Securities and Exchange Commission Chairman William H. Donaldson announced yesterday that he will resign at the end of the month. President Bush appointed Mr. Donaldson in 2003 in reaction to the wave of hyper-publicized corporate scandals that resulted from the bursting of the stock market bubble in the early part of this decade. Here is the SEC press release on the resignation and an earlier post from late last year on concerns that business interests were expressing over Mr. Donaldson’s performance.
President Bush intends to nominate Republican California Congressman Christopher Cox to replace Mr. Donaldson. Representative Cox was a White House counsel during the Reagan administration and a corporate finance attorney with the law firm of Latham & Watkins. He is in Washington for being one of the Congressional leaders advocating repeal of inheritance and estate taxes.
Mr. Donaldson clearly alienated business interests during his two and a half years at the Commission. He was an advocate of hefty fines for corporate wrongdoers, registration of hedge fund advisers and a requirement that stock marketplaces always give investors the best possible price. Although it was enacted before he was appointed, Mr. Donaldson was the first SEC chairman who was required to deal with enforcement of the landmark Sarbanes-Oxley corporate reform law, which has been no picnic. Most business leaders have criticized the law as another costly governmental regulation of business. Finally, Mr. Donaldson was often at odds with his two fellow Republican commissioners as he increasingly sided with the commission’s two Democrat commissioners in pushing through controversial proposals.
However, the straw that broke the camel’s back was probably the disclosure last week of the Commission’s $48 million budget shortfall stemming from real-estate costs relating to its sparkling new building in Washington and a GAO audit report that found that the agency had failed to institute some of the same financial controls that it requires of public companies. Oops!
Update: Professor Oesterle over at the Business Law Prof Blog notes in this interesting post that the SEC’s abysmal handling of the increased costs resulting from Sarbanes-Oxley was the more than enough to justify Mr. Donaldson’s exit.