Oft-criticized SEC chief announces his resignation


CHICAGO -- William H. Donaldson, who was widely expected to be a caretaker but ended up criticized for his activism, announced yesterday that he would resign as chairman of the Securities and Exchange Commission on June 30.

"This has been ... a really interesting and productive period. I think that we have made great progress," said Donaldson, 74, who took office in February 2003 after the tumultuous reign of Harvey L. Pitt.

The White House did not identify a potential successor. But the Associated Press reported that Republican officials, who spoke on condition of anonymity, say President Bush intends to nominate Rep. Christopher Cox of California as early as today. Cox, who serves as chairman of the Homeland Security Committee, was first elected to Congress in 1988.

Cox has been a longtime advocate of repealing the estate tax, the capital gains tax on savings and investment, and taxes on dividends. He also has supported banning taxes on Internet commerce.

Donaldson came to the SEC at a critical time in many ways, as the scandals surrounding Enron Corp., WorldCom Inc. and others rocked the corporate landscape. Pitt's tenure ended with his resignation amid controversy over the handling of the nomination of the first head of the accounting oversight board.

Many experts predicted Donaldson, a Wall Street veteran and former head of the New York Stock Exchange, would steady the commission, but few expected him to make waves.

But Donaldson aligned several times with the commission's two Democrats to push through an ambitious agenda, including breaking with fellow Republicans to require mutual funds to have independent chairmen; to have hedge funds register with the SEC for the first time; and to adopt the so-called trade-through rule that guarantees investors the best price on stock trades, sometimes at the expense of speed.

He said those disputes "had nothing to do with my intention to resign."

Donaldson frequently incurred the wrath of corporate America, which thought his efforts went too far. The U.S. Chamber of Commerce, for example, has sued to have the independent mutual funds chairmen requirement overturned.

Yesterday, chamber officials suggested a change in approach was necessary.

"His successor will need to focus on ensuring the future competitiveness of our markets. We must have markets where good ideas are rewarded, where entrepreneurs can take risks and create wealth and prosperity for the economy," said chamber chief executive Thomas Donohue. "We need modern, effective regulations that foster innovation and growth."

Businesses also howled about Donaldson's proposal to allow investors, under limited circumstances, access to corporate proxy statements to nominate directors to run in contested elections.

That effort has languished for months and is widely seen as dead. That has drawn intense criticism from shareholder activists, including California Treasurer Phil Angelides, who complained that Donaldson "retreated from his proposal to give shareholders -- the true owners of companies -- the basic right to nominate candidates for corporate boards of directors."

Elsewhere, Donaldson received warm praise.

Rep. Michael Oxley, an Ohio Republican and the co-author of the Sarbanes-Oxley corporate governance law, praised Donaldson as "a tireless advocate for investor protection," saying, "He will be remembered well for helping to restore investor confidence in the markets."

Columbia University securities law Professor John Coffee said he considered Donaldson to be effective at compromise.

"In general, I see him as a pragmatic reformer, but not as a true activist," he said.

Like Coffee, Roberta Karmel, a former SEC commissioner who is now a professor at the Brooklyn Law School, said one of Donaldson's key accomplishments was to bolster the commission's image.

"I think that he did a great deal to restore the SEC's reputation as a vigorous enforcement agency after some of the problems that the commission had when Harvey Pitt was chairman," she said.

Although Donaldson in a news conference played down the number of nonunanimous votes, Karmel expressed concern about the 3-2 splits on several key issues.

"Somehow, it just seems like it's becoming more and more acrimonious. ... It has never been that politicized at the SEC in the past," she said. "Hopefully, it will become a little more collegial again. I think it's important, but I don't blame Bill Donaldson for that."

Randall Kroszner, a professor of economics at the University of Chicago's Graduate School of Business, said Donaldson arrived at a time of great stress amid all the corporate scandals but said it's too early to fully assess his tenure.

"Certainly, this was one of the most challenging times to be heading something like the SEC, really since it was founded," he said.

Donaldson's resignation will lead to significant turnover at the SEC. Democrat Harvey Goldschmid has said he intends to leave this summer to return to teaching. The term of the other Democrat, Roel Campos, expires Sunday, though he can remain in office for several months until he is renominated or a replacement is selected.

The Chicago Tribune is a Tribune Publishing newspaper.

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