Days after his remuneration first came under scrutiny in the spring, Mr Richard Grasso recalled how he was paid a pittance when he first arrived at the New York Stock Exchange as a clerk 36 years earlier.

Then, reflecting on his achievements in his past eight years as chairman, he gave the gathering of executives from NYSE-listed companies an unvarnished justification for his eight-figure pay package: "I'm worth every penny."

The NYSE chairman's defence - characteristically shorn of any self-doubt - has looked shakier this week, after the Big Board announced that Mr Grasso had received a pay-out of $139 million in deferred compensation. He justified the move by saying his estate planning and tax strategy required him to draw the entire sum now.

For a man who only last year was trying to put the NYSE in the vanguard of corporate reform, following a series of US company scandals, it seemed an extraordinary mis-step, especially coming after a series of other setbacks.

The nomination earlier this year of Mr Sandy Weill, the Citigroup chief executive, to the NYSE board was universally seen as bad judgment on Mr Grasso's part, given the investigation into the financial services group's conflicts of interest. Lately, an investigation into floor trading practices at the NYSE has cast unwelcome light on the institution that Mr Grasso helped to build.

This series of blunders contrasts with his leadership after the terrorist attacks of September 11th, 2001, when he was widely praised for rallying Wall Street behind the rapid reopening of the stock exchange.

To his critics, the disclosure of Mr Grasso's compensation package seems to fly in the face of efforts to clean up corporate America. Executive compensation has become a touchstone of how enthusiastic US companies are about reform.

Mr William Donaldson, Mr Grasso's former boss at the NYSE and now head of the Securities and Exchange Commission (SEC), said less than a month ago that executive pay in corporate America was "one of the great, as yet unsolved problems". SEC officials have said that America's top financial regulator will look at the details of Mr Grasso's pay-out.

The size of the lump-sum payment stunned Mr Rand Araskog, former chairman of ITT - an executive whose own remuneration package came under attack in the early 1990s. "Dick's a friend of mine but that doesn't change anything. Right is right and wrong is wrong, and this is dead wrong," said Mr Araskog, an erstwhile member of the compensation committee of the NYSE board.

Mr Grasso's annual salary of $1.4 million already far exceeds those of fellow regulators such as Mr Donaldson and Mr Alan Greenspan, the chairman of the Federal Reserve. He was reported to have earned total compensation of at least $10 million last year, far more than his counterparts Ms Clara Furse, the head of the London Stock Exchange, and Mr Werner Seifert, the Deutsche Börse chief.

His total compensation last year is closer to that of Mr Henry Paulson, the Goldman Sachs chief executive, or Mr Philip Purcell, his counterpart at Morgan Stanley. This sort of benchmark may suggest that Mr Grasso needs to compare himself with the financial executives he regulates, several of whom are on the NYSE board that voted unanimously for the $139m pay-out. "It's a phenomenal sum . . . an entrepreneurial sum for a regulator," said Mr Charles Elson, a professor of corporate governance at the University of Delaware.

When Mr Grasso began his journey to the chairman's office at the NYSE, remuneration on such a scale would have seemed out of reach even for established corporate leaders, let alone for an Italian-American from Jackson Heights, a working-class neighbourhood in Queens, where he was raised by his mother and three sisters. It is a long subway ride from Wall Street.

A man of action from an early age, Mr Grasso quit university to join the army, before joining the NYSE in 1968. His first exchange job as a clerk earned him less than $86.50 a week.

Wall Street rewards ambition and Mr Grasso had plenty of it. By 1977 he had become vice-president, having used a series of postings to gain an education in the inner workings of the world's biggest stock market. In 1995, he became the first NYSE chairman to have risen from the ranks.

His eagerness to be chairman was reflected in the speed with which he started to turn the venerable institution on its head, in a relentless effort to shape it for the challenges posed by the Nasdaq - the automated marketplace of the internet age - and electronic trading systems.

Out went paper trading tickets; in came computers and technology investments, followed by the television cameras that eventually made the NYSE's trading floor and opening bell familiar to audiences of 20 networks worldwide.

Mr Grasso's star - and that of the NYSE - rose in line with the equity market of the late 1990s, silencing critics. His tireless public appearances promoting the NYSE earned him the title of "the public face of America's bull market" from the Economist.

In the aftermath of that bull market, the NYSE has held up better than the electronic rivals that were meant to bring it down. But latterly Mr Grasso's touch has seemed to desert him. The fact that he has had to launch an investigation into trading practices among the specialist firms on the NYSE floor is particularly galling for Mr Grasso, given the energy and effort the chairman had always put into defending the historic system.

The investigation has put him at odds with LaBranche, the largest specialist, which has challenged the NYSE's authority by refusing to hand over some e-mails, citing the privacy rights of its employees.

All this is taking place in a bear market in which the NYSE specialists and small brokers are barely making money.

Supporters and critics are unanimous on one point, however. The imperious and pugnacious Mr Grasso will undoubtedly try to tough out the controversy over his pay. Though there was plenty of muttering on Wall Street this week about the compensation package, it was significant that no leading figure was prepared to speak out against it in public.

That is a measure of Mr Grasso's continuing power. - (Financial Times Service)