An Accounting for the SEC

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Related stories: 10/25/02 As accounting woes spread, so do concerns about SEC

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The resignation of SEC Chairman Harvey Pitt, followed by the commission's chief accountant Robert K. Herdman, and then William Webster as head of the Public Company Accounting Oversight Board, reveals more about the charged atmosphere over regulation of companies than any particular missteps by those individuals.

For most of its 68 years, the SEC has quietly done its work with integrity, helping ensure that the US is a secure investment market for the world. But the financial scandals of the past year, starting with Enron, turned both corporate governance and government oversight into campaign and media fodder. Public distrust bred by the few big companies gone bad quickly became a Beltway battle to control the SEC.

Picking a new SEC chief and accounting board head could now be as difficult as choosing a Supreme Court justice unless party leaders realize that a weak economy and fumbling stock market require that they call a truce and work quietly and quickly together to stabilize the SEC.

Much of the correction needed in corporations, especially in accounting, has already been made by the pressure of investors and the integrity of company officials. The SEC can only work on the margins by setting down rules and then setting an example by prosecuting the worst offenders.

Still, the SEC needs to earn back public respect by having a chairman who is unsullied by either scandal or political pressure. It also needs to continue adding staff and to rethink its regulations to cope with new corporate behaviors.

That chairman then needs to select a new head of the accounting board who can carefully balance the profession's ability to police itself with government oversight that's tougher but not too heavy-handed.

Scandals are fodder for politics, yes, but elected officials can know when to stop being politicians and start being leaders.