We’ve got quite a week of compliance and governance news coming up this week, folks. I can’t recall the last time we’ve seen so many different stars in our particular universe align, so perhaps it’s worth drafting a scorecard for the week:

Shareholder activism and disclosure. Remember that investor advisory committee the Securities and Exchange Commission formed last year? Neither did I, so I was pleasantly surprised to see that the committee will hold its third meeting ever on Monday. On the agenda are reports from various sub-committees—including the “Investor as Owner Subcommittee,” which plans to give its views about Regulation Fair Disclosure, as well as reports on plans for environmental, social, and governance disclosure and on financial reform legislation. Hmmm.

Typically the recommendations that these SEC advisory committees make do carry some influence, and SEC Commissioner Luis Aguilar has already hinted that the Commissioner has big ideas for disclosure at least as it pertains to climate change, which is a stone’s throw from the “ESG” disclosure this committee will discuss. So whatever these people are doing is worth watching.

Bank of America smackdown. Sometime this week—possibly as soon as Monday—federal judge Jed Rakoff should make a ruling in the SEC’s proposed enforcement action against Bank of America. I say “should” because at almost every turn, Rakoff has told the SEC to re-check its homework: draw up stronger sanctions against BofA, provide more evidence, and so forth. What was originally a $33 million settlement reached last year was reborn into a $150 million settlement replete with a raft of governance reforms, and should be great fodder for the next season of “Damages.” Probably it will reach a conclusion Monday. Personally I hope not, because it’s the best governance spat going.

Aside from the obvious implications for Bank of America, the rest of the corporate world should watch this settlement to see just how far other parties can push enforcement settlements. The SEC’s new proposal forces governance reforms such as a say-on-pay vote for shareholders, “super-independence” for the board’s compensation committee, and CEO certification that he has reviewed all information in the proxy statement. And the SEC has proposed those reforms because Rakoff told the agency last year to impose stronger sanctions against BofA. If Bank of America becomes an indicator of enforcement actions yet to come, Corporate America could be in for a rough time.

IFRS! IFRS! We pivot back to the SEC for more news on Wednesday, when the commissioners will hold an open meeting to discuss their latest thinking on adopting International Financial Reporting Standards in the United States. The meeting notice is rather cryptic: the SEC will consider “whether to publish a statement regarding its continued support for a single-set of high-quality globally accepted accounting standards and its ongoing consideration of incorporating IFRS into the financial reporting system for U.S. issuers.” You don’t get much more vague than that.

I suspect the underlying goal will be to dial back expectations that the Commission will move ahead with adoption as originally envisioned in the IFRS roadmap proposed in 2008. That plan called for the Commission to decide in 2011 on whether to require IFRS adoption by 2014, and to allow a select group of large filers to experiment with filing in IFRS as soon as this year. Since then, however, the economy crashed and the SEC has had more pressing issues on its calendar. The select group of large filers who might volunteer to try IFRS conversion never materialized. And the Financial Accounting Standards Board and the International Accounting Standards Board, which keep promising to converge U.S. and international accounting rules by June 2011, still have a huge volume of work in front of them. All that makes speedy progress on IFRS adoption unlikely.

Regulatory reform. Christopher Dodd, chairman of the Senate Banking Committee, may unveil his latest proposal for reforming financial regulation and corporate governance this week. Precisely when this may happen is unknown, but news broke last week that Dodd and the Obama Administration have reached an agreement on creating a “council of regulators” to monitor systemic financial risks rather than one supra-agency. The chairman of the this council would be the treasury secretary, and the vice-chair the head of the Federal Reserve.

Compliance officers should remember several points here. First, a regulator of systemic risk isn’t the major sticking point with the Senate legislation; a consumer financial protection agency is. Dodd’s last proposal died a quick death in November from lack of interest and any hint of Republican support. He has made significant efforts to win support of committee Republicans this time around, but the party as a whole implacably opposes any hint of larger government, which a financial protection agency clearly is. So don’t be surprised if this new bill quickly sinks into the usual Senate quagmire, too.

Second, all this talk of Senate hang-ups over risk regulators still ignores the already-passed House bill, and its provisions to exempt small filers from compliance with Section 404(b) of the Sarbanes-Oxley Act. That 404(b) exemption was not in the first Dodd bill; we’re waiting to see whether it will be in the second one. Either way, reform legislation is still a long, long way from success—and 404(b) compliance goes into effect for small filers on June 15 of this year. As I’ve warned previously, any non-accelerated filer betting that Congress will deliver a permanent 404(b) exemption before that deadline does so at his peril.

The other day I pondered whether the improbable ascendancy of Sen. Scott Brown, R-Mass., might delay or otherwise thwart Democrats’ plans to overhaul financial regulation. Let’s not forget one other niche of corporate compliance where Brown’s arrival as the 41st Republican senator might have serious consequences.

He might allow the dreaded Section 404(b) of Sarbanes-Oxley to take effect on small filers, at long last.

Think about it: Last fall the Securities and Exchange Commission gave non-accelerated filers a final warning that compliance with Section 404(b), which requires public companies to get an outside auditor’s review of internal controls, must start with annual reports filed for fiscal years ending on or after June 15, 2010, period. The House of Representatives then passed its massive regulatory overhaul bill in December, specifically exempting non-accelerated filers from Section 404(b) permanently. For that exemption to become law, however, it must be included in regulatory overhaul legislation approved by the Senate—and Brown’s arrival has just made passage of Senate legislation much less likely.

The Senate’s reform legislation nominally exists as a draft bill circulated by Christopher Dodd, chairman of the Senate Banking Committee. That bill doesn’t even include a Section 404(b) exemption, and it’s been pretty much dead since Dodd unveiled it in November anyway. All indicators are that the Senate will spend its time bickering over curbs to the power of the Federal Reserve and whether to include creation of a Consumer Financial Protection Agency in the bill, not a Section 404(b) exemption. With Brown giving the Republicans the power to filibuster any final bill, and Dodd able to stand his ground since he’s not seeking re-election, we can all expect that bickering to take lots of time.

Like, say, beyond the June 15 compliance deadline set by the SEC that’s still tick-tocking away. At the Securities Regulation Institute annual conference I’ve been attending this week, several speakers guessed that reform legislation might not happen this year at all.

After all, even if a Section 404(b) exemption gets inserted into the bill, and Republicans settle their differences with Dodd, and the Senate reconciles its bill with the House bill, and the 404(b) exemption survives that process, and both chambers then vote in favor of the full bill, and the president signs it into law—all this assumes Washington doesn’t have other demands on its time, like starting over with healthcare legislation, or cutting the deficit, or running for re-election.

This makes me wonder whether the SEC might end up granting another extension on compliance after all. Yes, that would be a huge turnaround from its previous statements; Chairman Mary Schapiro clearly wants to extend Section 404(b) to all filers and move on with life, as do her two fellow Democratic appointees to the Commission. But consider a world where non-accelerated filers must cough up auditors’ attestations about internal controls for some reporting periods (which they’ll flunk anyway, since none of them have been preparing for it), and then that requirement goes away after Congress finally does pass an exemption. How do investors determine that disclosed weaknesses in internal controls were ever resolved?

Let’s take it one step further. What if a permanent exemption arrives on Oct. 1, say, and some filers have made 404(b) disclosures but others dodged the bullet? Could that latter group ever compare itself to companies in the former, since they now have different standards of scrutiny over their internal controls? What if there’s a restatement, and the lawsuits start flying? I’d welcome any guesses from securities lawyers out there who think about these things.

Of course, this might all be much ado about nothing, if the Senate moves forward on reform promptly. But as Republicans have been gleefully noting these last two days, now that Scott Brown is with them, they can stop anything from moving forward at all.

Well, that was quite a political curveball Massachusetts threw yesterday.

Scott Brown’s startling victory in the special U.S. Senate race should, in truth, startle very few people. Compliance Week is based in Massachusetts and I personally have lived here almost my entire life, so first let me dispel a few notions about why Republicans captured such a vital political prize. Then we can move on to what his arrival in the Senate means for the future of regulatory reform.

Brown won simply because the Democratic nominee, Martha Coakley, could not campaign her way out of a paper bag. She rarely advertised (until it was too late), and rarely met actual voters (until too many of them began drifting towards Brown). Coakley also never faced a serious battle in her previous runs for lower office. Her first campaign was for a local district attorney’s seat, and nobody ever cares about those races; her second was to run for state attorney general in 2006, when she faced token opposition and bounced into office along with the formerly popular Gov. Deval Patrick. But real, spirited Republican opposition? She’d never seen that until about three weeks ago.

Brown, on the other hand, flip-flopped from his previous opposition to abortion rights and gay rights, as well as from his previous support for the Massachusetts healthcare law that’s the model for what he wants to kill in the Senate. Yes, he happened to ride a wave of voter dismay at high taxes to victory. But any Democrat with a modicum of political sense and money—and we do have a few here—could have pasted Brown like the waffling piece of wallpaper he is. Anyone else who believes his victory is a shining star announcing the rebirth of Republican ideology clearly isn’t from here.

Now, how will the arrival of the 41^st Republican senator affect regulatory reform in Washington? I can immediately see two consequences.

First, we still have the matter of a regulatory reform bill kicking around the Senate Banking Committee. The committee chairman, Christopher Dodd, has said he wanted to craft a bill in collaboration with the Republicans on the committee, rather than see yet another major piece of legislation passed only by Democrats. Well, now that’s not just political posturing—he and the Democratic leaders do need Republican support for a final bill, period. Dodd allegedly has already been reconsidering the wisdom of a Consumer Financial Protection Agency akin to what’s in the House bill, and Republicans have been stirring up opposition to the CFPA as yet another bloated regulatory agency that will only harm the taxpaying public. If the Dodd had to give one big concession to get Republican support, killing the CFPA would be a good way to do it.

I also wonder about the idea of allowing the Securities and Exchange Commission to be self-funding. The current Senate bill does contain that provision; the House bill does not, but does give the SEC huge budget increases from now to 2015. I can’t imagine conservatives would be thrilled with an empowered and emboldened SEC either, but self-funding does save tax dollars.

(By the way, Brown has not served on any committees in the Massachusetts State Senate related to banking or finance, so I suspect we won’t see him end up on the Banking Committee.)

Second, there’s a small but steady buzz by nattering nabobs of the media about the fate of Treasury Secretary Timothy Geithner. He looks increasingly bad in how he handled federal guarantees to banks looking to collect on the debts that put AIG into receivership, and the nabobs have begun wondering when Geithner will resign. Forty-one Republican senators makes the calculus of a Geither resignation more complicated. If Geithner leaves, the Obama Administration will need to kow-tow to the pitchfork political climate currently sweeping the GOP, and Wall Street isn’t popular right now anyway. I’d expect a replacement with big plans to knock some heads in the financial sector. Those plans will fail (as all plans to knock Wall Street heads do), and Corporate America will get nothing but a big dollop of frustration, failure and uncertainty.

Well, Compliance Week seems to have touched a nerve with news of the latest speaker for our annual conference this spring: Congressman Barney Frank.

As some of you might have seen already, earlier this week we sent out a mass email announcing that Frank, chairman of the House Financial Services Committee, will be the keynote speaker at our conference (May 24-26, in Washington, D.C.). We consider this good news. Corporate compliance officers, internal auditors, financial reporting executives and boards of directors are all awaiting a tectonic overhaul of corporate governance in this country. Since Frank is, you know, the person pushing the legislation through Congress, we decided it would be useful to give Compliance Week readers a chance to hear his thoughts on the matter and ask him a few questions.

Most of you seem to understand that logic. A vocal minority, however, opened the e-floodgates and fired off the usual denunciations of Frank as a liberal windbag. One bitter gem of an example:

Barney Frank is a despicable liar who puts self-interest before the country’s best interest. He will be tossed out on his ear in November, so I personally think he is a waste of your good money—and mine. I am disappointed with your choice of keynote speaker, and I will not be attending. I’ll also have to seriously weigh my subscription options next time it rolls around.

Yikes. First off, Frank is running against token Republican opposition this year and will be re-elected. Second, the Democrats will retain control of Congress this year and Frank will continue to be chairman of the Financial Services Committee. Third, this person (the corporate controller at a nationally known retailer) should consider a few anger-management classes. Or at least try yoga.

We received several dozen more responses like that, some of them equally vitriolic and ignorant, most of them assuming that if you don’t listen to what Frank has to say, somehow what he does won’t affect you. Others said someone should grill Frank on whether he helped drive the mortgage crisis by tinkering with the Community Reinvestment Act in the 1990s … and then promptly said they personally couldn’t be bothered to do the asking. I see.

I’ve had the experience of interviewing Barney Frank several times in my career, so let me confirm: Whether you agree with his politics or not, Frank is among the most intelligent, well-versed people in Washington. More to the point, he is also among the most powerful. He is a master of the legislative minutiae that ultimately end up being what really matters when it comes time to comply with the law. So if you want to know how the United States’ new corporate governance regime came to pass (we’ll have a new one by May, remember), or why some elements of reform became law while others died, or how Congress expects you to handle this new challenge, or if you simply want to uncork your frustrations to the elected official who oversees your line of work—Frank’s speech will be the opportunity to do any of that.

My only advice is that if you do want to ask the congressman a question, for your own sake, be prepared. Frank always is, and if you don’t know what you’re talking about (like my bitter commenter above), you won’t do yourself or other attendees any favors.

You can also see all our other speakers, an agenda, and extended early-bird pricing on our Compliance Week 2010 Conference webpage.

You may need to dust off some old brain cells to recall (I did), but the 2000s began with recession, financial meltdown and radical legislative overhauls from Congress to fix corporate governance. Next came years of struggle to master the new contours of corporate compliance, complete with policy spats at the Securities and Exchange Commission, enforcement actions from the Justice Department, and briefings galore to corporate boards confused about their new duties in a new era.

And then we ended the decade right back where we started: with recession, financial fraud, and radical legislative overhauls from Congress to fix corporate governance.

Will the 2010s be the same, with more confusion to come and then more repeating of mistakes we already made? I hope not… but I suspect they will.

Congress has already demonstrated, yet again, its constant prediliction to surrender to special interests. The financial reform bill that seems destined to become law would scuttle Sarbanes-Oxley compliance for small companies and endangered the independence of the Financial Accounting Standards Board. It would also establish a new bureaucracy in the Consumer Financial Protection Agency, whose jurisdiciton and enforcement power are still unclear, and pave the way for new shareholder activism and emboldened SEC enforcement. In my opinion, only the end of SOX compliance for small companies and the changes to FASB oversight are clearly bad ideas—but many, many more provisions in the reform legislation are unclear ideas, which for compliance officers is pretty much equal to “bad.”

Equally ominous were the legal fireworks at the Supreme Court earlier this month. In the space of two days, we saw plaintiffs make compelling cases that both the Public Company Accounting Oversight Board and the legal theory of “honest services fraud” (a key tool to prosecute white-collar crime) are unconstitutional. By later this spring we may well see both overturned. How might that change the day-to-day challenges of chief audit executives, chief compliance officers and audit committees? Nobody really knows. But those decisions will drop another big heap of uncertainty on your plate.

And those are just the headaches for bread-and-butter compliance issues you’ve been worried about for years. We haven’t even started with the new challenges coming for climate change, privacy, social media, risk management and more. In every sense of the phrase, the 2010s have not even started yet.

Compliance Week will continue to delve into all of those issues as always. Already we have plans to address them at our 2010 annual conference (coming this May!), as well as by Webcast, podcast, online blogging and old-fashioned print reporting. Last year we also launched our executive roundtables to let you, the front-line fighters in compliance, gather in person and discuss the problems you face; that series has been hugely popular, and will continue in 2010 and beyond.

Despite all that, however, Compliance Week still needs your input and intelligence about what’s happening out there and what you need to know. Are we following the right issues? Is there other data or analysis you need? Always feel free to drop me a line at mkelly@complianceweek.com.

Good luck with the new year and the new decade. If the 2000s were any indicator, we’re all going to need it.

The following is a guest post from Compliance Week assistant editor Jaclyn Jaeger.

The U.S. Supreme Court heard oral arguments on Dec. 7 in the long legal challenge against the legitimacy of the Public Company Accounting Oversight Board—and by extension, the legitimacy of the Sarbanes-Oxley Act itself.

Conservative activists teaming up with a small auditing firm in Nevada argued that the PCAOB is unconstitutional, because its board members are appointed by the Securities and Exchange Commission rather than the president. That, they said, violates the Appointments Clause in Article II of the Constitution. They also contend that as “principal officers” performing significant executive functions, PCAOB members should be removable for cause by the president, which he currently cannot do.

The PCAOB was created under the Sarbanes-Oxley Act in 2002, in the wake of the Enron and WorldCom scandals. The Board oversees accounting firms that audit public companies in the United States, and has the power to sanction audit firms if they fail to adhere to PCAOB-endorsed auditing standards.

The central issue for the Supreme Court justices—whose comments generally fell along predictable liberal-conservative fault lines—was how much control the president actually can exert over the PCAOB.

Michael Carvin, a partner at the law firm Jones Day and lead plaintiff attorney, argued that that PCAOB members have too much authority to investigate auditing firms and not enough oversight by the SEC.

Some of the more conservative justices seemed to agree. Chief Justice John Roberts, for instance, noted that PCAOB could impose “collateral consequences” on firms that don’t comply with its requests, all without input from the SEC.

And when U.S. Solicitor General Elena Kagan countered that the president has “constantly sufficient control over the SEC,” Justice Antonin Scalia interrupted: “only because he can dismiss the chairman of the SEC. The governance of the [PCAOB] is by the members of the SEC. The knife that the president has into the SEC has no role in this board.”

“I’m not sure the ability to take away responsibility from an agency is the same as controlling what authority that agency does exercise,” Scalia added. “It seems to me they are two different things.”

Justice Sonia Sotomayor did not appear to agree. She inquired how the accounting board, as entity answering to the SEC, is any different from an employer that recognizes that it can’t interfere with every bit of business that goes on between employees, “because that’s impossible.”

Carvin retorted: “In your hypothetical, the principal has exactly the same powers as the subordinate. Here the subordinate has statutory duties and responsibilities totally distinct from what the SEC can do.”

Secondly, Carvin said, “if that subordinate didn’t do things the way the principal wanted in the employment situation, the principal could fire the subordinate. When can the SEC fire the board in these circumstances? Only when they have committed gross abuses and after notice and opportunity to a hearing.”

Sotomayor wasn’t the only liberal justice; Justice Ruth Bader Ginsburg and Justice Stephen Breyer also expressed skepticism. Ginsburg objected to Carvin’s characterization of the auditing oversight board as an unaccountable, independent agency. “It can’t even issue a subpoena without the SEC’s approval.”

Case Background

Beckstead & Watts is the Nevada auditing firm that was cited for eight different auditing failures when the PCAOB inspected it in 2005. The firm teamed up with the Free Enterprise Fund and sued the Board in 2006. It lost its case in federal district court in 2007, and then in appeals court in 2008, but doggedly pressed forward and last spring the Supreme Court agreed to hear the case.

Lower courts have upheld the constitutionality of the PCAOB with the exception of a dissent by Judge Brett Kavanaugh of the U.S. Court of Appeals for the District of Columbia. In his dissent, Kavanaugh found that PCAOB members are not “inferior” appointees, because they are not directed and supervised by the SEC. He said the PCAOB therefore violates both the Appointments Clause and the separation-of-powers doctrine.

Kavanaugh characterized the case as “the most important separation-of-powers case regarding the president’s appointment and removal powers to reach the courts in the last 20 years.”

Justice Ruth Bader Ginsburg, however, said the dispute over the PCAOB is largely a theoretical question, telling Carvin: “We don’t know what is fictional and what is not here, because you don’t have a particular case.” Without having an individual case and a firm that has been hurt, the constitutionality of the Board is being challenged based on a hypothetical example, she said.

A ruling from the Supreme Court is not likely to come until spring, when it renders most of its decisions. But should the Court rule against the PCAOB, it could cause significant chaos for the U.S. financial reporting regime: SOX lacks a “severability clause” that would maintain the rest of the law should the PCAOB’s particular provisions be struck down. At least in theory, therefore, if the PCAOB is unconstitutional, the whole of SOX is too.

Exactly what might happen then—whether Congress would re-open SOX for fresh legislative tinkering, or whether the PCAOB would cease to exist, or whether oversight would continue as usual—is unclear.

A quick read of the Obama Administration’s proposed reforms of regulatory oversight leaves you with two impressions. First, for the large majority of compliance officers and financial reporting executives out there not involved in the financial sector, little will change. You still have much bigger concerns about increasingly aggressive folks at the Justice Department and Securities and Exchange Commission you need to worry about in your daily routines.

Second, not much has changed for those compliance officers who are in the financial sector, either: they still face too many voices in the regulatory realm, talking past each other and investors, sending conflicting messages about what financial firms are supposed to do.

To my thinking, the Administration’s proposed reforms fall somewhere between a missed opportunity and a mixed bag of under-developed ideas. Some seem sensible. Others seem to fly in the face of political reality. Most seem to have the potential to do good, but are in such an embryonic state that they could evolve into considerable new burdens or risks for corporations—financial and non-financial alike—by the time Washington is done fiddling with them.

A few high-lights:

• The agencies endure. Remember that halcyon time when everyone finally seemed to agree that the Commodities Futures Trading Commission and the Securities and Exchange Commission should be merged? Well, everyone in Washington has forgotten it. Both agencies will remain intact, doing what they’ve always done. At least one of them—presumably the SEC—will also start overseeing those over-the-counter derivatives that have caused so much trouble in the last year, but the Obama plan isn’t entirely clear on that point.

• Creation of a Consumer Financial Protection Agency. I already can envision new types of legal headache here. If an approved financial product fails to deliver on its promise—and good luck defining the scope of that—could an aggrieved investor sue the firm that sold it? Could corporations then claim some sort of pre-emption defense, akin to what drug-makers claim under Food and Drug Administration rulings? We also have no word on who would appoint this agency’s leadership. This is an important detail; remember, plaintiffs have hauled Public Company Accounting Oversight Board in front of the Supreme Court, saying its SEC-appointed leadership is unconstitutional.

• Enhanced regulatory cooperation internationally. The Administration might as well put this proposal out for comment in MAD Magazine. Politicians on both sides of the Atlantic are so busy pressuring securities and accounting rulemakers to relax the rules as a means of inflating economic growth, nobody will have time to develop a serious framework for international oversight of large institutions. That’s a shame, because we need one.

• Compensation crackdown! Don’t die of shock, but all public companies would now be required to let shareholders have an advisory vote on executive pay packages. They would also need to establish more independence on the board’s compensation committee, and achieve the fabled “alignment of executive pay with long-term shareholder value.” All of this is about as surprising as sunrise in the east. I was hoping the Treasury Department would decree that all CEOs are to be immediately enslaved.

• More accounting reforms. Financial firms would be required to use more forward-looking provisions for loan losses. Originators and issuers of securitized loans would be required to keep a financial interest in those loans. And fair-value accounting rules, which always crop up in these discussions, would get yet another examination to see how they can increase the transparency around cash-flows from holding investments. I’m not sure whether that’s code for “letting banks say they’re not going to sell worthless assets, so they don’t need to say the asset is worthless”—but since Congress already forced the Financial Accounting Standards Board to relax fair-value rules, I’m not sure we need to ask.

Alas, nowhere do we see some of the more creative solutions floated in past months, like imposing a small transaction tax on stock trades to curb speculators, or integrating the CFTC and SEC, or re-instating the Glass-Steagall Act to segregate investment banks and their dumb decisions from commercial banks that consumers depend on. Those were good ideas—and to boot, they could help unravel the financial crisis without imposing drastic new challenges on Corporate America and on the chief compliance officers who must ensure those challenges are met.

Instead, we will see a hodge-podge of regulatory reforms meander their way through Washington. Even if these ideas sound good—a statement I don’t know that I support, but it may be true—they will still need enforcement mechanisms. They will need to be quantified in data, which will need to be collected, disclosed, and reviewed or audited. How are you, the corporate compliance or governance executives, supposed to achieve that? Nobody really knows yet.

So like I said at the start—not much has changed.

Let me be sure I remember things correctly: Last fall, Washington was worried about the Europeans watering down accounting rules in the face of political pressure, right?

I ask because last week we witnessed the crisis over fair-value accounting rules devolve into some sad mixture of The Godfather and an accounting textbook. The banking industry didn’t like the rules as written; the banking industry complained to Congress; Congress made the Financial Accounting Standards Board an offer it couldn’t refuse: publish new guidance to ease the pain of fair-value accounting, or else.

And now, miraculously, FASB is rushing to publish two pieces of new guidance that will ease the pain of fair-value accounting.

I could drone on all day long about the appalling political elbow Congress just threw into FASB’s gut, or call out Rep. Paul Kanjorski, chair of the House Subcommittee on Capital Markets, as an uninformed bully for deciding to throw it.

Instead, however, let’s review the comment letter FASB Chairman Robert Herz submitted to the Securities and Exchange Commission about the wisdom of adopting global accounting standards in this country—standards mostly churned out by the International Accounting Standards Board in Europe:

Recent events have demonstrated the significant pressure that can be brought to bear on standard setters and the adverse consequences such pressure can cause, such as suspension of established due process procedures. For accounting standards to serve the needs of users, the standard setter’s governance and financial structure must be designed and operated such that the organization has the ability to maintain focus on the needs of investors and to withstand such undue pressure to the maximum extent possible. We acknowledge recent and ongoing efforts by the International Accounting Standards Committee Foundation to strengthen its governance, oversight, and independence by adopting certain changes to its constitution, including the establishment of a Monitoring Group to provide a formal link between the IASB and its Trustees and major capital market regulators. We support the objectives and await the outcomes of those efforts.

Herz submitted those thoughts to the SEC on March 11. Kanjorski steamrolled him March 12. He’d do well to take Herz’s comments to heart, and try a reform program of his own. 

We don’t write about corporate sustainability all that much around here because, well, nobody in Washington had been doing all that much about sustainability either.

Now that may change.

A recent legal bulletin from McGuire Woods notes that Lisa Jackson, the Obama Administration’s new head of the Environmental Protection Agency, has agreed to reconsider whether carbon dioxide and similar greenhouse gasses are subject to regulation under the Clean Air Act. Historically (read: during the Bush Administration), the EPA’s view was that CO₂ was not subject to regulation … giving us the current landscape of various states trying to regulate greenhouses gasses themselves, conflicting court rulings over who can regulate what, and unhappy shareholder activists trying to push the issue forward via proxy resolution.

The particulars forcing Jackson’s review right now deal with power plants: energy companies don’t want to worry about carbon emissions when building new ones, environmental groups do, the Bush Administration sided with the companies, and the Obama Administration is reviewing whether that’s the right policy given the language of the Clean Air Act. (The EPA promised to publish a rulemaking proposal for public comment sometime soon, but I haven’t seen it yet.)

More broadly, however, this bit of regulatory arcana is worth watching to see what other changes may come down the road—or float over the horizon, to use a better metaphor. The McGuire Woods bulletin contends that Jackson’s review does not foreshadow wholesale changes to regulation of greenhouse gasses yet; the question is too politically delicate to hang major changes on something as specific as permitting new power plants.

But the Obama Administration has already shown a tendency to think big (the economic stimulus bill) and then let the Democratic Congress stuff all manner of small-scale reforms into legislation (the economic stimulus bill). That’s a pretty volatile mixture for something as important as regulating carbon emissions. Stay tuned.

Back in the 1990s, I was a big fan of The X Files. Little did I know that the central tenets of that program—distrust, cynicism, and a deep suspicion that people in Washington are controlled by aliens—would be so useful when analyzing the economic stimulus bill. 

Compliance officers and corporate secretaries in the financial sector have spent the last two weeks with one watchful eye on the Treasury Department and the other on Capitol Hill, as lawmakers whirled out all manner of attacks on executive pay. Politically, walloping overpaid CEOs has been great theater. Practically, the theatrics have led to increasing confusion about exactly what is supposed to be included in the corporate proxy statement due later this spring. And the Fox Mulder disciples out there, trusting nobody, have been wondering when the new pay restrictions would start applying to all companies, not just those receiving government bailouts.

Then came Friday, and things started to get really weird.

Earlier in the week, the Senate had passed a stimulus bill with severe restrictions on executive pay. Most notorious was a provision that merit pay (that is, bonuses and performance-based compensation) could not be more than one-third of an executive’s total pay package. That was more far-reaching than anything the House had passed or the Treasury Department wanted to see, so late in the week that provision was deleted as part of the usual haggling that goes on when important bills are near a vote. Everything looked splendid; on Friday morning I even checked a copy of the House bill myself (the only version available to the public) and nary a peep was included about the Senate’s restrictions.

Then Sen. Christopher Dodd, chairman of the Senate Banking Committee, slipped the provisions back in sometime later in the day. By evening, when the final bill was passed, those original, severe Senate restrictions on executive pay were the law of the land. And they apply to the top 20 executives at any company taking government bailout funds.

Were this an election year, I’d assume Dodd had the pure and age-old motive of pillorying an unpopular group to score points with the public. But we just staggered through an election, and Dodd is actually interested in the business of governing—which is all about doing favors for the special interest groups that support you financially.

So I can’t help but notice the other major provision Dodd slipped into the stimulus bill: a clause letting TARP recipients repay their government loans much more quickly, which in turn would let them evade these onerous pay restrictions and resume their normal, bloated lifestyles. Nobody is saying that quick repayment is a good thing; in fact, the banks could well return back to their under-capitalized state too quickly and be just as endangered as they were in the first place. But they would also be able to give their executives whatever fat compensation they like—which is what the bank executives wanted all along.

The banks didn’t like the Treasury Department’s pay restrictions. Then along come even worse restrictions, and a neat way to escape the whole mess of compensation reform entirely. It makes you wonder: Were the banks behind Dodd’s seemingly bone-headed stunt in the first place?

Like Fox Mulder said, trust nobody.