SEC chief asks corporations to act ethically


Published: Saturday, March 1, 2003 at 6:01 a.m.
Last Modified: Friday, February 28, 2003 at 10:43 p.m.
WASHINGTON - The new chairman of the Securities and Exchange Commission is challenging American corporations to behave more ethically than the law requires to help restore investors' trust.
In his first speech since taking office, Wall Street veteran William H. Donaldson also said Friday that a reshaped SEC will have to act like the Marines to respond to a fast-changing financial world.
". . . The U.S. military has had to evolve into a much more efficient force - quicker, more agile and more proactive," said Donaldson, who was a rifle platoon commander in the Marine Corps in the early 1950s. "My hope is that the SEC can develop a similar new approach to our mission - that we can play offense more often, be more proactive and anticipate the problems we may face."
Donaldson, an investment banker, former chairman of the New York Stock Exchange and Bush family friend, was named by President Bush to replace Harvey Pitt - who resigned under pressure in early November but remained as a lame-duck chairman until Donaldson assumed the job on Feb. 18.
Bush has promised that Donaldson will lead "an active and energetic agency" to rebuild investor confidence shattered by last year's wave of corporate scandals that started with the collapse of Enron. The SEC's budget has nearly doubled in response to the scandals and an array of new rules for company officials, directors, accountants and stock analysts have been put in place to combat fraud.
His first public act as SEC chairman, on Tuesday, was standing with Attorney General John Ashcroft at a news conference announcing the government's criminal and civil charges against eight former and current executives of Qwest Communications International for alleged accounting fraud.
Donaldson did not use Friday's speech, to an attorneys' conference, to announce any new initiatives. Only about 10 days into the job, he has been meeting with SEC staff and others. He had a "get-acquainted" meeting Thursday, for example, with New York Attorney General Eliot Spitzer, who led a recent crackdown on abuses by Wall Street investment firms.
At his Senate confirmation hearing, Donaldson expressed only qualified approval of the move by state law-enforcement officials. He termed it "constructive up to a point" as a supplement to SEC enforcement efforts, but said state officials should take care not to intrude on the federal agency's turf.
"Corporate America and Wall Street have been given a wake-up call and told that things must change," he said in the speech.
For trust to be restored, Donaldson said, investors must see companies "shift from constantly searching for loopholes and skating up to the line of legally acceptable behavior."
Company officials "will have to make a conscious decision that ethics and integrity should be at the heart of every business decision," he said. "They will have to decide that the limits of the law are not the only way to determine what's right and wrong."
An SEC review has found, meanwhile, that despite pressure for greater disclosure to investors by companies, many of the largest U.S. corporations have not made their financial reports sufficiently clear and accurate.
By failing to disclose their key accounting policies, many companies make it harder for investors to understand revenue figures, special charges, tax liabilities and other aspects of their finances, the review found.
-- On the Net: Securities and Exchange Commission: http://www.sec.gov

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