Saying that he is "terribly concerned" about staff morale, William Donaldson, the White House's nominee to head the Securities and Exchange Commission, promised to work with employees and their union to revitalize the troubled agency.
"The SEC staff is superb, with knowledge and commitment that are unsurpassed," Donaldson told the Senate Banking Committee at his Feb. 5 confirmation hearing. "The recent scandals have depleted their morale and taxed their resources like never before. If confirmed, I will work closely with the agency staff to enhance their sense of dedication and pride and restore the stature of the agency."
Exactly how Donaldson plans to do that is still an open question. When asked how he will motivate staff, the former Marine and investment banker offered few details other than saying he'll create a workplace where employees are free to express their opinions. He added that motivation comes from having quality work assignments and the freedom to pursue innovative ideas. Pay and benefits are also key factors in the agency's ability to attract and retain top-notch employees, he said.
The SEC's pay structure for attorneys and other professional employees pales in comparison with to the private sector and even similar federal agencies such as the Federal Deposit Insurance Corporation and the Treasury Department's Office of the Comptroller of the Currency. The agency and the National Employees Treasury Union, which represents 2,000 SEC workers, have been negotiating a pay parity system. After hitting an impasse last summer, the SEC implemented its own system. The union went to the Federal Service Impasses Panel to resolve the dispute. Last November, the panel ruled that the SEC can implement its system.
The agency is waiting for Congress to approve a fiscal 2003 omnibus appropriations bill before implementing a pay raise for employees. The president's fiscal 2004 budget proposes a 92 percent increase in the agency's budget. If enacted, the increased money would allow the agency to hire at least 710 new employees. The agency currently has 3,100 workers.
"Under the next chairman, the agency is facing extraordinary public expectations of its service to the nation-and the only way to meet those expectations is to treat employees fairly and with respect," said NTEU President Colleen Kelley. She called on the agency to work with the union to create a "fair and equitable pay parity system."
Donaldson also told the committee that he will vigorously enforce the 2002 Sarbanes-Oxley Act. Enacted in the wake of the Enron and WorldCom debacles, the legislation heaped a number of new oversight and rulemaking requirements on the SEC. The most immediate task is naming a chairman to the Public Accounting Oversight Board, which will oversee and discipline auditors. While its members are appointed by the SEC, it will function as a nonprofit corporation, funded by fees from publicly traded companies.
Several members of the committee told Donaldson that naming an independent chairman will be a major step in restoring public confidence in the market.
Senate Banking Committee Chairman Richard Shelby, R-Ala., also told the nominee: "It is time to put some fear into people. Wrongdoers have to fear you." It was an oblique reference to outgoing SEC Chairman Harvey Pitt who has been accused of being too soft on rule breakers.
A committee vote on Donaldson's nomination could come as early as next week. He is expected to sail through confirmation.