Donaldson restored confidence in markets
NEW YORK — William Donaldson’s run as chairman of the Securities and Exchange Commission was absolutely crucial to restoring the independent agency’s power and prestige.
And through that effort he helped restore investors’ battered confidence in U.S. financial markets after a stock market bubble lost its air and a seemingly endless stream of corporate scandals came to light.
He wasn’t perfect, of course, and the restoration of investor confidence is a work in progress that will need to be carried on by others.
Donaldson, 73, announced Wednesday that he will resign as SEC chairman on June 30, wrapping up about 2½ years in the post.
It was an incredibly active period. Donaldson said it “may well be remembered as the most consequential and productive period in the commission’s history since its founding in 1934.”
But Donaldson’s biggest contributions were not limited to the concrete variety. They were his willingness to take on tough issues, to eschew political labels in the search for solutions, and to constantly remind those who toil in financial markets and atop public companies that ethical behavior is in their own, as well as everyone’s, interest.
And he did it all with a lot of class.
He maintained that class through some tough votes on the five-member commission in which he joined the two Democrats for three-two approvals of hedge-fund adviser registration and the insistence on independent chairmen for mutual funds.
“The image of us at one another’s throats is not correct,” Donaldson said in an interview in his Washington office last fall. He then cited the small percentage of SEC decisions that were not unanimous.
“It’s great when we all agree, but I think striving too hard for unanimity can result in mediocrity, or in things never getting done,” he said in that interview.
He showed a lot of class in dealing with the aggressive attorney general of New York, Eliot Spitzer.
Donaldson repeatedly stated how the SEC wanted to, and mostly did, work well with Spitzer. When they couldn’t agree, they parted company. One notable example was during the resolution of the mutual-fund late trading scandals, when Spitzer in at least one case insisted as part of a remedy that a family of mutual funds lower fees to investors.
Donaldson and the SEC wisely demurred, saying such fees needed to be set in the market, not by regulatory fiat.
He showed a lot of class when dealing with the business interests that claimed he was too aggressive a regulator and thumped since the November 2004 re-election of President George W. Bush for Donaldson’s replacement.
Donaldson simply said over and over that he served at the president’s pleasure, and his own, by which he said he meant he would stay as long as he thought he was being effective.
Donaldson never made a statement, though it would have been warranted, like that issued by a Spitzer spokesman quoted in the Financial Times about a business group that wanted to rein in the New York attorney general.
The SEC under Donaldson has a huge list of achievements. Enforcement was active. Long neglected issues such as market reform were acted upon. The mutual-fund industry was reformed after a series of scandals. Hedge-fund advisers will have to register with the agency.