With executive pay packages under increased scrutiny after recent scandals, the Securities and Exchange Commission (SEC) is looking into the compensation of Richard A. Grasso, chairman of the New York Stock Exchange.

The NYSE claims it will save about $3.5 million this year by paying out a lump sum of $140 million to Grasso in the form of accrued savings and incentives. This was on top of his base salary of $1.4 million and a bonus of at least $1 million.

The lump sum payment was tied to the renegotiation and extension of Grasso’s contract and directors defend the payment by saying that it would save on as much as $10 million more in interest that would have accrued by the time the original contract expired in 2005.

Despite this, the SEC Chairman William Donaldson wrote to NYSE Director H. Carl McCall, who is also head of the exchange's Human Resources and Compensation committee, saying that approval of Grasso’s pay package “raises serious questions regarding the effectiveness of the NYSE's current governance structure.”

Donaldson, the former head of the NYSE, asked that a list of questions about Grasso's pay package be answered by Sept. 9.

This is the first time the NYSE has disclosed the details of its chief executive’s pay package and the payment has raised eyebrows since in comparison Donaldson makes just $142,500, and Federal Reserve Chairman Alan Greenspan earns about $172,000 a year.

The New York Times said Donaldson was “unusually blunt” in his letter to McCall, taking aim at the pace of the NYSE’s reforms. “I am especially concerned that the pay package was awarded before the exchange completed its governance review, which has been pending since March,” Donaldson wrote.