NEW YORK (CNN/Money) -
Richard Grasso is out as chairman of the New York Stock Exchange, resigning at the request of the board in an emergency meeting to discuss his fate and his pay, the exchange announced late Wednesday.
"Dick offered to submit his resignation if the board requested, and the board did so and accepted that resignation," said H. Carl McCall, the NYSE compensation committee's chairman and former New York state comptroller. "Dick called a special meeting of the board this afternoon in light of the recent discussion surrounding the exchange and his compensation."
Meanwhile, Larry Sonsini, another NYSE board member and a celebrated Silicon Valley securities lawyer, turned down a request to be the interim chairman, according to an NYSE spokeswoman.
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 CNNfn's Allan Chernoff looks at the rise and rapid fall of Richard Grasso, the man who worked his way up to the world's most prominent stock exchange.
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As a result, McCall will serve as lead director of the exchange, with co-chief operating officers Catherine Kinney and Robert Britz handling day-to-day operations.
The departure came a day after the leaders of some of the nation's biggest pension funds called for Grasso to step down, declaring his pay package inappropriate for a market regulator.
Resentment over Grasso's pay was also percolating on the exchange floor, as the exchange's owners were planning to meet after the market closed Thursday to discuss the issue with three directors who are also NYSE members.
'Fundamental reforms'
Current New York Comptroller Alan Hevesi, who called Tuesday for Grasso to step down, praised the decision, but said the exchange needed to do more.
"Dick Grasso's decision to resign was the right one. It's best for the New York Stock Exchange," Hevesi said in a statement.
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| Grasso was widely praised for his role in reopening the exchange after the Sept. 11th attacks. |
"However, the issue is not just Mr. Grasso. The issue is making fundamental reforms at the stock exchange to restore investor confidence [and] establish a model of good corporate governance, accountability and disclosure. Now that Mr. Grasso has stepped down, we can move forward with those reforms," said Hevesi.
But some traders disagreed with Hevesi on Grasso's departure.
"This is a sad day for the NYSE and Dick Grasso and for people who have worked so hard for the American investor," said Art Cashin, head of floor trading at UBS Paine Webber. "This is not a triumph for anyone."
Pressure to do something about the compensation controversy has grown in recent days.
Two presidential candidates and the head of the biggest specialist trading firm at the NYSE publicly called for Grasso to go Wednesday. Meanwhile among the NYSE board members to call for Grasso's resignation were three leading Wall Street chiefs: Henry Paulson, who runs Goldman Sachs Group Inc. (GS: Research, Estimates); Philip Purcell, head of Morgan Stanley (MWD: Research, Estimates); and William Harrison, head of J.P. Morgan Chase & Co. (JPM: Research, Estimates), a source familiar with the board meeting told Reuters.
One of the most recent additions to the board, former U.S. Secretary of State Madeleine Albright, was also a voice for Grasso to go, the source said. But the decision to push him out was far from unanimous. The final vote was 13 to 7, another source said. Grasso supporters included Kenneth Langone, co-founder of Home Depot Inc. (HD: Research, Estimates); Viacom Inc. (VIA: Research, Estimates) President Mel Karmazin; and James Cayne, CEO of Bear Stearns Cos. (BSC: Research, Estimates), the person said. He also had his supporters among the NYSE membership.
"It's a very sad time for the New York Stock Exchange," said Francis Maglio, a long-time NYSE member. "He wasn't in this alone. Other people have to share responsibility for the demise of a man who spent his entire life at the New York Stock Exchange and loved it."
Securities and Exchange Commission Chairman William Donaldson said the agency had further questions for the NYSE on its governance and the $140 million pay package.
"We will be asking the NYSE some further questions, based on information we've received," Donaldson told a House Financial Services Committee hearing.
"The SEC will continue its review of governance standards and will work closely with the new leadership at the exchange to put an appropriate structure in place that will ensure the credibility and integrity of the governance of the exchange," Laura Cox, managing executive for external affairs at the commission, said in a statement after the resignation was announced.
The details of Grasso's pay package have infuriated many business and political leaders, coming after last year's corporate scandals and disputes over excessive executive pay.
"Dick Grasso's pay package is extraordinarily excessive, but the amount is just a symptom of the real problem," said Sen. John Edwards, D-N.C. and a presidential candidate, in a statement before the resignation.
"The real problem is that the board of the New York Stock Exchange has operated like a clubhouse, with no accountability to anybody except itself. Instead of setting an example for corporate America, the board has become a symbol of what's wrong at too many corporations," Edwards said.
In a statement, Grasso said: "For the past 36 years, I have had the honor and privilege of working for what I believe is the greatest equities market in the world, the New York Stock Exchange.... I believe this course is in the best interests of both the exchange and myself."
-- Reuters contributed to this story
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