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Tuesday, June 14, 2005

Spitzer Should Go After Stern

In a hilarious, full page essay in the WSJ entitled "Behind the Spitzer Curtain" , Kimberly Strassel provides the background of Richard Grasso's $139.5 million compensation package and the lawsuit DA Elliot Spitzer is bringing against the compensation board of the NYSE. The compensation board has been interviewed and the WSJ has the comments by the board members. What we see is corporate celebrities hiding behind feigned or actual ignorance about Grasso's compensation package that Spitzer feels is criminally too high.

The one stand-up guy is Viacom President Mel Karmazin, Howard Stern's boss. Again, while other members of the compensation board head for the hills like Madelaine Allbright, Karmazin says plainly the committee "was not comprised of wallflowers" who could be bullied or coerced by Grasso to be paid so handsomely. Another board member, Merrill Lynch Chairman David Komansky, said Grasso was paid his value and "We knew what we were doing when we paid him. We did it purposely, and we believed it was the right compensation."

The best part was regarding Carl McCall, the former NYS Comptroller, who was apparently named head of the committee for "political reasons" (see my fingers doing the quotation sign?). He never fully grasped and could never explain to others anything about Grasso's compensation. According to Strassel, Spitzer has not named McCall, a fellow Democrat, in the lawsuit. Of course, how could he be liable for any criminal charge since he so ignorant about what was happening (though ignorance is no excuse as many directors and officers can attaest these days). McCall's fellow board members felt he was "incompetent", "did not apparently understand the proposed payout very well" and as Leon Panetta said "Carl knew nothing."

The $139.5 million was a one-year pay-up of compensation that had a long tail and presumably the NYSE would have paid Grasso much more money in the future. The board all along recognized that Grasso had earned the money for his past accomplishments and were worried someone of his talents would easily get employment elsewhere so they offered him what he wanted. Spitzer, appealing once again to the baser instincts of the electorate, has seized upon this big number for all it can gain as headlines. He is likely to lose again.

Calling it straight, Karmazin said:

"If Dick is going to resign, why don't we resign instead? The NYSE needs him more than us."

Anyone who knows Karmazin knows he pays well for talent. If Stern gets $40 million a year for saying "dick" and "fart" 400 times each day, then Spitzer has another target for his newspaper trials. But Mr. Karmazin knows that idiots like me listen to Stern every day and that is how the free market works.

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