Running the New York Stock Exchange isn’t quite the glamorous job it once was. Six years ago, the hue and cry against excessive pay of the NYSE’s chief—then Dick Grasso—rose up when it was revealed the board of directors had signed off on a $180 million pay package.
This year shareholders are once again objecting to excessive pay but the amount involved is much, much smaller. Duncan Neiderauer was paid $9.2 million in stock and cash, including a $4 million performance bonus. But at the annual shareholders meeting last week, the board found itself on the defensive. Neiderauer himself tried to defend his compensation by telling the audience that much of his compensation was in stock—which has sunk in value as the exchange suffered a $745 million net loss and saw its stock price fall by two-thirds.
NYSE’s compensation committee seemed to bend over backwards last year to be generous with its CEO. It targeted Mr. Niederauer, named CEO in late 2007, for a $5 million “performance bonus” and insisted even in light of poor results that “individual performance would have supported higher award levels,” according to a regulatory filing. It ultimately granted the CEO a $4 million performance bonus to reflect a 20% reduction in the company-wide bonus pool.
In an effort to defuse anger over his pay, Mr. Niederauer tried to make a case that the exchange performed better than its dismal financial results and stock price indicated. Last year, NYSE had a net loss of $745 million on revenue of $4.7 billion, compared to net income in 2007 of $639 million on $3.9 billion of revenue. Its stock price fell to $26.90 a share from $83.81.
Mr. Niederauer cited progress in raising revenue and lowering expenses and noted the exchange would have been profitable were it not for a $1.6 billion asset write-down related to the 2007 merger between NYSE and Euronext. Mr. Niederaurer said it was “good governance” to take the write-down, which auditors require of companies when they determine the asset will not generate the expected cash.
“We try to be a leader in good governance,” he said.
Kenneth Steiner, another investor, blasted the board for agreeing to golden parachutes for Mr. Niederauer and three other senior executives. Under the terms of that agreement, Mr. Niederauer would be awarded $26.2 million if he elected to sell the exchange, which includes the company paying the taxes associated with his windfall.
“How does this benefit shareholders?” Mr. Steiner asked.
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