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NYSE chairman Grasso resigns

Grasso was concerned over potential negative publicity.
Grasso was concerned over potential negative publicity.

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NEW YORK (CNN) -- New York Stock Exchange chief executive officer Richard Grasso has resigned his post after a special board meeting called to address the furor over his pay and retirement package, the exchange has announced.

"I shared with the board of directors ... that, with the deepest reluctance and if the board so desired, I would submit my resignation," Grasso said in a statement. "I believe this course is in the best interests of both this exchange and myself."

Larry Sonsini, another NYSE board member and a celebrated Silicon Valley securities lawyer, has turned down an offer to be the interim chairman, a person familiar with the matter said late Wednesday.

News of Grasso's controversial compensation package -- which extended his contract and included a lump-sum payout of $139.5 million dollars in deferred compensation and retirement benefits -- prompted calls for Grasso's resignation Tuesday from the managers of three state pension funds.

Two Democratic presidential candidates -- Senators John Edwards and Joseph Lieberman -- added their voices to those calls Wednesday.

New York State Comptroller Alan Hevesi, one of the pension-fund managers who called for Grasso's resignation, welcomed the resignation.

"It's best for the New York Stock Exchange," he said in a written statement. "However, the issue is not just Mr Grasso. The issue is making fundamental reforms at the stock exchange to restore investor confidence."

The NYSE is considering proposals to change its structure.
The NYSE is considering proposals to change its structure.

He said the NYSE should now "establish a model for the entire financial community of good corporate governance, accountability and disclosure."

At an August 7 meeting of the compensation committee of the NYSE board of directors, Grasso had expressed concern about potential negative publicity resulting from disclosure of the package, according to meeting minutes CNNfn obtained Wednesday.

According to the minutes, the committee's chairman, H. Carl McCall, "informed the committee that, as a result of calls he had received, Mr Grasso did not think it was wise to proceed at this time," the minutes state.

But committee members brushed aside Grasso's concerns, saying it would be in the stock exchange's best interest to complete the new deal.

Board members Gerald Levin, Mel Karmazin and Laurence Fink argued in favor of going ahead.

"Mr Levin felt that the agreement should be entered into now. He stated that not implementing now would put Mr Grasso in an awkward position, that a new agreement would reduce the exchange's financial obligation and help with succession planning," the minutes state.

Levin is the former CEO of AOL Time Warner, the parent company of CNN.

More board members

Amid the controversy, the NYSE board is considering recommendations for changing its structure.

An exchange official told CNNfn the board's governance committee will propose at a September 24 meeting that the board be comprised of a majority of independent directors.

Currently, 12 directors come from the securities industry and 12 are "public" directors -- considered to be independent representatives of the public. Grasso also sat on the board, along with his two top lieutenants.

The committee, according to the exchange official, will call for the addition of independent board members to replace members of the board who are scheduled to step down next June.

Eleven members' terms are to expire at that time, including those of Levin, CS First Boston CEO John Mack, and Daimler Chrysler CEO Juergen Schrempp.

-- CNNfn's Allan Chernoff, Louise Schiavone, Chris Huntington and Gene Bloch contributed to this report.


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