SEC chairman: Crackdown has helped, but not enough

Donaldson wary of pension funds, executive benefits

? The past year’s crackdown on corporate corruption has helped lure investors back to the stock market, but some companies still haven’t grasped the importance of reform, the chairman of the Securities and Exchange Commission said Tuesday.

Donaldson also said Tuesday that new rules may be needed to ensure companies put enough money into their pension funds for employees.

Some corporations have made overly optimistic projections of their future earnings, allowing them to boost short-term profits with money that otherwise should have gone to shore up pension funds. Later, some companies have been forced to scramble for money to restore to the pension funds.

The accounting “is murky and needs a lot of attention,” Donaldson said, noting that the SEC and the Labor Department are looking into the issue.

Donaldson spoke a day before the one-year anniversary of sweeping anti-fraud legislation — enacted at the height of the scandals at Enron, WorldCom and other companies — that wiped out billions in investors’ savings. The legislation imposed new criminal penalties, changed how companies operate and brought the accounting industry under stricter supervision.

The market’s resurgence in recent months has been aided by investors regaining confidence from the new corporate accountability law, Donaldson suggested.

“Clearly investors have gotten back into the market because they like the market,” he said. “Clearly a part of that is a feeling that the change is under way. … People recognize that we have a rigorous program under way.”

At the same time, Donaldson said, some companies still “haven’t gotten the message” when it comes to lavishing pay packages and stock options on executives, incentives that encourage short-term leaps in a company’s stock price often at the expense of a company’s long-term financial health. He said it was important for boards of directors to set longer-term goals for their chief executives and avoid slavishly trying to meet Wall Street’s quarterly profit targets.