How much pay is too much for a good watchdog? For critics of the new Public Company Accounting Oversight Board (PCAOB), $452,000--the salary four board members voted themselves on Jan. 9--is. The chair, who is yet to be named, will draw $556,000. That easily tops George W. Bush's $400,000 and is more than three times the $142,500 the head of the Securities & Exchange Commission makes. No wonder they're drawing fire. "Financial regulators are vastly underpaid," says Paul C. Light, founder of the Brookings Institution's Center for Public Service, "but [$452,000] is double the fair level for public service."
But with watchdogs, you get what you pay for--and if the oversight board meets its challenges, those rich salaries will be justified. The senators who designed the board as part of last year's Sarbanes-Oxley Act authorized high pay to draw top talent. The pay matches that of the Financial Accounting Standards Board, another private-sector nonprofit under the SEC.
The board, which is charged with reining in the traditionally potent accounting lobby and restoring investors' faith in financial statements, requires as much toughness, independence, and political savvy as any Cabinet post--without the glory. Remember, until he declined, former Federal Reserve Chairman Paul A. Volcker was everyone's top pick to head the PCAOB. For that type of talent, public companies--who will pay fees to support the board--must ante up. Sure, Volcker and others often serve government for low pay. But they tend to leave their posts quickly. Top salaries will allow longer tenures, slowing the spinning door between agencies and industry.
In return, investors should demand the best. The board must write stricter auditing rules and impose brutally honest reviews on accounting firms. That would make it priceless.
By Mike McNamee in Washington