Posted on: Friday, June 3, 2005

Reaction to new SEC chief mixed

By William Neikirk
Chicago Tribune

WASHINGTON — President Bush nominated conservative Rep. Christopher Cox as chairman of the Securities and Exchange Commission yesterday, prompting speculation that the agency would take a more pro-business approach after it battled financial scandals at Enron Corp., WorldCom Inc. and other companies in recent years.

Business organizations praised Bush's selection of the California Republican and said they expected that he would focus more on regulatory reform rather than on the enforcement and stiffer rules that characterized the turbulent reign of departing Chairman William Donaldson.

Critics said they feared that Cox would pull back from aggressive SEC enforcement, which has resulted in big fines for some of America's largest companies in recent years and in tougher accounting and corporate governance regulations.

"I think we're going to see something of a U-turn," said John Coffee, law professor and securities regulation expert at Columbia University. "The moment you lay off the night watchman, the greater is the likelihood you will have more Enrons and WorldComs."

At the same time, Coffee called it a "formidable appointment" and said Cox, a former corporate lawyer, is "well-versed in finance and law."

In naming Cox, the president called him a "champion of the free enterprise system" who would become "an outstanding leader of the SEC."

Bush said Donaldson, a former Wall Street official, "has done an exceptional job" in helping restore investor confidence in the wake of corporate scandals. The president said Donaldson "took this post as our economy was faced with a crisis in investment."

The U.S. Chamber of Commerce hailed the choice. David Hirschmann, senior vice president for the chamber, said Donaldson was brought in to handle a crisis in financial markets triggered by scandal.

Now that these scandals have dissipated, he said the organization is hoping Cox will balance enforcement efforts with modernizing rules and regulations affecting corporate America that would foster investment and growth. The business community feels some of these rules have hampered its competitiveness, Hirschmann said.

Cox, 52, a low-key but ambitious lawmaker who holds joint graduate degrees in business and law from Harvard, would bring a strong pro-business attitude to the SEC.

He worked as a senior associate counsel in Ronald Reagan's White House and won election to Congress in 1988. Twice he considered running for speaker of the House, but he dropped out each time when support did not materialize.

In 1995, he led a drive to pass a bill over President Bill Clinton's veto that made it more difficult for shareholders to file class-action suits and limited what investors could collect in case of corporate bankruptcies. It was one of only two bills that became law over Clinton's veto.

Barbara Roper, director of investor protection for the Consumer Federation of America, said the measure "was one of the factors that contributed to the recent spate of accounting scandals, in that it was easier for auditors to turn a blind eye to fraud" since their liability was reduced by the law.

But Roper added that it was too early to pass judgment on the kind of chairman Cox would be at the five-member SEC. She said Donaldson "has proven to be quite an effective advocate for investors" even though he appeared to be too pro-business when he was named to the job.