State:
Free Special Resources
Get Your FREE Special Report. Download Any One Of These FREE Special Resources, Instantly!
Featured Special Report
Claim Your Free Cost Per Hire Calculator
This handy calculator lets you plug in your expenses for recruiting, benefits, salaries, and more.

Graphs automatically generate to show you your annual cost per hire and a breakdown of where you are spending the most money.

Download Now!
May 26, 2004
HR Figures Prominently in Stock Exchange Scandal

The human resources director of the New York Stock Exchange and a major HR consulting firm have become key players in the scandal surrounding a $139.5 million pay package for former NYSE Chairman Richard Grasso.

For a Limited Time receive a FREE Compensation Market Analysis Report! Find out how much you should be paying to attract and retain the best applicants and employees, with customized information for your industry, location, and job. Get Your Report Now!

New York Attorney General Eliot Spitzer filed a civil suit against Grasso this week, demanding that he repay more than $100 million of the sum. Spitzer believes Grasso "inflated his pay and deliberately misled his high-powered board about many details of his package to enhance his pay above and beyond a benchmark of comparable chief executives," The New York Times reported on Tuesday.

Grasso, forced out of his job when word of the compensation package caused an uproar last fall, said he's "disappointed that New York's attorney general has chosen to intervene in what amounts to a commercial dispute between my former employer and me. I look forward to a complete vindication in court."

But Grasso will have to overcome the testimony of Frank Ashen, head of human resources for the NYSE. Ashen, a 25-year employee of "the big board" and its internal compensation expert, has given Spitzer a statement that essentially says he and Grasso hid bonus payments for Grasso from the board.

In a Tuesday story carrying the headline, "More Than One Canary Sang," the New York Post reported that Ashen has admitted to concealing "lumps of pay of as much as $18 million a pop, by removing large sums from his worksheets and spreadsheets before he presented final pay recommendations to the NYSE's Board of Directors for approval."

"After directors signed off," the Post reported, "Ashen would restore the numbers in order for payroll to cut the excessive paychecks without the board's knowledge."

In exchange for Ashen's cooperation, Spitzer dropped his original plan to name Ashen as a co-defendant in the Grasso suit. Ashen has also agreed to return $1.3 million of the $1.9 million in bonuses he received from Grasso, according to the Times.

Ashen's lawyer issued a statement saying, "Mr. Ashen recognizes in hindsight that certain mistakes were made, but at no time did he intentionally provide inaccurate or incomplete information to the board of directors."

Spitzer described Ashen's cooperation as crucial to the lawsuit.

Another "gold mine of evidence"--as the Post puts it--has been Mercer Human Resources Consulting Inc, which had been brought in to advise the stock exchange on Grasso's 2003 contract and his request for $139.5 million. The Post reported that Mercer was pressured by Grasso and Kenneth G. Langone--an NYSE board member, chairman of the board's compensation committee, and a friend of Grasso's--"to crunch the numbers Grasso wanted."

According to the Times, Mercer has since admitted giving the NYSE board a compensation report that contained "omissions and inaccuracies." It has also provided key documents in the lawsuit.

Among other things, the Post reported, Mercer had concealed a "bombshell" internal memo saying that each $1 million increment in a certain bonus plan for Grasso would trigger a $6.8 million increase in lump-sum payments later. The newspaper added that Mercer has agreed to give back about $440,000 in fees it collected from the NYSE.

Spitzer is suing Grasso under a New York State law that regulates not-for-profit organizations. It says the chief executive of a quasi-public institution--like the NYSE--can be held liable for being paid an unreasonable amount not "commensurate" with his official duties.

"This case demonstrates everything that can go wrong in setting executive compensation," Spitzer said in a press release. "The lack of proper information, the stifling of internal debate, the failure of board members to conduct proper inquiry and the unabashed pursuit of personal gain resulted in a wholly inappropriate and illegal compensation package."

Links

Featured Free Resource:
Cost Per Hire Calculator
   
   
 
 
Twitter  Facebook  Linked In
Follow Us
CT-WEB06
Copyright © 2016 Business & Legal Resources. All rights reserved. 800-727-5257
This document was published on http://Compensation.BLR.com
Document URL: http://compensation.blr.com/Compensation-news/Compensation/Bonus-Payments/HR-Figures-Prominently-in-Stock-Exchange-Scandal/