SEC Taps Economist to Head Accounting Board

William J. McDonough, 68, an economist and not an accountant, will head the five-member Public Company Accounting Oversight Board, established by the Sarbanes-Oxley Act of 2002. He replaces acting board chairman Charles Niemeier.

Since 1993, McDonough has held his presidential post at one of the most prominent of the 12 Federal Reserve banks. He served an instrumental role when Wall Street was paralyzed by the World Trade Center terrorist attacks on September 11, 2001.

McDonough will take steps to relinquish his current responsibilities at the Fed prior to assuming his role as chairperson of the PCAOB. He had announced earlier this year his intention to retire from the Fed in July, and was sleighted to join the New York Stock Exchange Board in August.

The SEC will complete a thorough background investigation before McDonough's slips into the $556,000 a year position.

"The task before us is to restore the confidence of the American people and others around the world that the accounting statements issued by public companies registered in our country and certified by public accounting firms present a complete, true and timely report that can be relied on," McDonough said in a statement.

Prior to joining the Federal Reserve, McDonough had spent 22 years at First Chicago Corp. and its bank, First National Bank of Chicago.

The Sarbanes-Oxley Act, a legislative reaction to corporate malfeasance, mandates that the PCAOB chairperson be a "prominent individual of integrity and reputation who has a demonstrated commitment to the interests of investors and the public, and an understanding of the responsibilities for and nature of the financial disclosure required of issuers under the securities laws and the obligations of accountants with respect to the preparation and issuance of audit reports with respect to such disclosures."

The board's first appointed chairman, William Webster, was forced to resign when it was revealed he had ties to companies under SEC investigation.

Upon his appointment in February, SEC chief William Donaldson made the selection of a PCAOB chairperson his top priority. An intensive search began just last month when the SEC adopted a nomination process.

"America's markets, business community and entire economy are at a critical crossroads," Donaldson said at a news conference. "We have weathered the storm of scandal and continue to seek justice and pursue wrongdoing."

On Wednesday, April 16, the accounting board will hold a meeting to consider auditing and related professional standards, funding rules, and an ethics code -- fundamental aspects of the independent board that the SEC will review later this month.