Pitt out, but who will even want to step in to helm of SEC?

Posted: Friday, November 08, 2002

NEW YORK (AP) -- Wanted: Experienced candidate to head regulatory agency. Must be able to cope with extreme pressure from government and private industry, withstand close public scrutiny, work with overburdened staff suffering from low morale, operate with limited budget.

Who would want this job, anyway?

Signing on to head the Securities and Exchange Commission right now is like stepping into a minefield. You're not sure what will happen next.

The vacancy is the result of chairman Harvey Pitt's resignation under pressure after a series of political missteps during his 14-month tenure that embarrassed the Bush White House just when it needed to boost investor confidence.

That was just the latest blow to an already shaky SEC, which has been on a bumpy ride for the last year.

Anyone who takes control now will find an organization under the gun. It won't be an easy place to walk into.

It is among the busiest times in the agency's 70-year history. Much of that has to do with all the business scandals it is investigating. When former Wall Street stars like Enron and WorldCom collapse, the SEC has to mobilize to sniff out other troubles that may be lurking in corporate America.

On top of that, its staff has been fully involved in the investigation of Wall Street investment firms that have been accused of all sorts of misdeeds, from issuing biased research to doling out stock offerings to preferred clients.

Also burdensome are added duties set forth in the Sarbanes-Oxley corporate reform bill, which was passed last summer. That includes setting up an accounting industry oversight board and more frequent reviews of corporate filings.

And all this work is being placed on an already stretched staff. Morale has been low, and it seems new things keep coming along to knock sentiment down even more.

There had been hope for a 77 percent budget increase that would bring the SEC's total funding up to $776 million. That gain, which was set forth in the Sarbanes-Oxley act, would allow the agency to significantly increase its work force.

But the White House has requested the amount be reduced to $567 million, and the matter is stalled in Congress.

Pitt's numerous troubles also haven't helped. Here was an agency working hard to boost investor trust, and it then found itself under fire for the chairman's maneuvering and mishaps.

Pitt's latest -- and last -- fumble came when he failed to tell fellow commissioners about a potential conflict of interest on William Webster's part before the panel voted last week to put him in charge of the accounting oversight board.

''Pitt is a smart guy, a competent guy, but why he did this, I don't know,'' said Paul Danos, dean of the Tuck School of Business at Dartmouth College. ''It seems to me that it was really a deadly blunder.''

The next chairman clearly has a full plate. The real question is whether all this will prevent strong candidates from even thinking about taking the job.

It could be a giant boost for the resume of anyone with an interest in politics and the public sector. But will the real heavy hitters, those who would be best for the agency and the country, put themselves in such a volatile environment?

The best candidate will be someone who isn't closely linked to Wall Street or the accounting industry. And forget any serious political ties. All that was part of Pitt's problem.

The candidate also needs to be a caretaker of sorts. He needs to rally the staff at the SEC and get investors on its side, too.

A showman wouldn't work, especially someone craving publicity. The new chairman's place in history should be how he got the SEC back in order during a time of chaos.

And anyone who signs on should get firm commitments from the president and Congress to beef up the SEC.

''You need resources and discretion to do this job right. And you need a pledge of relatively little political interference. That's very important,'' said Charles Yablon, director of the Samuel and Ronnie Heyman Center for Corporate Governance at the Benjamin N. Cardozo School of Law.

No one ever said leading the SEC was easy, even in good times. These are the toughest times.


Rachel Beck is the national business columnist for The Associated Press. Write to her at rbeck(at)ap.org

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