In the business world, the story of the early 21st century is bleak indeed. The public learned that many giant companies, presided over by highly compensated executives, engaged in fraud and deception to allow the big shots to live in regal splendor. You’d think that the people who run the New York Stock Exchange, of all places, would appreciate how public opinion has turned since the collapse of Enron. You’d think they would realize that investor confidence in the C.E.O. class is abysmally low. You’d think they would act with appropriate discretion and modesty. You’d be wrong.
In late August, the New York Stock Exchange’s board revealed the outrageous compensation package of the exchange’s chairman, Richard A. Grasso. Board members gave Mr. Grasso a lump-sum payment of $140 million in deferred compensation, along with an annual pay package of about $2.5 million. The chairman of the compensation committee happens to be former State Comptroller H. Carl McCall, whose political tenure was marked by fuzzy ineptitude and distinguished by the disturbing ease with which he rewarded campaign contributors with multimillion-dollar deals from the $120 billion New York State pension fund.
Some have argued that Mr. Grasso’s compensation is perfectly in line with that of C.E.O.’s of investment-banking firms. But to make such a comparison is ludicrous when, in fact, the NYSE is not much different from a governmental regulatory agency. A more apt benchmark would be the Securities and Exchange Commission, where chairman Bill Donaldson’s annual salary is $144,000.
What could Mr. Grasso possibly have done to deserve $140 million? Nobody really seems to know. His long career at the exchange has been undistinguished, notably lacking in achievements which might justify such absurdly high compensation. Mr. McCall no doubt believes he will be rewarded somehow for his support-he justified the board’s actions by praising Mr. Grasso’s “excellent leadership.” Too bad he never was somebody who raised hell about sleazy deals. Otherwise, he might have questioned not only Mr. Grasso’s compensation deal, but the culture at the Stock Exchange. The New York Post ‘s Terry Keenan reported that the NYSE Foundation, a charity of some sort, regularly donates money to organizations with connections to members of the Stock Exchange board. For example, the foundation gives money to the New York City Police Museum; Mr. Grasso and Kenneth Langone, former chairman of the board’s compensation committee, are trustees of the museum. Mr. Langone is also on the board of the Metropolitan Opera, which also benefits from the largesse of the NYSE Foundation. The list goes on: The foundation gives to the New York Philharmonic, whose board includes NYSE board member Gerald Levin. The foundation gave $15,000 to the Panetta Institute-yes, Leon Panetta is a NYSE board member. Half a million dollars reportedly went to Duke University; NYSE board member John Mack is a Duke trustee. Get the picture? A quasi-public organization like the NYSE should be above reproach, not rife with shady conflicts of interest.
Everything about Mr. Grasso’s deal stinks. And no one stands up to denounce it. Is there anyone on the NYSE board of governors who doesn’t receive some material benefit, either directly or indirectly, from the NYSE and its foundation? What a shameless disgrace.
Howard Dean: Graffiti For the Environment
Howard Dean came to town recently and showed that he is utterly clueless about the economic, social and cultural rebirth of New York City over the past decade. For a speech he was giving in Bryant Park, Dr. Dean’s campaign arranged for a graffiti artist to create a backdrop of graffiti mimicking the spray-painted scrawls that defaced subway cars and public spaces-including Bryant Park-back in the 1970′s and 80′s. It seems the former governor of Vermont thinks that New Yorkers are nostalgic for the time when graffiti turned a walk in the park or a subway ride into an ugly visual assault. Is Dr. Dean nuts?
One can legitimately argue whether graffiti can be considered art, but there’s no argument that New Yorkers have overwhelmingly benefited from the absence of graffiti. As Republican Councilman James Oddo wrote in a letter to Dr. Dean, “I bet you wouldn’t be too happy to see graffiti when you are campaigning in the hills of Vermont, yet you come to my city, erect a wall of graffiti and have the audacity to ask for support.” One of Dr. Dean’s spokesman arrogantly told The New York Times that those who object to the candidate’s use of graffiti simply “don’t know what’s going on in urban America.” On the candidate’s next appearance in the city, don’t be surprised if he campaigns alongside a squeegee man.
Michel David-Weill: A Cold, Heartless Frenchman
One might expect that having inherited an investment bank from his father, and sitting atop a $2 billion fortune, Michel David-Weill would understand the role luck plays in all of our lives, and might thus be moved by the plight of a former business partner whose own luck had taken a turn for the worst. But as The New York Times ‘ Geraldine Fabrikant reports, the chairman of Lazard Frères showed former Lazard partner Peter Jaquith the back of his hand when Mr. Jaquith came to see him as he was recovering from cocaine addiction. Mr. Jaquith’s life story is the stuff of Greek tragedy; Mr. David-Weill was apparently unmoved, despite the fact that Mr. Jaquith was once one of Lazard’s key players.
Mr. Jaquith started out with a leg up on life: He attended Andover and Dartmouth, earned a law degree at the University of Minnesota, and landed a job at the white-shoe law firm Shearman & Sterling. In 1970, he joined Lazard Frères and made an impression on its top deal-maker, Felix Rohatyn, who told The Times , “He was my chief lieutenant.” Mr. Jaquith stayed at Lazard for roughly 15 years and acquired expensive cars (three Mercedes and a Bentley), homes (Palm Springs, Santa Monica, New Canaan) and meals (he was a regular at the Four Seasons.) He was worth around $20 million. After Lazard, Mr. Jaquith worked for Forstmann Little and Bear Stearns. But by the 1990′s, his nightly drinking outshone his daily performance. In 1993, he became addicted to crack; soon he was evicted from his Upper East Side apartment and living in an abandoned basement in Queens. In 1997, former colleagues got him to enter a recovery program. At age 67, he’s been clean for almost six years. After starting to get his life back together, Mr. Jaquith arranged to meet with Mr. David-Weill.
Mr. David-Weill was born into the family business: A descendant of the Lazard brothers who founded the firm, he attended the Lycée Français in Manhattan and graduated from the Institute of Political Studies in Paris. He inherited control of Lazard from his father in the 1970′s. Mr. David-Weill clearly knew of Mr. Jaquith’s golden days at Lazard when the former partner asked for a meeting. And yet, after their meeting, Mr. David-Weill simply sent Mr. Jaquith a letter saying, “As you may know, we always had a policy of not rehiring people who have left.” Mr. David-Weill apparently lacked the empathy to reach out even a little-not necessarily by hiring Mr. Jaquith, but certainly he could have done something that would give his former colleague some support. Mr. David-Weill may have inherited a fortune, but he seems to have squandered a more valuable asset: his character.
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