You wouldn't trust a general who'd never seen war to lead an army into battle, or a defensive end to quarterback your football team. The Securities and Exchange Commission, however, has given over its new accounting oversight committee to a man with no recent experience in the troubled world of corporate accounting.
In response to scandals at Enron and WorldCom, Sen. Paul S. Sarbanes (D-MD), the Senate Banking Committee chairman, sponsored a bill calling for an independent organization to review and regulate corporate auditing practices. The SEC was charged with appointing a five-member board to oversee the new committee. Its choice of chairman is not only a bad one, it is also creating a controversy that is making things even worse.
The SEC's appointee is William Webster, former head of both the CIA and the FBI. There can be little doubt that Webster is a capable administrator; he took charge of an FBI still tarnished, in the public eye, by the Watergate affair and a CIA in the midst of the Iran-contra scandal.
He does not, however, have much experience with corporate accounting, a fact which concerns members of the SEC, Sarbanes and many on Wall Street. Webster's lack of experience, coupled with the controversy surrounding his appointment, should also concern investors interested in timely and significant changes to current auditing practice.
Webster admits that he has less knowledge than one might hope when it comes to corporate accounting. That begs the question: why would Webster accept the post knowing that he does not have a full knowledge and does not have the support even of the entire SEC? In a prepared statement, Webster explained, "Whatever expertise in specific areas we may lack or need among ourselves, we can or will obtain and utilize from others as our charter clearly contemplates" ("Government go-to guy," The Washington Post, Oct. 26). This from the man now responsible for eliciting straight answers from accountants and auditors? That's unsettling.
The SEC usually acts unanimously. This appointment, however, has prompted adamant dissent from within the five-member commission. Still more troubling, the commission has split itself along party lines. What was billed as a bi-partisan effort to reform corporate America has dissolved into a partisan squabble. The two Democrats on the commission did not vote for Webster and do not support his appointment. Instead, they support John Biggs, and say that the SEC's chair, Harvey Pitt, supported him too, until that choice came under fire from the accounting community and its lobbyists.
Biggs is described in a New York Times editorial as one who has "long been critical of accounting gimmicks and auditors' conflicts of interest" ("Judge Webster, miscast," Oct. 26). Throughout September, Biggs was expected to be the commission's unanimous appointment. Failure to appoint him has led to at least the appearance, if not also the reality, of an SEC commissioner unwilling to stand up to pressure from corporate lobbyists who feared that Biggs' reform would be too zealous for their taste.
As a result, Sen. Sarbanes has joined the growing chorus calling for Pitt's resignation. "He has eroded credibility and he has detracted rather than contributed to investor confidence. The country would best be served if he stepped down as chairman of the SEC" ("Divided SEC picks watchdog for accounting," The New York Times, Oct. 25).
The partisan schism on this issue and the doubt it raises over the Republican and White House commitment to reform will do nothing to help Webster, already in possession of a limited knowledge of the topic, to build an effective committee.
The new committee's role is two-fold. First and foremost it is responsible for policing and actively reforming the accounting and auditing practices of an industry which wishes to maintain the status quo. Second, and possibly more importantly in economic terms, it will be the key to restoring investor confidence. That second function already has been damaged, possibly irreparably, by the tumult surrounding Webster's appointment.
Rebuilding the public's trust in corporate bookkeeping and public reporting is an enormous task. The new committee would, even under the best circumstances, have to prove that it is making headway despite the strict privacy guidelines dictated by the law. It now also will have to win over a skeptical Wall Street crowd and a disgruntled Democratic party if it hopes even to reach the public at large.
(Megan Moyer's column appears Wednesdays in The Cavalier Daily.
She can be reached at mmoyer@
cavalierdaily.com.)
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