December 19, 2007

The SEC’s “Non-Working” Day: Monday

We’ve received questions from a number of members related to the SEC’s declaration of Monday (Christmas Eve) as a “non-working day,” during which the EDGAR system will not be operational. Under the SEC’s rules, Form 8-Ks and other filings otherwise due on Monday are not due until the next business day, which is Wednesday.

The other common query is whether December 24 will be considered a “business day” for purposes of the 4-business day deadline? Since it’s a government-wide non working day, than I don’t think the SEC can treat it as a business day for 8-K purposes, similar to the mourning day for Gerald Ford earlier this year.

Proposed: A Major FASB Reorg

Yesterday, the Financial Accounting Foundation (the body that decides who will set accounting rules in the US) proposed an overhaul aimed at enabling the FASB to act faster while increasing the power of its chairman, Bob Herz. The proposals would reduce the size of the FASB to five members from seven (three members are stepping down soon) – and give the chairman the power to decide whether to place issues on the board’s agenda (it now takes a board vote to place an item on the agenda). The proposals would also involve changes in how the foundation’s trustees were chosen and would strengthen it to provide more oversight to the two accounting boards it oversees.

I am told that this is a precursor to ultimately merging the FASB and the IASB, shifting the US funding from the FASB to the IASB, and raising the question then as to who would be the next chairman of the IASB…

The SEC’s Squabble over PCAOB’s Board Member Salaries

Yesterday, during an open Commission meeting to approve the PCAOB’s budget, Commissioner Paul Atkins objected to the salaries of the five PCAOB Board Members and dissented (here is the meeting archive and the order approving the budget; here is a statement from Commissioner Atkins). Below is an excerpt from FEI’s “Financial Reporting Blog” (which recently was nicely restyled):

“As a matter of policy, the board salaries are disproportionately high,’ said Atkins, adding the rate of increase is higher than comparable rates. Although agreeing with PCAOB’s decision to de-couple use of FASB board salaries as a ‘benchmark’ rate, Atkins showed some slides at the meeting demonstrating why he thought PCAOB board salaries were still too high.

Atkins’ slides compared the $515,000 PCAOB board member’s salary (other than the chair) to that of the President of the United States, the Supreme Court Chief Justice, and CEO level salaries, showing it was higher than most all of those (if not all). He also stated the salary of the Chairman of the PCAOB exceeded that of the SEC commissioners, combined.

‘We have not found difficulty finding and retaining board candidates,’ Atkins said of the PCAOB board. He added “The level of [PCAOB] board salaries is out of synch with other prominent indviduals of integrity,’ who serve in prestigous government and private sector positions.

Commissioner Kathleen Casey also took the PCAOB to task over the level and rate of its salary increases, but she voted in favor of the budget.”

This is not a new bone of contention for the SEC. Board member salaries outsize the SEC’s Commissioner salaries by a magnitude of roughly 3x because when Congress adopted Section 101 of Sarbanes-Oxley – which established the PCAOB – it specified that the Board Member salaries should be set based on what was being paid in the private sector (and placed the SEC in the role of pay-setter; probably not a good idea in hindsight). This provision was designed to ensure that the PCAOB could attract and retain qualified people – and the most plausible benchmark is the level of a salary for an ‘above average’ partner from one of the Big 4.

– Broc Romanek