Board Makeup Hinges on Volcker Decision
The Securities and Exchange Commission’s selection of a new five-member board to police the accounting industry has been delayed as Paul A. Volcker, the former Federal Reserve chairman, considers whether to accept an offer to head the panel.
The SEC is waiting for a decision from 75-year-old Volcker before filling the other seats, said people familiar with the process. The board was created by Congress in July to help restore investor confidence shaken by accounting scandals at Enron Corp., WorldCom Inc. and other companies.
SEC commissioners have discussed the job with Volcker, who has concerns about the full-time hours and possible conflicts with his other activities, such as chairing the foundation that oversees the International Accounting Standards Board, which develops worldwide audit rules, sources said. Other top board candidates include NASD Vice Chairwoman Mary Schapiro and TIAA-CREF Chairman John Biggs, the sources said.
“It’s going to be full time, and will Paul Volcker go full time?” said Charles Elson, director of the University of Delaware’s Center for Corporate Governance. “It’s a position that requires you to drop everything you are doing.”
Through his secretary, Volcker declined to comment about his possible appointment. SEC Chairman Harvey L. Pitt and the other four commissioners all favor Volcker as board chairman, said people familiar with the selection process.
SEC spokeswoman Christi Harlan said the agency received about 350 recommendations and applications for board membership before a deadline for submissions on Sept. 2. She declined to comment on specific nominees.
Volcker, who was Federal Reserve chairman from 1979 to 1987, heads a commission examining whether Swiss banks destroyed proof of thousands of World War II-era accounts thought to belong to Holocaust survivors and victims.
Earlier this year, Volcker led an unsuccessful effort to separate Arthur Andersen from its consulting business and make other changes to stave off a criminal indictment of the accounting firm. Andersen was later convicted of obstructing an SEC investigation of its audit client Enron.
Volcker said the “sad demise” of Andersen, which involved allegations that the firm pulled punches in audits to get consulting contracts, was part of a larger problem afflicting the accounting industry. During congressional debate on the accounting scandals, Volcker endorsed audit oversight legislation sponsored by Sen. Paul S. Sarbanes (D-Md.).
The bill, passed by Congress, included a plan to create a five-member board with new powers to write and enforce accounting rules. President Bush signed the legislation in July.
The law, which calls for staggered five-year terms for the board members, stipulates that two members must have had experience as certified public accountants and the other three members must not have worked as CPAs. The chairman may not have practiced as an accountant for five years, the law says.
The law also says members cannot hold other jobs or engage in any other professional or business activity. In selecting the board, the SEC is to consult with the Federal Reserve and the Treasury secretary.
Other leading candidates for the five-member board include former California Public Employees’ Retirement System general counsel Kayla Gillan; Columbia University law professor Bevis Longstreth, an SEC commissioner under President Reagan; and Joel Seligman, dean of Washington University School of Law in St. Louis, said people familiar with the selection process.
Charles Bowsher, former head of the Public Oversight Board, is another top contender, the sources said, as is Donald Kirk, former chairman of the Financial Accounting Standards Board and former vice chairman of the Public Oversight Board.
