A new agreement between the SEC and FASB gives the regulator greater say over future board candidates. Could that open a door for political interference in accounting standards?
With the holidays fast approaching at the end of 2001, Harvey Pitt, then chairman of the Securities and Exchange Commission, was presiding over a collapse in investor confidence. That fall Enron had imploded in one of the most spectacular finance scandals in memory, and it looked increasingly as though its auditor, Arthur Andersen, had been careless — or perhaps even complicit — in some of the energy company's most questionable dealings.
In the midst of this, Pitt recalls, the Financial Accounting Foundation (FAF) informed the SEC — by phone — that it had settled on a new nominee to replace Edmund Jenkins, the outgoing chairman of the Financial Accounting Standards Board. Pitt claims he cannot recall the candidate's name. However, it was probably G. Michael Crooch, then and now a FASB member, who confirms he was a candidate at the time. Like Jenkins, Crooch was a veteran of Arthur Andersen, and had succeeded Jenkins as head of the firm's professional-standards group.
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