New York Attorney General Eliot Spitzer has filed a lawsuit asking a judge
to rescind a $187.5 million compensation package the New York Stock Exchange
awarded to former chief of the exchange Richard Grasso.
The civil suit comes after a four-month investigation by Spitzer's office.
Spitzer alleges that directors of the NYSE were misled about various aspects
of the payment package.
The suit asks a judge to rescind the pay package and to determine a "reasonable"
level of compensation for Grasso. Spitzer filed the suit under New York Not-for-Profit
Law, which requires that compensation for executives be "reasonable"
and "commensurate with services provided."
The suit, which names Grasso, the exchange, and former chairman of the NYSE
compensation committee Kenneth G. Langone, was filed in Manhattan.
The lawsuit alleges that the exchange's compensation formula for Grasso was
flawed because it was driven by a comparison with the salaries of top executives
in the world's largest corporations. In addition, the lawsuit claims Grasso,
in effect, set his own performance targets.
"This case demonstrates everything that can go wrong in setting executive
compensation," says Spitzer.