Pressure on Grasso to quit NYSE job

RICHARD Grasso is fighting a losing battle for his job as chief executive of the New York Stock Exchange (NYSE) after the treasurers of three states demanded his resignation.

Since they control some of the biggest public investment funds in the United States, with assets of hundreds of billions of dollars, they wield enormous power in American stock markets and are likely to get their way.

Grasso, under fire since details of his $140m (£88m) pay package were disclosed, faces another hurdle on Wednesday as Exchange members meet to air their views in front of NYSE directors.

Support among members appears to have been waning over the past week, and the hostility of major investors is likely to have a significant influence on how the members view the crisis.

The treasurers of California, New York and North Carolina all said the only way to resolve the crisis at the NYSE was for the chief executive to step down. Phil Angelides, the California treasurer, also said Grasso's pay should be scaled down at the same time.

The treasurers said their funds were simply too big to withdraw from NYSE quoted stocks in protest at the poor governance of the Exchange, Grasso's excessive pay, and the conflict of interest inherent in his job. Their only alternative was to try to force the NYSE to change, they said.

Angelides represents Calpers and Calstrs, the largest and second-largest pension funds in the country with total assets of $245bn. Calpers in particular has for years had a record of investor activism.

Angelides said the NYSE should set an example for the companies quoted on its market, but had failed to do so. Grasso's pay 'defied all definitions of fairness' and had 'set back critical efforts to restore the public's faith' in the stock market.

If the Exchange paid no attention to his demands he would use his investment funds to influence major companies quoted on the exchange, whose shares they own, to put pressure on the NYSE. None of the three treasurers is a member of the NYSE board and therefore cannot directly affect how the Exchange is run.

NYSE directors have been discussing various solutions to the crisis. One involves splitting the marketing and regulatory roles of the chief executive, though Grasso has said he will not accept any reduction in his authority.

Another possibility is to turn the NYSE into a public company through a public share sale, which would make the market accountable to its shareholders.