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CEO Compensation and Corporate Governance Case Study at NYSE



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Code : GOV0008

Year :
2004

Industry : Business Law, Governance and Ethics

Region : USA

Teaching Note:Not Available

Structured Assignment :Not Available

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Excerpts

The Compensation Issue The contract announced onAugust 27th 2003 extended Grasso’s tenure by two years up to May 31st 2007. It also offered a pay package of $187.5million, including retirement benefits and deferred compensation to its chairman and CEO Grasso, of which he received an amount of $139.5million. In the eight years of his service in the highest office at NYSE, he received a salary and bonus of $17.8million for the first four years,whereas for the later four years from 1999 to 2003, he gained a huge sum of $80.7 million...

The Board and the Issue of Corporate Governance The entire fiasco brought to the fore the issue of corporate governance atNYSE. “Apparently, the NYSE’s board was structured such that Grasso served as both chief executive and chairman of the board, had a strong hand in selecting his own directors, and had been criticized for having a heavy hand in determining the members of both the nominating and compensation committees,” stated ToddMilbourn, a professor of finance at the Olin School...

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Reforming the Big Board After Grasso’s episode, it was felt that reforms in the governance policies and practices are all the more necessary in corporateAmerica. BusinessWeek pointed out, “Many CEOs had a terrible year – but were still left with a mountain of wealth.”28 AFL-CIO, the American Labor organization, urged for a reformin the CEO compensation system...

Special Committee’s 10 Initial Recommendations

  • 1.Revise the Compensation Committee charter to provide that only non-securities industry directors may serve as members of the committee.
  • 2. Publish in the Exchange’s annual report a Compensation Committee report that includes the compensation of the directors, the chairman and the four othermost highly paid officers...



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