAZINE: Yes. I think there's not all that much wrong with the New York Stock Exchange. And his pay package was actually $188 million. They didn't divulge $48 million of it. And he offered to give that $48 million back in order to keep his $140 million.

I think people were really outraged by the obscene amount of money that he got. I think that that won't happen again. He was paid $5 million just for reopening the New York Stock Exchange after 9/11. That was play money.

He got to name his own compensation committee. His contract, which was misunderstood by most of the people on the board, was approved by the chairman of the largest investment banks in America who get paid that way. But the head of the New York Stock Exchange should not be paid as if he's the chairman of Merrill Lynch of Goldman Sachs.

Whether there's going to be -- there's going to be some talk about reforming the New York Stock Exchange. They need to overhaul the board. They need to get an independent chairman and CEO who is not obliged to do what the Wall Street firms want them to do. Then they may decide to split up -- you see, the chairman of the New York Stock Exchange is supposed to regulate the New York Stock Exchange, not just run the Exchange.

You never saw Grasso stand out and talk about the corruption that went on in Wall Street over the last five years. So that was what was wrong with this situation.

LIN: Well, Robert...

LENZNER: They may decide to change that.

LIN: ... let me join this conversation here.

LENZNER: Yes.

LIN: I mean, what exactly can change now? I mean, do you fundamentally see the basic structure of the New York Stock Exchange changing?

LENZNER: I myself think there's going to be a lot of talk about it. I don't think they're going to change it that much. I think they need an independent chairman.

I think they need to overhaul the board and put more people from the outside, maybe the big institutional investors on the board. OK? Then, three, they're going to consider dividing up the function of chairman into two parts: running the Exchange for its members, and, two, regulating the member firms.

Then there's this other issue about the specialist system, the way stocks are traded on the New York Stock Exchange, which is not by automation, but by individuals actually buying and selling the stocks. I think there's going to be a call to change that as if there's something unfair about it.

I think it's archaic, but I'm not sure that there's anything egregious happening as a result of that. Maybe in the end the New York Stock Exchange will go public and the people that own seats on the New York Stock Exchange, which are now worth around $2 million, will be able to cash in their shares, and they'll feel that if they do automate the trading there that that's a fair exchange. I think those are the possibilities, but...

LIN: OK. Even...

LENZNER: ... I don't think that we need a major overhaul of the New York Stock Exchange.

LIN: All right. Well, as -- go ahead.

LENZNER: Sorry. Because this is an issue about compensation for Grasso. It's not an -- Grasso did not get ousted because there's something rotten at the New York Stock Exchange. That's my position on it.

LIN: Well, in the meantime, as these reforms were being discussed, who would even want the job or jobs that you're talking about?

LENZNER: I think that there are people. I mean, I wouldn't be surprised if Arthur Levitt, the former chairman of the SEC, didn't want it. But I'm not sure that they would give it to somebody who was the former chairman of the SEC.

I think there will be people who want to be the chairman of the New York Stock Exchange. It's a very high-prestige, high-image job. But I think that he's not going to -- most of this compensation that Grasso got he was paid for, for the last four years, when it was a bare market, when investors were losing a lot of money. That won't happen again.

LIN: So what do you think that job should be paid?

LENZNER: Oh, I would say somewhere between maybe $2 to $3 million a year, perhaps something like that. I don't know. What they did here was that they hired the great compensation experts of America, who compared the pay -- what they thought the chairman of the New York Stock Exchange should get to the chairman of CitiGroup and the Chairman of AIG and other publicly-owned, hugely profitable financial institutions.

But the New York Stock Exchange is a non-profit quasi-public institution. Not like the chairman of the Federal Reserve Board, but similar to that. He shouldn't have been paid the way the chairman of Goldman Sachs, Merrill Lynch, Morgan Stanley and J.P. Morgan Chase were paid. That's all.

LIN: All right.

LENZNER: And that's what was happening. He became a player equal to them, but he's supposed to be regulating them. So it wasn't going to work. But is an image that we'll remember about this year, that's all.

LIN: Right.

LENZNER: It's about a certain kind of greed that got translated into the New York Stock Exchange.

LIN: Yes, we clearly saw that. Thank you very much, Robert Lenzner, for joining us from "Forbes" magazine.

LENZNER: Not at all.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com