The New York Stock Exchange's (search) embattled board of directors could soon be very different — and much smaller — if a group of influential state officials get their way.

The officials, who played a key role in knocking Richard Grasso (search) off his perch at the top of the exchange last week, proposed an array of reforms for the exchange Wednesday, with New York Comptroller Alan Hevesi (search) leading the charge for the board to get much slimmer.

In a drive led by Hevesi, California Treasurer Phil Angelides (search) and North Carolina Treasurer Richard Moore, the group — which is responsible for nearly $600 billion of public pensive overhaul at the exchange.

The state officials called on the NYSE to shrink the size of its 27-member board, allow greater investor participation on the board, separate the exchange's regulatory and business arms, submit to an independent review and separate the positions of chief executive and chairman.

Hevesi told Reuters after the meeting that the changes would imply "a whole new board."

The group met with NYSE directors on Wednesday morning and presented its views in a report titled "Restoring the Public's Trust in the New York Stock Exchange."

Grasso quit last week in the wake of a firestorm of criticism over his $140 million compensation package. On Wednesday, Angelides said Grasso should give some of the money back.

"We sent a clear message that it's time to clear the air and restore the credibility of the New York Stock Exchange," Angelides told a news conference after meeting with 11 of the Big Board's directors.

"The saga of Richard Grasso is more than one man.... It is also about the breakdown of accountability by the New York Stock Exchange," he said. Without specifying an amount, Angelides said Grasso's pay should be revised to reflect a level that was "rational and appropriate."

Denise Nappier, Connecticut's state treasurer, said: "The culture at the Big Board is one that represents a profile of a private club with an old-boy network very much in place. That has got to change."

Hevesi said he was "encouraged" by the NYSE board members' response to the officials' proposals, and he said one director asked the states to "keep up the pressure on them."

He charged that the Securities and Exchange Commission (search) has historically fallen short in its role as the market's policeman and enforcer of regulations that protect investors.

He added that the current tempest buffeting the NYSE "is also a test of the SEC ... (and) I think they are going to deliver."

Hevesi was particularly critical of former SEC Chairman Harvey Pitt (search), who resigned under fire last year, saying that during his tenure the government watchdog did not provide sufficient oversight of the markets.

The exchange's response to the meeting was conciliatory. H. Carl McCall (search), lead director of the embattled board, said in a statement the gathering was "very constructive."

"It was clear that their interests are aligned with ours regarding governance issues at the exchange," added McCall, who is co-chairman with Leon Panetta of the NYSE's Special Committee on Governance.

McCall said he would discuss the meeting with John S. Reed (search), who was named interim NYSE chairman on Sunday. Reed, the former co-chief executive of Citigroup Inc. (C), is due to start at the NYSE next Tuesday. Hevesi said Reed did not participate in Wednesday's meeting.

In an interview with Bloomberg News, Reed said he supported the idea of shrinking the size of the board.

The SEC sounded a positive note on working with Reed in his new post at the exchange.

"Clearly, there are many views on how this process should proceed," SEC Chairman William Donaldson said in a statement. "We look forward to hearing those views and working with John as he helps the exchange to effect meaningful reform."

In a related development, Donaldson wrote to the nation's other stock exchanges seeking information on how much they pay their executives, an SEC spokesman said.

Donaldson's letter requested information on public representation on exchange boards, exchanges' processes for nominating directors, directors' committee assignments and public disclosure plans for this information, the spokesman said.

The letter — to the American, Pacific, Philadelphia, Boston and other exchanges, as well as the Nasdaq stock market — was sent "in light of recent events and increasing public demand for greater transparency," the spokesman said.