NEW YORK - The opening bell at the New York Stock Exchange ushered in a new era Thursday, as the financial market began life without the charismatic Dick Grasso as its leader.
As trading began, Grasso, who resigned Thursday in response to rising fury over the $139.5 million payout he received last month, was notably absent from the podium where he had helped open sessions since becoming chairman in 1995.
His departure left the NYSE searching for a successor under the scrutiny of its members, critics and federal regulators, who want big changes at the world's richest market.
"Richard Grasso has done the right thing. He's fallen on his sword," said New York State Comptroller Alan Hevesi. "However, the issue is not just Mr. Grasso. The issue is making fundamental reforms at the stock exchange to restore investor confidence."
Hevesi and other state finance officials and pension managers had called for Grasso's resignation a day earlier, joining an increasingly noisy chorus of politicians, investor advocates and traders who said the lavish pay undermined the credibility of the exchange, a not-for-profit, member-owned institution that also serves as a regulatory watchdog.
"In an era of corporate scandals, you can't have the regulator of the world's largest stock exchange take tens of millions of dollars in remuneration from the people he's regulating," Hevesi said. "That's a conflict of interest."
Grasso called an emergency meeting of the NYSE board shortly after the market closed Wednesday. He offered to resign as chairman and chief executive, and after some discussion the board accepted, said H. Carl McCall, chairman of the compensation committee.
The vote was 13 to 7, according to a source familiar with the meeting, which was held by teleconference. Among those who thought Grasso should step down were CEOs of the nation's largest investment banks, former Secretary of State Madeleine K. Albright and Avon CEO Andrea Jung, the source said.
His defenders included Home Depot co-founder Kenneth G. Langone, who led the compensation committee when key parts of Grasso's pay were approved, and William B. Summers Jr., chairman of McDonald Investments, Inc., a unit of Midwest banking giant Key Corp., the source said.
Grasso is entitled to keep the $139.5 million in benefits and savings accumulated over his three decades with the exchange - mostly since he became chairman in 1995 - and he could get another $10 million in severance pay, according to his contract.
In a statement, Grasso said he was stepping down "with the deepest reluctance." But he added that "I believe this course is in the best interest of both the exchange and myself."
In a second, 90-minute meeting, the board later agreed that McCall, a former New York comptroller who now works in private equity, would serve as lead director. They also said co-chief operating officers Robert G. Britz and Catherine R. Kinney would see to day-to-day business at the exchange until a replacement is named. No interim chairman was named.
Grasso may not be easy to replace. Widely praised as a smart and savvy diplomat, the 57-year-old who started out as a floor clerk in 1968 became the NYSE's biggest promoter and cheerleader, transforming the opening and closing bells into public happenings. After the Sept. 11 terrorist attacks, he turned the resumption of trading into a tribute to the dead and a first step toward recovery of the financial district.
The NYSE was set to open the market Thursday without Grasso, who missed few opening and closing bells during his tenure. Kinney would host the opening, NYSE spokesman Ray Pellechia said.
Grasso also canceled a planned luncheon speech Thursday at the Investment Company Institute's conference on institutional trading, organizers said. ICI is the main mutual fund lobbying group.
Grasso is the latest prominent figure in the business world to fall in a three-year storm of public uproar over outsized pay and questionable practices in corporate boardrooms and executive suites. That anger was fueled by the collapse of stock prices in 2000 and a string of scandals, starting with Enron Corp.
No one has suggested Grasso is guilty of the sort of wrongdoing that led to criminal charges against executives at Enron, WorldCom Inc. and other companies. But some saw conflicts of interest among board members and too much influence from the chairman, both in selecting directors and naming them to committees.
Grasso has insisted he did nothing to influence his pay. At a Sept. 9 news conference, he said that each year, when informed of his compensation, his response was: "I'm blessed. Thank you."
Critics say now it's time to take a hard look at the directors themselves. Grasso's departure is but "one small step for shareholders," said Nell Minow, editor of the Corporate Library, a private research group that studies business governance.
"The CEO took the money, now we need to look at the people who paid the money," Minow said. "They should all be replaced. Obviously you can't do that all right this minute, but the next thing that happens has got to be a very serious board assessment."
The NYSE revealed its top executive's pay for the first time on Aug. 27, as it announced Grasso's contract extension through 2007. The disclosure was part of a larger effort to conform with new governance rules being applied to public companies, but the magnitude of the sum sent jaws dropping.
Securities and Exchange Commission chairman William Donaldson, who held the top NYSE post before Grasso, sent a sharply worded letter on Sept. 2, requesting details. The NYSE responded that Grasso was entitled to another $48 million, which he said he would forgo. Still, many were stunned by the new revelation and outrage spiraled.
Under his current contract, Grasso is entitled to at least $9.6 million in severance pay - equal to his salary and target bonus for the next four years - as well as lifetime health and life insurance for himself and his wife. He's already declined other provisions, including supplemental retirement benefits, a $5 million bonus and funds vested in a capital accumulation plan, which were included in the $48 million.
Aside from the fantastic sums, there was little unusual in the contract's provisions in the event of "involuntary termination without cause," which is what appears to have happened in this case, said Peter N. Hillman, who specializes in employment matters as a partner at the law firm of Chadbourne & Parke.
"It looks like something we might have done for one of our clients, though certainly not with so many zeros," Hillman said after surveying the contract. "This guy, he doesn't have to worry about a thing."