Hot Times for Accounting Officials

The SEC thinks that members of the Financial Accounting Standards Board require fat raises to stay on board. Here's what they'll be making now.
David KatzMarch 11, 2008

Forget the recession. If you’re a CPA in your fifties, live in the New York area, and know a fair amount about how Generally Accepted Accounting Principles work, you’re sitting pretty.

That, at least, is the Securities and Exchange Commission’s new view of the job market for elite accounting rulemakers. Last month, SEC officials acknowledged that the 8.5 percent pay hike for Financial Accounting Standards Board members that FASB’s $31.1 million budget calls for in 2008 is justified by the tight labor market for elite accounting experts.

Reporting on his review of FASB’s budget at an SEC meeting in February, Conrad Hewitt, the commission’s chief accountant, said that it’s hard for the standards board to attract CPAs who are “making a lot of money” and who, at around age 50, are at the top of their careers. “These people are in extremely high demand in the [Sarbanes-Oxley] environment,” he added.

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In contrast to members of the Public Company Accounting Oversight Board, FASB members operate in a “different geographic context—the greater New York metropolitan area rather than Washington” where the labor market for accounting officials is less competitive, according to SEC member Paul Atkins. (FASB is headquartered in Norwalk, Conn.) In December, Atkins dissented from the SEC’s approval of the PCAOB budget on the basis of the 3.3 percent increase in the PCAOB board members’ salaries, which he called “disproportionately high.” The increase hiked chairman Mark Olson’s pay by $21,000 to $654,406 and each of the other PCAOB members by $17,000 to $531,995.

In contrast, Atkins, along with the rest of the SEC, supports the 8.5 percent pay hike for board members in the FASB budget, which also includes a 4.5 percent raise for employees. FASB disclosed in 2006 that the salary of a FASB Board member was $500,000, and no raise was approved last year. The 8.5 percent salary hike for 2008 will put FASB chairman Robert Herz’s salary at $667,275.

The SEC’s attitude toward the accounting standards board was a good deal more favorable than it was last year. Last month, commission officials had particularly high praise for FASB’s work in the changeover to extensible business language reporting, a pet project of SEC Commissioner Christopher Cox. Hewitt said that FASB had “dedicated significant resources in XBRL,” furthering the goal of interactive data and helping significantly to generate taxonomies for U.S. Generally Accepted Accounting Principles.

The chief accountant also said that the $2.8 million boost over FASB’s 2007 budget would go for “XBRL taxonomy maintenance work and hiring for four staff positions.” The SEC approved $23.7 million in accounting support fees, a 4.9 percent increase over the previous year. The remainder of the $31.1 million budget comes from the reserve funds of the Financial Accounting Foundation, its parent organization.

Last year, the commission held up FASB’s budget until FAF agreed to SEC demands for more say in the appointment of both FASB members and FAF trustees.

As Cox noted in February, however, the SEC doesn’t approve FASB’s budget, but signs off on the level of support fees the commission thinks it’s appropriate for corporations to pay. Following approval by FAF’s board, the foundation submits its annual budget for the organization as a whole (including FAF, FASB, and the Governmental Accounting Standards Board) to the SEC, according to FAF’s interim chief operating officer, Terri Polley. The accounting support fees, which are one component of the budget, are subject to review by the SEC under Sarbox, she said.

In any event, things seemed to have changed considerably between last winter and February 2008, when SEC member Kathleen Casey echoed Hewitt’s praise for the way FASB’s budget would be spent: “I’m happy that it goes to user-friendly projects like codification [of accounting standards] and XBRL.”

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