The embattled board of the New York Stock Exchange (search) Friday named the head of an investment management firm to lead the search for a successor to departed chairman Richard Grasso (search).

BlackRock Inc. (BLK) Chairman Laurence Fink (search) will lead the search, a source familiar with the situation said shortly after a meeting of the exchange's board.

The board has been struggling to find a replacement for Grasso, who quit Wednesday amid a furor over his $140 million pay package, with several likely candidates saying they were not interested in the job.

The board is also trying to address concerns that conflicts of interest exist in a system where the conduct of the exchange and the pay of its top executives are influenced by the members the exchange regulates.

"It has to be fixed. There is obviously something wrong," said David E. Robbins, a securities lawyer and former director of compliance for the American Stock Exchange (search). "It's not just the payment to the chairman and CEO. It's the way they regulate themselves and serve their members."

The board is also considering whether to split the post of chairman and chief executive, whether the exchange should continue its regulatory role, and whether further departures from the board are necessary.

Also on Friday, Henry Paulson, chairman and chief executive of Goldman Sachs Group (GS), was pushing a plan to exclude securities firms that are listed on the exchange from having seats on its board, according to a person familiar with the proposal.

The proposal would affect executives of all NYSE-listed companies, but is aimed primarily at the financial services industry, the person said. Currently, securities firms represent 12 of the board's 27 members.

Some questioned whether the board will be able to significantly change its structure.

"This is the same board that approved (Grasso's contract) secretly so no one would know about it," Robbins said. "These shouldn't be the people making the decision on their future."

One board member, Viacom Inc. (VIA) President Mel Karmazin, said Friday he would step down from the board if there was pressure on him to resign, after he voted on Wednesday in support of Grasso.

He said he had supported Grasso's controversial $140 million compensation package because the ousted head of the exchange had exceeded all the targets set for him.

"Dick has been a great leader and he's done a terrific job and I'm sorry to see him leave," Karmazin told Reuters.

Another influential board member, Stan O'Neal, chief executive of Merrill Lynch & Co. (MER) and a recent addition to the board, favors a wide-ranging review of the NYSE, a source told Reuters on Friday.

O'Neal has not made public his views about Grasso's resignation, and a Merrill spokesman declined to do so.

While the world's No. 1 stock exchange would like to quickly appoint a new permanent head, whom the marketplace will trust, doing so is proving no easy task.

At a news conference Thursday, lead director H. Carl McCall (search) also said the board would consider an initial public offering of shares, which would separate the exchange's regulatory function from its market operations and improve public scrutiny of its workings.

McCall has been in charge of the board since Grasso quit.

Until a successor is found, day-to-day exchange operations are being run by co-Chief Operating Officers Robert Britz and Catherine Kinney, a pair of long-time Grasso loyalists.

McCall said he doesn't want the job.

Neither does William McDonough, the former president of the Federal Reserve Bank of New York (search), who now runs the Public Company Accounting Oversight Board (search).

Others in the "thanks, but no thanks" column are: ex-PaineWebber brokerage head Donald Marron, and former U.S. Treasury Secretary Robert Rubin, now chairman of Citigroup Inc.'s (C) executive committee.

Corporate lawyer Larry Sonsini, asked on Wednesday to take the job on an interim basis, turned it down.

On Friday, The New York Times said former Nasdaq Chairman Frank Zarb had also taken a pass on the opportunity.