Friday, September 19, 2003

Rights and Reason: Grasso Resigns

National Review's Larry Kudlow analyzes the resignation of New York Stock Exchance CEO Dick Grasso with appropriate outrage:
kangaroo court of liberal-leaning journalists and Democratic state treasurers charged and convicted former New York Stock Exchange CEO Dick Grasso with an unpardonable sin — success.

This collection of class-envy warriors put such relentless pressure on the NYSE that Grasso was finally forced by his board to resign. Grasso, of course, was the man whose Herculean efforts were behind the reopening of the stock exchange only four business days after the terrorist bombing of downtown New York. But the so-called titans of finance who sit on the NYSE board were so mau-maued by the media and political onslaught that they actually sided against the man who inflicted the first major blow on Osama's terrorism.

There was no scandal here. Dick Grasso accepted a big pay package endorsed on two occasions by the NYSE board in return for 35 years of successful service. What is scandalous is that key Big Board officials — like Hank Paulson of Goldman Sachs, Philip Purcell of Morgan Stanley, and William Harrison of JP Morgan Chase — succumbed to the pressure of newspaper headlines and abandoned Grasso.

Not only did Grasso start America's economic recovery immediately after 9/11, he also saved the NYSE from a late-1990s assault by the Nasdaq. At the time, the technology stock market threatened to induce numerous Big Board companies to switch their listings, and at one point cautioned that it might even take over the NYSE. But it was the diminutive son of Italian immigrants who defended NYSE floor brokers and retail investors from a new era of impersonal electronic trading. Some thanks he got: Many of these same floor brokers helped push Grasso over the edge.

Let's be very clear about this: Grasso has done nothing wrong. Nothing, that is, except believe his own board when they offered him a large pay package for his long-term service.
The Grasso "scandal" has every appearance of hating the good for being good. Just like the federal indictment of Martha Stewart, the ouster of Grasso is not about corporate ethics or the rule of law, but about demonizing those who dare to earn and enjoy business success.

The most disturbing aspect of this story is the self-indulgent whining from numerous state treasurers--including California's--over Grasso's "unfair" pay package. You can argue the treasurers are a valid stakeholder, since state-administered pension funds are a major stock investor. That's true enough, but state treasurers are first and foremost politicians, not businessmen, so their criticism of Grasso is presumptively an act of political self-indulgence, not a rational criticism of NYSE's business practices. Especially coming from states, like California, that have financially mismanaged themselves into near-insolvency, the attack on Grasso's salary seems little more than an effort to deflect public attention from the genuine financial scandal of state budgets run amok.

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