Harvey Pitt may be gone, but what he left undone can't be forgotten
The perpetually embattled chairman of the Securities and Exchange Commission resigned on Election Night after 15 tumultuous months in office. Criticized for being too close to his former Wall Street clients, unable to build consensus, and arrogant to boot, he finally succumbed to criticism over his selection of William Webster to head the Public Company Accounting Oversight Board.
The leadership vacuum he leaves behind, however, especially coupled with the subsequent resignation of chief accountant Robert Herdman, could have a major impact on how regulatory reform is carried out. The SEC is charged with devising 24 sets of rules, completing six major studies, hiring 200 new employees, and reviewing one out of three filings by next year. By law, these duties must be fulfilled, says Greg Bruch, a partner at law firm Foley & Lardner, but the lack of a chairman could mean they are done in "a compromised way" that could lead to "more legal challenges and less public acceptance."
Georgetown law professor Donald C. Langevoort agrees that without a permanent chairman, "there will be little effort to be aggressive" on the rule-making side. And with the White House warning that finding a replacement could take months, don't be surprised, says Bruch, if other forces step in. "For corporations, not having an SEC chairman could mean more actions from the states," he says, citing as an example the campaign of New York State Attorney General Eliot Spitzer.
Retired judge Stanley Sporkin, who's been mentioned as a possible successor, speculates that the next chair might have it easier. Where Pitt was consumed by the accounting scandals and political upheaval, he says, his successor "will have time to study what went wrong and be proactive rather than reactive."
Not that he or she won't be busy. "There is so much the SEC has to do in regards to [the] Sarbanes-Oxley [Act of 2002]," says Dennis Beresford, professor of accounting at the University of Georgia, "that there will hardly be time to do anything else."