The Securities and Exchange Commission has ousted Kathleen Hamm from the Public Company Accounting Oversight Board in a decision more convoluted than it appears at quick glance.
The PCAOB was established under the Sarbanes-Oxley Act of 2002 and is overseen by the SEC. Although the SEC framed Hamm’s departure in the light of her “completing her term,” that isn’t exactly the whole story.
Hamm was sworn into her role by the SEC in January 2018 to serve out the remaining term of an outgoing board member at a time when the SEC was cleaning house at the PCAOB by bringing in an entirely new board. This was an unprecedented move at the time—marking not only the first time the SEC declined to reappoint PCAOB board members who were eligible to serve a second term, but also the first time in the history of the audit regulator’s existence that it replaced its entire board.
While Hamm’s tenure does expire later this month, she was eligible to serve a second term that would have ended in 2024—a term that Hamm, herself, wanted to pursue. “I am seeking reappointment to continue the important work I began 20 months ago,” Hamm said in a statement in September, provided to MarketWatch.
Based on all that unfolded, it seems the SEC had an entirely different agenda. In June, the SEC announced it was opening up Hamm’s position to other applicants. On Friday, it announced the appointment of Rebekah Goshorn Jurata to fill Hamm’s position, for a term ending Oct. 24, 2024.
SEC Chairman Jay Clayton thanked Hamm for her “dedicated service as a member of the board,” stating that she “brought increased focus at the PCAOB to emerging technology, cyber-security, and the important role that auditor quality control systems play in ensuring consistent delivery of high-quality audits.”
A new report suggests the PCAOB might not embody a healthy work culture, exemplified outwardly by the way it handles its employees. An eight-page whistleblower letter sent to the SEC in August, made public by the Wall Street Journal, stated the PCAOB is “permeated by a sense of fear,” due to “the numerous terminations … [some] driven by retaliation.” The letter was reportedly written by a group of current and former PCAOB employees.
According to the whistleblower letter, former PCAOB Associate General Counsel Heidi Steiber left last year after expressing concerns that the way terminations were done could “conflict with representations made to insurance carriers.” Specifically, the PCAOB’s insurance policies require its leaders to consult with legal counsel before dismissing employees, and Steiber was concerned these policies were not being followed, people familiar with the matter told the Journal.
In addition to Jurata’s appointment, Clayton announced Commissioner Hester Peirce has agreed to lead the Commission’s coordination efforts with the PCAOB board, along with the SEC’s Chief Accountant Sagar Teotia and his office. In a statement, Clayton said this important role “will improve the efficiency and effectiveness of our efforts to ensure that financial statements, the bedrock of our capital markets, have the high quality and reliability our investors expect.”