Kudos to the SEC

William Donaldson is off to a great start as chairman of the Securities & Exchange Commission. He hired well-respected ex-New York Federal Reserve chief William McDonough to run a new accounting oversight board. Donaldson publicly criticized Morgan Stanley (MWD ) Chief Executive Philip Purcell for dismissing the $1.4 billion settlement between regulators and 10 Wall Street firms as unimportant to investors (getting a public retraction and apology from Purcell). He also made sure that those financial firms and all other companies that pay big fines and penalties can't deduct them from their taxes or seek insurance repayments.

Now he is presiding over the SEC's decision to levy an unprecedented $500 million penalty on MCI (MCWEQ ) formerly WorldCom, that will go to defrauded shareholders. Donaldson is taking the SEC's task of cleaning up corporate fraud very seriously.

We wish Congress would do the same instead of trying to roll back reforms. Republicans and Democrats representing Silicon Valley are pressing the Financial Accounting Standards Board (FASB) to delay adopting new rules that would expense stock options. They did the same thing 10 years ago and succeeded. They shouldn't this time around.

High-tech companies can make a reasonable case that stock options should not be expensed because they are an important employee incentive in their fast-paced world. But the proper arena to make that argument is FASB, not Congress. Politicians shouldn't muck around in accounting, especially after the accounting scandals at WorldCom, Tyco International (TYC ), Qwest Communications (Q ) HealthSouth (HRC ), Waste Management (WMI ) and many other corporations.

So kudos to Donaldson and the SEC for doing a terrific job -- and catcalls for Congress for not.

    Before it's here, it's on the Bloomberg Terminal.