Last summer, in the wake of the financial scandals that torpedoed U.S. investor confidence in Wall Street, Congress passed the Sarbanes-Oxley Act, a corporate-reform package. Included in that legislation was a new oversight body, the Public Company Accounting Oversight Board (PCAOB), a five-member board charged with setting and enforcing audit standards for public companies. But no sooner was the PCAOB created than it began to experience serious troubles. Harvey Pitt, then - Securities and Exchange Commission chairman, named former FBI and CIA chief William Webster to chair the new board. Less than a month later, amid news that Webster had overseen the audit committee at U.S. Technologies, a company embroiled in an accounting scandal of its own, Pitt and Webster resigned. Before leaving, Pitt named PCAOB board member Charles Niemeier, formerly the SEC's chief accountant in the enforcement division, to replace Webster as the board's acting chairman. (William H. Donaldson, the recently confirmed new chairman of the SEC, is expected to name a permanent chairman of the PCAOB.) Niemeier's task, as acting chairman, has been a daunting one: to get the board up and running, to navigate the choppy waters between Washington, DC and Wall Street, and to begin the process of restoring the public's confidence in corporate America. This month, Niemeier takes the hot seat.
Who is to blame for last year's series of accounting scandals?
There are those who want to blame the accountants. But the fact is, there's plenty of blame to go around. The investment bankers, the lawyers, management, and even, to a certain extent, investors helped cause the situation. We wanted to hear good news all the time. And companies were excited to comply, because otherwise, their stocks would plummet. We had companies saying that they brought in $100 million in sales when absolutely no improvement was made to their bottom line. There were a lot of breakdowns in the system.
Are financial scandals simply the price we pay for capitalism?
I don't think we'll eliminate scandal. What we have learned about the nature of fraud is that it hates the spotlight. It doesn't go away. It migrates to the shadows.
What kind of impact did these scandals have on the economy?
What the market hates more than anything is uncertainty. Misstatements created uncertainty in the market. And because of that, the market went down much further than it should have. The economy really didn't fall apart. There was still business activity. In fact, the economy still may have been growing through this whole phase.
Some have said that Sarbanes-Oxley does not go far enough. What do you think?
To those who say it doesn't go far enough, I say, No law can go far enough. It's the implementation that matters. I'm a believer that Sarbanes-Oxley was a dramatic change. But it's the start. It's not the fix forever.
What are some key things that the PCAOB can do to restore public trust?
Our mission is to protect investors by restoring confidence in the audit opinion and the continuing role of auditors. How are we going to do that? We want to put integrity back into the profession. It's not about what services you can sell. It's the audit opinion itself that's valuable.
Should people go to jail for committing white-collar crimes?
If someone walked into a bank and used a gun to rob it, no one would think twice about whether that person should go to jail. In some of these situations, the amount of money that was stolen far exceeds the amount a bank robber would get. Is it any less venal not to use a gun, but to use a pen? Is it any less sinister? Maybe it's more venal. Maybe it's more sinister. I believe that white-collar criminals are just as deserving of punishment as people who rob banks.
A version of this article appeared in the May 2003 issue of Fast Company magazine.