You've got to feel a bit of sympathy for SEC Chairman Christopher Cox these days. The SEC faces a Gordian knot on the regulatory front, certainly. But the SEC also faces a deeper, more serious political crisis: It is becoming irrelevant in the conversation now occurring across Washington to decide what should happen next. Cox is on the outside looking in, and that is not where any policy-maker wants to be. It is not where companies regulated by the SEC—that would be you—should want him to be, either.
The Cox Irrelevance Factor has become apparent in any number of ways recently. Foremost, you could see the irrelevance by not seeing Cox himself in the numerous Congressional hearings lately into the Wall Street meltdown. That hearing of the House Oversight and Government Reform Committee, where Alan Greenspan was grilled for four hours? Cox was there; he just received scant attention. His testimony consisted of a) giving a history of how regulators, himself included, missed the scope of the crisis; and b) calling for a merger of the SEC and the Commodities Futures Trading Commission. That’s pretty much it.
For financial reporting executives, however, the Cox Irrelevance Factor is surfacing in more subtle ways that also make your job more frustrating. Those plans to unveil a final mandate for XBRL technology in financial reports? Nowhere to be seen. That roadmap to adopt International Financial Reporting Standards for U.S. companies? Lost in the great glove compartment of bureaucracy. Even the SEC’s annual ritual of delaying Sarbanes-Oxley compliance for non-accelerated filers isn’t happening. When a Republican-tilted SEC can’t muster the willpower to give into the U.S. Chamber of Commerce, you know things are bad.
At this point, one has to wonder whether any of the promised major SEC initiatives will happen at all. Cox’s term ends on Jan. 20, 2009. Three of his four fellow commissioners have less than a year’s experience on the job. All evidence indicates a Democratic president is going to name a Democratic chairman to replace him, and that person is likely to have very different ideas about what the SEC’s priorities should be.
So why fight for roadmaps and blueprints now? After all, those decisions are only going to be revisited in three months, and the critics will only give you grief for spending time on them rather than the crisis at hand. It's wiser simply to stick with the corporate accounting basics. At the New York Society of Securities Analysts meeting this week, an SEC accounting fellow talked of materiality thresholds and judgment frameworks as the order of business at the SEC these days. That’s not huge, but every little bit helps, right?