New York Stock Exchange Chairman Richard Grasso’s resignation underscores a harsh new reality in corporate boardrooms, executive compensation experts said Thursday

Chief executives can lose their jobs simply because of how much they’re paid, regardless of how well their companies perform or how honorably they conduct business.

“It’s probably the first time anyone has resigned because they were paid too much,” said Paul Hodgson, a senior researcher at The Corporate Library, a corporate governance research firm in Portland, Maine.

Criticism of excessive pay and conflicts of interest on Wall Street converged in August when the exchange disclosed Grasso’s package of $139.5 million in deferred pay. Institutional investors called for his resignation, and he did quit Wednesday night.

“The issue really stirs the pot,” said Charles M. Elson, director of the University of Delaware’s Center for Corporate Governance. “Even courts are losing patience” with employment contracts rubber-stamped by boards of directors. The NYSE board approved Grasso’s pay.

To be sure, Grasso’s is a special case. As chairman of the NYSE, he was responsible for regulating the conduct of exchange members and public companies listed on the NYSE.

New York State Comptroller Alan G. Hevesi, calling for his resignation, questioned how effectively Grasso could police exchange members when they were paying him so well, and sitting on his board.

Hevesi said Thursday that Grasso’s resignation cleared the way for “fundamental reforms at the stock exchange to restore investor confidence.”

Corporate boards often resist change until crises force their hand, said Hodgson, of The Corporate Library. “I’m waiting to see if anyone else goes” at the NYSE, he said. “There are lots of people with their fingerprints all over” Grasso’s pay pact.

Elson said courts are more inclined to let plaintiffs’ class-action attorneys dust for those prints. He pointed to a decision in May by the Delaware Chancery Court allowing a shareholder’s suit against Walt Disney Co. to proceed.

The suit challenges Disney’s award of a $140 million severance package to president Michael Ovitz, who left the company in 1996 after 14 months on the job. The Delaware judiciary holds sway over a large chunk of corporate America.

The alleged facts, according to the May order, suggest that “directors consciously and intentionally disregarded their responsibilities, adopting a “we don’t care about the risks’ attitude concerning a material corporate decision.”

Meanwhile, Norman Veasey, chief justice of the Delaware Supreme Court, stated last year that post-Enron reforms are “changing how the courts look at these issues. Directors who are supposed to be independent should have the guts to be a pain in the neck and act independently.”

Elson said, “Corporate boards are slow to change.” But the Grasso flap “just sent a wakeup call.”

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AP-NY-09-18-03 1850EDT