CEO compensation has become one of the most important issues of concern in the field of corporate governance. Some people believe that CEOs are only glorified managers and do not deserve high salaries while others feel that they should be compensated for taking responsibilities.
On
September 17, 2003, Richard Grasso, the Chairman and
CEO of the New York Stock Exchange (NYSE) resigned.
The resignation came amidst demands from corporate governance
experts, NYSE members and several other parties that
he step down on ethical grounds, after news broke in
early September 2003 that in the year 2002, Grasso took
a salary and bonus of $8.5 mn. The hugeness of this
amount shocked people who could not understand what
Grasso did to warrant such rewards. A study conducted
by an independent source revealed that the compensation
package of Grasso was much larger than even that of
CEOs of certain public limited companies.
What
shocked and offended further was that Grasso had taken
a bonus of $5 mn, in 2001; the year in which US reeled
under the shock of terrorist attacks which left the
political and economic systems of the country crippled.
It was different, said critics, for the head of a large,
for-profit company to be paid huge compensation, but
for the head of a relatively smaller, non-profit organization
to be paid such amounts, was unacceptable. "It
would be one thing if Grasso was the head of GE, but
these numbers are just enormous." said Alan Johnson,
of Johnson Associates, an executive recruiter firm.1What was even more astounding was that some members
of the NYSE's board of directors, including the board
compensation committee were unaware of the size of the
payout. |
