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September 30, 2003

The Grasso Post Mortem

By John A. Byrne, Editor

The forced resignation of NYSE Chairman Dick Grasso will settle like a storm cloud over the securities industry. His undignified exit from the Big Board - in the dark of night - produced the inevitable soul searching and political handwringing. It was driven by a media feeding frenzy, amidst unsettled economic conditions. This, after all, is a thumping good yarn as the media salivates for the next bold headline. But it is a sad story because of the damage it causes to the NYSE in general, and investor confidence in particular. How this yarn - a somewhat quirky story about a man reputedly accused of legally earning a bundle - is spun in the court of public opinion will matter. It will matter for the future of the NYSE and for Grasso's own legacy. Will he be viewed by the public years hence as a robber baron, a hog who walked away with some $140 million? Or, will he be viewed as the man who saved the Big Board, successfully negotiating a market structure that protected the NYSE's multi-billion dollar franchise? How Grasso is viewed in the years to come depends on how his story is told this year, next year and the year after.

Alas, Grasso may have a tough time recruiting spinmeisters to defend his undeniably amazing compensation package. It could be a career breaker. (I have here on my rolodex a list of several pricey PR damage control gurus who might work their media magic for Grasso.) So if there is one valuable lesson in this for students of damage control, it is simple: Never take the Fourth Estate - and I use this term somewhat playfully -- for granted. If you hadn't noticed, many media outlets, including the pro-free enterprise Wall Street Journal and New York Post, essentially editorialized that Grasso had what was coming to him. However, to understand the pervasive anti-Grasso media coverage - bordering on rage - it is important to measure some of the undercurrents. Most media lifers who've covered the NYSE during Dick Grasso's reign will tell you the same: It often used a hardball media policy. Take, for instance, when the NYSE recently took it upon itself to post its own supposed corrections about reporters' stories - usually stories on alleged Big Board front-running scams - on an exchange Web site. The impulse was understandable but the approach breaks most rules of media engagement and tradition. It was, in effect, a declaration of war by the NYSE aimed at the media. In most wars, there are casualties.

The NYSE had other ways to push around the media. It isolated some individual reporters, for example, by not granting them access to top exchange officials. But it was a flawed, misguided policy presumably directed from the top. So, given this reckless approach, how would Grasso now expect to receive some media milk of human kindness in the hour of his darkest need? The Grasso affair has clearly influenced how we approach some of this month's coverage in Traders Magazine, from the cover story on Sanford C. Bernstein and Matt Andresen to issues about market structure and regulation. And in the months ahead, this same yarn on Grasso will still be spun. However, we hope the media frenzy will be over. And we hope a more measured view of Grasso will be possible.

John A. Byrne