Six months after it was created by Congress, the new board overseeing the accounting profession -- the centerpiece of reform legislation after a year of corporate scandal -- held its first formal meeting on Thursday without a permanent chairman, a senior staff or a final budget.
During the meeting, the new board members voted themselves annual salaries of US$452,000, or US$52,000 more than the pay of the president. (Once it has a chairman, the board announced its intention to pay that official US$560,000.) They also ratified a lease to locate their Washington headquarters in the K Street space that was vacated by the accounting firm Arthur Andersen after it collapsed last year.
Their first decision was to reject a symbolic proposal by one board member, Kayla J. Gillan, to rotate the organization's own auditors every five years to assure their independence. Gillan, a former general counsel of a large California pension program, said she had raised the issue to make the new organization a model for public companies. But two other board members -- its acting chairman, Charles D. Niemeier, the former chief accountant for the Securities and Exchange Commission's enforcement division, and Daniel L. Goelzer, a former general counsel of the SEC -- strongly objected and said the issue required further study.
The board was formally introduced on Thursday by Harvey Pitt, who remains the chairman of the SEC despite resigning two months ago because of criticism over the selection of the new oversight agency. He continues to serve during one of the agency's busiest rule-making periods in history and plans to stay at the commission until the confirmation of William H. Donaldson, who has been selected to succeed him. That process could take months.
Pitt had chosen William H. Webster, the former director of the FBI and central intelligence, to head the oversight board over the objections of the two Democrats on the commission, who questioned his qualifications. Pitt resigned after failing to tell the other commissioners that Webster had headed the audit committee of a troubled company Webster also resigned after the disclosure of his former ties to the company. Without a new leader, the board has had serious difficulty recruiting senior staff members even though it is offering some of the best salaries for public service jobs in town, including US$425,000 to be the general counsel, US$250,000 to be the director of external communications, and US$300,000 to be the deputy director in charge of registration.
The board has been assigned the job of inspecting the auditors of the nation's publicly traded companies, in effect serving as the auditors of the auditors, as one member put it. It is supposed to write and enforce ethics rules and set standards for the profession.
The bumpy opening of the Public Company Accounting Oversight Board, as it is formally known, was largely unaddressed on Thursday, except for a brief comment by one member, Willis D. Gradison Jr., a retired member of Congress and former lobbyist for the health care industry, who tried to put the organization's difficulties in a positive light.
"While some pundits have described us as a star-crossed agency, I don't see it that way," Gradison said. "If anything, our rocky beginning has brought us closer together."
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