Washington is a strange town! The more you succeed, the more you attract enemies. If you outperform all prior occupants of your office, behave like a model gentleman, and achieve what no one thought possible, that will make you a political target, and, worse yet, attract the neurotic envy of all those you have outshone. If one individual among all U.S. financial regulators has earned world-wide respect in recent years—both for his brains and diplomacy—it has been James R. Doty, Chair of the Public Company Accounting Oversight Board (PCAOB).1 Guess what that means?
Yes, no good deed goes unpunished in contemporary Washington, and last week the Wall Street Journal quoted SEC Chair Mary Jo White saying that the SEC was “identifying” candidates to replace him.2 For weeks, there has been gossip that his enemies were organizing. Given that his term is up in October, such an announcement would usually be the signal for a Commissioner to quietly step aside. But Jim Doty does not want to go gently into the good night, and believes that the PCAOB and he have a number of important goals that they are on the verge of achieving. Also, he has the committed support of powerful allies in the institutional investor community and elsewhere. Finally, SEC Chair White has been publicly criticized by Sen. Elizabeth Warren for White’s alleged tendency to favor the status quo and side with the interests of the industry over those of investors. This case may prove the acid test for that critique. A decision by White to replace Doty could push Warren to seek the replacement of White (and force Hillary Clinton to “identify” a new SEC Chair if she is elected). At the least, White would have burnt her bridges to the investor community. The stakes then are high for all, as they are for the auditing industry and investors, as next explained.
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