Legal battle over Grasso's $140m
FORMER New York Stock Exchange chairman Dick Grasso, who resigned under pressure last September, is expected to launch a legal defence of his $140m (£76.4m) pay package.
The likely move comes after the Securities and Exchange Commission, and New York Attorney General Eliot Spitzer, agreed to investigate the package and attempt to recover all or some of the money.
'We will give it a very careful examination and determine whether the NYSE's setting of Grasso's compensation was appropriate, inappropriate, or whether it was excessive,' Spitzer said.
The investigations are being launched at the NYSE's request, after a board meeting at which Exchange directors decided Grasso should not have been given so much.
Interim chairman John Reed, said in a letter to the SEC and Spitzer that 'serious damage has been inflicted on the Exchange by unreasonable compensation of the previous-chairman and CEO, and by failures of governance and fiduciary responsibility'.
Their decision was based on a report, commissioned by Reed, by Chicago attorney Dan Webb that focused on whether the pay was awarded in breach of NYSE governance rules.
Legal experts said Spitzer may lead the inquiry into Grasso's package because, under New York state law, directors of not-for-profit organisations have a heightened responsibility not to squander corporate assets on matters such as pay.
The SEC is likely to focus on whether the former NYSE board broke Exchange governance procedures.
This could result in legal action being taken against some former board members, including the heads of several investment banks such as Goldman Sachs and Merrill Lynch, lawyers said.
Reed has said he would like to see Grasso return most of the $140m, but observers point out the former chairman would almost certainly challenge any attempt to take it away, arguing it was given to him under a contractual agreement.
Although he voluntarily gave up an extra $40m when the scandal over his remuneration first erupted last year, he has never shown willingness to give back the money he has so far received.
