HR Home Work 8 – Assignment Example

Grasso Pay Package Richard Grasso, chairman of the New York Stock Exchange, was forced to resign from his post due to outrage over the size of his $140 million pay package (CNN and Reuters). In addition to the resentment towards Grassos hefty paycheck, the article insinuates that Grasso did a poor job of running the NYSE in the best interests of the owners. It is embarrassing that the article does not provide any evidence to suggest that Grassos pay was not warranted by his performance. It makes it seem like Grasso was ousted due to jealousy.
Presumably, Grasso did not have the unilateral authority to determine his pay. If he did have that authority, then a case could be made that a conflict of interest prevented him from serving the best interest of the NYSE shareholders by accepting lesser pay. If the board determined Grassos compensation, then there is no reason to fire him if his pay is excessive. If anything, other members of the board should have been forced to resign for not setting an appropriate level of compensation. Based on these assumptions, I find it much more likely that some combination of jealousy and other ulterior motives were responsible for Grasso being forced to step down. It seems as though Grasso and his large paycheck became scapegoats for the New York Stock Exchange.
In order to determine if Grassos performance warranted the pay, we would need to know if NYSE was generating above average returns on investment under Grassos tenure. If a lesser paid executive could not generate the same returns, then the board has failed to uphold its fiduciary duties to its shareholders by asking for Grasso to resign. The only possible excuse for the board would be if future returns would be hurt by bad publicity. Unfortunately, the article does not provide any insight into this question.
References
CNN and Reuters (2003, September 18). "Grasso out as NYSE chairman". Retrieved from http://money.cnn.com/2003/09/17/markets/nyse_grasso/index.htm.