Richard Grasso is a spunky sort who provided leadership and inspiration while he headed the New York Stock Exchange. We all owe him for his post-9-11-01 defiance of all odds in bringing back our financial markets. And the New York State Appellate Division was correct to dismiss the state’s action against Mr. Grasso. The New York Stock Exchange Board approved Mr. Grasso’s $187.5 million pay package so, by law, the money belongs to him. But just because the pay was legal does not mean it was ethical.Anyone can understand Mr. Grasso’s need to clear his name. Former Attorney General Eliot Spitzer’s action against him sought to portray Mr. Grasso as a symbol of evil.  Anyone can understand how, after nearly five years of litigation, Mr. Grasso feels vindicated. The law is indeed on his side. His board approved the pay of its CEO, and that’s all the law required.Â
But the law was never intended to be the maximum standard of behavior; it is the minimum standard of behavior. Ignoring ethical standards whilst relying on legal loopholes only brings more regulation. The stock options mess came about when deductible executive compensation was capped during the Clinton administration. Nobdy wins on this legal victory. Mr. Spitzer always looked overly aggressive in his dogged pursuit of Mr. Grasso, stretching legal standards to fit around something that was a matter of ethics.  But Mr. Grasso’s response had done little to help us make the case for allowing the market, not regulation, to exercise its control over excessive CEO pay. His glee is understandable but damaging for the cause of free markets.Â
If Mr. Grasso wanted to preserve that 9-11-01 legacy, he should donate a good portion of the money. Better yet, Mr. Grasso could start a foundation that would be dedicated to helping companies establish solid governance standards and aiding shareholders in their efforts to extract accountability and responsibility from corporate leaders.Â
We have a victory but, in the words of the great Bard, all are punished. Mr. Spitzer has self-destructed. Those who advocate CEO pay limits are emboldened in their efforts because the Grasso case is a poster child for their arguments that the law can’t help. Those who served on the NYSE board look weak and ineffective.  Such weak and ineffective directors make the case for advocates who want to change board structure to something along the lines of the German model, to wit: Forget electing directors exclusively, they bellow, get some employees, consumer advocates, community activists, and other so-called independents on these boards.  A company shackled by the opinings of those with no skin in the game is a company that loses its entrepreneurial spirit. With these governance advocates and the fomenting high dudgeon presently surrounding executive compensation, Mr. Grasso’s Chesire grin of one big, “Gotcha!” is risky. Mr. Grasso has a window of opportunity to help his beloved markets remain free. We can hope that he seizes that moment.
The decision in Mr. Grasso’s case can be found at State ex rel Spitzer v. Grasso,  2008 WL 2573262. Â
About mmjdiary
Professor Marianne Jennings is an emeritus professor of legal and ethical studies from the W.P. Carey School of Business at Arizona State University, retiring in 2011 after 35 years of teaching undergraduate and graduate courses in ethics and the legal environment of business. During her tenure at ASU, she served as director of the Joan and David Lincoln Center for Applied Ethics from 1995-1999. In 2006, she was appointed faculty director for the W.P. Carey Executive MBA Program. She has done consulting work for businesses and professional groups including AICPA, Boeing, Dial Corporation, Edward Jones, Mattel, Motorola, CFA Institute, Southern California Edison, the Institute of Internal Auditors, AIMR, DuPont, AES, Blue Cross Blue Shield, Motorola, Hy-Vee Foods, IBM, Bell Helicopter, Amgen, Raytheon, and VIAD.
The sixth edition of her textbook, Case Studies in Business Ethics, was published in February 2011. The ninth edition of her textbook, Business: lts Legal, Ethical and Global Environment was published in January 2011. The 23rd edition of her book, Business Law: Principles and Cases, will be published in January 2013. The tenth edition of her book, Real Estate Law, will also be published in January 2013. Her book, A Business Tale: A Story of Ethics, Choices, Success, and a Very Large Rabbit, a fable about business ethics, was chosen by Library Journal in 2004 as its business book of the year. A Business Tale was also a finalist for two other literary awards for 2004. In 2000 her book on corporate governance was published by the New York Times MBA Pocket Series. Her book on long-term success, Building a Business Through Good Times and Bad: Lessons from Fifteen Companies, Each With a Century of Dividends, was published in October 2002 and has been used by Booz, Allen, Hamilton for its work on business longevity. Her latest book, The Seven Signs of Ethical Collapse was published by St. Martin’s Press in July 2006 and has been a finalist for two book awards.
Her weekly columns are syndicated around the country, and her work has appeared in the Wall Street Journal, the Chicago Tribune, the New York Times, Washington Post, and the Reader's Digest. A collection of her essays, Nobody Fixes Real Carrot Sticks Anymore, first published in 1994 is still being published. She has been a commentator on business issues on All Things Considered for National Public Radio.
She has served on four boards of directors, including Arizona Public Service (1987-2000), Zealous Capital Corporation, and the Center for Children with Chronic Illness and Disability at the University of Minnesota. She was appointed to the board of advisors for the Institute of Nuclear Power Operators in 2004 and served on the board of trustees for Think Arizona, a public policy think tank. She has appeared on CNBC, CBS This Morning, the Today Show, and CBS Evening News.
In 2010 she was named one of the Top 100 Thought Leaders in Business Ethics by Trust Across America. Her books have been translated into four different languages. She received the British Emerald award for authoring one of their top 50 articles in management publications, chosen from over 15,000 articles.
Personal: Married since 1976 to Terry H. Jennings, Maricopa County Attorney’s Office Deputy County Attorney; five children: Sarah, Sam, and John, and the late Claire and Hannah Jennings.
