New York (Feb. 28, 2002) - Former Federal Reserve chairman Paul Volcker announced Wednesday that Charles A. Bowsher, chair of the soon-to-be-disbanded Public Oversight Board, will serve beside him on a panel to examine and change firm policies at Andersen in an effort to restore the firm's credibility following the Enron fiasco.
P. Roy Vagelos, retired chair and chief executive of Merck & Co. Inc., completes the three-member board. Vagelos and Bowsher will receive $50,000 honorariums and $1,000 per meeting for their work. Volcker will receive no stipend for his participation.
Bowsher was in the news recently when he announced that the POB, which is charged with overseeing the accounting profession, would disband. The decision was apparently made after SEC Chairman Harvey Pitt bypassed the group when he unveiled plans to create a new independent body to bolster accounting regulations. At the time, Bowsher termed the fact that the POB was excluded as "significant."
Volcker's panel members will have sweeping authority to change firm policies at the troubled accounting firm and terminate or reassign personnel. Per the contract signed by Volcker and Andersen managing partner Joseph Berardino on Feb. 2, the board will have an initial two-year term, though Volcker noted, "I'll be very disappointed if in 18 months, we're not in very good shape and moving ahead."
When asked about Andersen's viability at a midtown news conference Wednesday afternoon, Volcker said, "It's fair to say that none of us would be here if we didn't think it would be a good thing for Andersen to have a future," later adding, "I'd like to see this firm returned as a recognized leader in the audit business."
Volcker reiterated that the board will initially focus on five main areas within Andersen:
1. Strong control procedures to ensure prompt resolution of technical accounting issues;
2. Measures to maintain audit quality and discipline;
3. Resolution of questions concerning client retention by senior partners;
4. Enforcement of appropriate restrictions regarding future employment of Andersen employees by audit clients; and
5. Review of compensation and other business practices that could affect the judgement of audit partners.
The board will be helped in its work by an 8-member advisory panel that includes:
John C. Bogle, founder of The Vanguard Group; John A. Bohn, retired president and chief executive of Moody's Investor Services; Frank. J. Borelli, retired CFO and director of Marsh & McLennan Cos. Inc.; Donald P. Jacobs, dean emeritus and professor of banking at Northwestern University's Kellogg School of Management; David B. Pearson, director, peer review of the Public Oversight Board and professor at Case Western Reserve University; Ned Regan, former comptroller of New York State and current president of Baruch college; and former SEC chief accountant Michael H. Sutton.
Andersen's appointment of Volcker comes on the heels of a committee report detailing the collapse of Enron, to whom Andersen served as auditor.
-- Melissa Klein
