At the end of the month, Chairman William Donaldson will step down from his post at the SEC. Reports have it that Representative Christopher Cox will be his replacement.

What will the investing public get? We never know for sure at this stage of the game.

Consider Arthur Levitt Before his stint as SEC chairman, he was owner of Washington newspaper “Roll Call” and the chairman of the American Stock Exchange. He was widely expected to be a lapdog for the securities industry – and turned out to be a tougher regulator than anyone expected, although not tough enough when it came to backing the private investment trust on stock option expensing, as he admitted later.

Consider Harvey Pitt. Widely considered to be a brilliant lawyer, he had a tin ear for politics – and was most evident in his handling of the nomination of William Webster as the head of the Public Company Accounting Oversight Board. When he took the job, he was expected to be extremely competent when it came to securities law. His ties to the accounting industry hampered his effectiveness in the initial years of his tenure, and when the Enron hit the fan, he didn’t have much political capital to work with.

Look at Donaldson. Some folks say he didn’t do enough to be a good chairman; it’s actually amazing that given his pedigree – the “Donaldson” in Donaldson, Lufkin & Jenrette – that he was as tough a regulator as he was. Like Levitt, he was expected to be a securities industry lapdog – but wasn’t.

So – what’s to make of Cox? Let’s look at some of his communications. This excerpt from a press release in his website:

WASHINGTON, D.C. (October 3, 2000)-—House Policy Chairman Christopher Cox today introduced legislation that would delay for one year the proposed elimination of the “pooling of interests” method of accounting for mergers. The legislation, called the Financial Accounting for Intangibles Reexamination (FAIR) Act, provides that a final decision by the Financial Accounting Standards Board (FASB) must await the results of a comprehensive study of the appropriate methods of accounting for intangibles.

Support for putting FASB’s proposal on hold is bipartisan and bicameral. House cosponsors include: leading members on the Commerce Committee, which has oversight over the nation’s securities markets (full committee Chairman Tom Bliley, subcommittee Chairman Billy Tauzin, and Democratic Rep. Anna Eshoo); and Democrats and Republicans interested in preserving the growth of the Internet economy (David Dreier, Tom Davis, Bob Goodlatte, Jerry Weller, Cal Dooley and Jim Moran). In the Senate, Michigan Senator Spence Abraham—together with more than a dozen other Republicans and Democrats, including Vice Presidential candidate Joe Lieberman—is today sending a letter asking FASB to delay its proposal.”

And this communication, from the “Legislative Accomplishments” section of his website:

“The Almanac of American Politics specifically credits Rep. Cox’s efforts as a key reason for the Financial Accounting Standards Board’s decision in 1994 to abandon a proposed accounting change that would have hindered small and start-up companies’ ability to offer stock options as a way of attracting and retaining talented employees.”

Well, let’s just hope history does not repeat itself. And let’s hope it doesn’t rhyme either. Do the names “Anna Eshoo” and “David Dreier” ring a bell? They should. They’re the sponsors of the “Broad-based Stock Option Transparency Act” which would “defer” (read: kill) the implementation of FASB’s stock option expensing standard until a study is completed to determine its effects on the economy. Just like Cox’s 2000 bill to stall FASB from ending pooling until a study was completed.

In keeping with history, Cox is a co-sponsor of this bill, HR 913.

More Cox communications:

” From 1978 to 1986, he specialized in venture capital and corporate finance with the international law firm of Latham & Watkins, where he was the partner in charge of the Corporate Department in Orange County and a member of the firm’s national management.”

So let’s see: he was a California venture capitalist; he tried to stiff-arm FASB in the past when it came to pooling; and he’s already a co-sponsor of legislation designed to stiff-arm the FASB on stock options. Any questions?

It’s always possible that he’ll be a different man once he’s unshackled from the tyranny of seeking re-election. One can only hope.

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