October 3, 2003
Dick Grasso, chairman of the New York Stock Exchange (NYSE) was forced to resign September 17. Grasso was forced out over the $139.5 million bonanza in accrued benefits the NYSE paid him in August. The total pay package, according to Associated Press reports, was $187.5 million.
What words can describe such a deal? The exact words are hard to come by, but “greedy,” “ugly,” and “arrogant” will do for starters.
The nearly $200 million qualifies Grasso as a member of the Greed Breed. The club’s artful members know how to squeeze the last egg out of the golden goose, and willing enablers on what’s called the “Compensation Committee” often help them.
But there have been bigger packages, with stronger smells. Michael Milken, the “Junk Bond King,” pulled in more than $500 million in a single year in the late 1980s. Milken’s tainted riches got him a 10-year prison sentence, and were connected with the demise of his company, Drexel, Burnham & Lambert.
Another figure in the Drexel scandals was Ivan Boesky, who pleaded guilty in November 1986 to illegal insider trading. Some months earlier, the corruptible Boesky, who had not attended college, was invited to speak at a commencement at the University of California, Berkeley.
Boesky, departing from his prepared text, told the seniors, “Greed is all right, by the way. I want you to know that. I think that greed is healthy. You can be greedy and still feel good about yourself.” The seniors reportedly applauded loudly.
He could have added that Jesse James felt good about his end of the banking business, too.
The number of business scandals has rapidly increased in recent years, more like an infectious disease than spreading slow rot. The lack of restraint and the inability to gauge when “compensation” ceases to be excessive and becomes obscene, reflect the moral decay that infects our nation.
The behavior of greedy executives, as barometers of corporate rot, has its counterpart in the excessive jury awards that reveal greed as a malignancy metastasizing in our national soul.
The result is that, with the combined efforts of tort lawyers and foolish juries, venal executives, and opportunists looking for a windfall, we seem to be producing more and more of the Greed Breed.
We’ve always had people who cut corners, in politics and in business. Still, the “legal” corporate greed harms more than the average stock investor, who may get the erroneous idea that the whole financial world is corrupt. The corruption undermines the whole enterprise system. For if honest businesses can’t raise needed capital, we all suffer, from fewer jobs, opportunities, and a weaker national economy.
The excesses reflected in the Grasso package are even more damaging than the illegal manipulations of others. That’s because of the simple fact that Dick Grasso’s package with the NYSE was legal excessive and ugly, but legal.
When an illegal windfall is found out, we charge it off to larcenous hearts and criminal behavior. But when an institution like the NYSE is a party to a legal, but vulgarly excessive, payoff to an executive, the public begins to wonder about the corruptibility of the entire business and financial worlds.
It can make Joe and Jane Citizen forget that ethically challenged CEOs are not the norm. Most executives are focused on doing the best job possible for their companies, from which shareholder-owners and employees also benefit.
These men and women don’t steal or cook the books. They are almost universally motivated to give something back to their communities, state and country.
While career politicians are often said to be too lazy to work and too nervous to steal, most business executives, on the other hand, thrive on hard work.
And, in a few cases, any nervousness that inhibits stealing is cured by going into politics, or by getting a compensation committee to do the stealing for them.