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Published: Monday, 7/7/2008

Jackpot capitalism

IN THE end, former New York Stock Exchange chief Richard Grasso kept every last penny of his $187.5 million pay package. He won a tendentious exercise in jackpot capitalism not for dispelling claims that his compensation deal was ridiculously extravagant, which it was, but because the case was nullified on what amounts to a legal technicality.

Mr. Grasso, the latest poster boy for corporate greed, is smirking all the way to the bank even as the former bulls in the stock market stampede into bear territory. The state law under which Mr. Grasso was aggressively pursued by then-New York Attorney General Eliot Spitzer governed not-for-profit companies but the Big Board converted to a publicly traded, for-profit business two years ago.

So while the unwarranted riches showered on the Mr. Grasso, even as investors struggled, were symbolic of exorbitant executive compensation, the legal claim on behalf of the public against his earning excess no longer applied. Game over, said the appellate division of the New York Supreme Court.

After the court dropped the state's remaining claims against Mr. Grasso, prosecutors threw in the towel.

Initially, the state sought to recover money paid to Mr. Grasso, alleging that his compensation was "wholly inappropriate" and constituted an unlawful transfer of NYSE assets and a breach of fiduciary duty by stock exchange officials. And it wasn't just the size of his compensation package but how it was awarded - on the sly with a NYSE compensation committee hand-picked by Mr. Grasso and approval at the last minute.

What a remarkable end to one of Wall Street's uglier fights, between Mr. Spitzer, a crusading prosecutor but now a disgraced former governor, and Mr. Grasso, a man who spent 35 years at the exchange, rising from clerk to the chairman's office, only to be forced from the job under a cloud of scandal.

That chortling we hear from the general direction of Wall Street comes from those who just don't care about the long-held concept of fiduciary responsibility in the business sector. They seem to believe that no deal is too outrageous - if you can get your friends to skirt the rules and set it up for you.

This is the essence of jackpot capitalism - shareholders be damned - and it is poisoning the public's faith in the way businesses are governed. The business community ignores reform at its peril.

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