The U.S. Securities and Exchange Commission is evaluating two former agency officials to fill the year-old vacancy at the top of the board that oversees auditors of public companies.
James R. Doty, who served as SEC general counsel from 1990 to 1992, and John J. Huber, who headed the agency’s corporation finance division in the 1980s, are the leading candidates to head the Public Company Accounting Oversight Board, said three people familiar with the matter who declined to be identified because the process isn’t public.
“We are now in the final steps of the selection process,” SEC Chairman Mary Schapiro said today at an American Institute of Certified Public Accountants conference in Washington. She didn’t identify candidates for the position.
The PCAOB, a privately funded nonprofit corporation created by the Sarbanes-Oxley Act in 2002, has operated without a full board since Mark W. Olson stepped down as chairman in 2009. Board member Daniel L. Goelzer has served as interim chairman and two others have served past the end of their terms while the panel withstood a legal challenge of its right to exist and questions about its effectiveness as a regulator.
“If you have somebody in there who is sort of an acting chair as opposed to a permanent chair, that person doesn’t feel as if they necessarily are fully charged with the responsibility of taking the leadership role,” said Olson, who called the search for his replacement critical to the PCAOB’s future.
PCAOB spokeswoman Colleen Brennan said her office can’t discuss candidates.
Huber, 62, has been advising companies on accounting issues as a law partner at Latham & Watkins LLP in Washington. Doty, 70, represents clients on SEC matters and counsels company directors on Sarbanes-Oxley rules as a partner at Baker Botts LLC. Neither responded to telephone calls seeking comment.
Schapiro told lawmakers at a congressional hearing in July that appointing a new PCAOB chairman in coming months was among her “highest priorities” and that she also was planning to appoint two new board members. A month earlier, the U.S. Supreme Court had upheld the PCAOB’s constitutionality in a 5-4 decision that expanded the SEC’s authority to hire and fire its members.
Board members Charles D. Niemeier, whose term expired more than two years ago, and Bill Gradison, whose appointment ended in October, are permitted to stay until they are replaced. Goelzer’s term ends next year.
“I understand that the appointment of the three new board members is a priority for the commission,” Goelzer said in an e-mail. “I am looking forward to having a full complement of board members to address the challenging issues we face.”
The SEC would be wise to fill the top post first, putting the new chairman in position to provide input on candidates for the other seats, said Olson, who is now co-chairman at Treliant Risk Advisors LLC, a Washington-based consulting firm.
“I’m sure that opportunity is not lost on the commission,” he said.
The PCAOB sets auditing standards for firms that certify the books of companies with U.S.-registered securities and is responsible for ensuring auditors comply with its rules. The board also has an enforcement division that can issue subpoenas and bring disciplinary actions against auditors.
Because Congress stipulated in creating the PCAOB that its salaries must be competitive with the private sector, pay for the panel’s five members far exceeds the norm for government service in Washington. The chairman earns $672,676, more than four times what Schapiro gets as SEC chairman. Board members get $546,891, exceeding President Barack Obama’s $400,000 salary.
The relatively high pay has been accompanied by complaints that the PCAOB is an ineffective and unaccountable regulator that has brought only 31 disciplinary actions since it was formed eight years ago.
Lynn E. Turner, a former SEC chief accountant who is a member of PCAOB advisory boards, said the panel has shown recent improvement that could be bolstered by new blood at the top.
“The PCAOB progress in recent months on significant issues of interest to investors has been good but is dependent on being able to successfully complete those projects under a new board,” Turner said.
According to a process outlined on the SEC website, the SEC chairman leads the search, taking nominations from the commissioners. A commission vote will then appoint the candidate.
The board currently counts 2,399 public accounting firms under its registration and has planned for a staff of 717 by the end of 2011. Its budget for that fiscal year, passed by the board on Nov. 23, will be $204.4 million if approved by the SEC.