Global Business

Harvey Goldschmid Named IASB Trustee

In his new governance role over international accounting rulemakers, Columbia University law professor Goldschmid looks for a more independent board.
Marie LeoneDecember 11, 2009

The independence of an organization depends in large part on its source of funding. That’s why Columbia University law professor Harvey Goldschmid thinks it’s a good idea for the International Accounting Standards Board to rework its funding mechanism, following the example of the Financial Accounting Standards Board.

“I think it would be very useful for the [IASB] to be in a position that FASB is in today, where funding is relatively automatic and doesn’t come with strings attached,” said Goldschmid in an interview with CFO. Currently, the IASB is supported by private-sector donations.

His opinion will have more influence going forward. That’s because Goldschmid, a former commissioner of the Securities and Exchange Commission, was appointed on Tuesday as a trustee of the IASB. He replaces another American, former Ernst & Young International chairman Philip Laskawy, whose three-year term expires at the end of this year. Also named as one of the board’s 22 trustees was Yves-Thibault de Silguy, chairman of construction conglomerate Vinci and a former member of the European Commission. De Silguy replaces Bertrand Collomb, chairman emeritus of LaFarge and chairman of the Association Française des Enterprises Privées.

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Goldschmid’s views on standard-setting independence and IASB funding are well known. In July, for example, the high-profile Financial Crisis Advisory Group (FCAG), a global committee co-chaired by Goldschmid, issued a report that addressed how regulators, accounting standard-setters, and corporate executives could work together to prevent the next financial crisis. One recommendation was to develop a permanent funding mechanism for the IASB as a way to protect its independence. A way to do that would be for the IASB to adopt a funding system similar to FASB’s, in which public companies are assessed annual support fees based on market capitalization.

“Whether in speeches or through the FCAG report, I emphasized the need for independent standard setting,” said Goldschmid. And while he recognizes the need for oversight and accountability in the standard-setting process, he said that “it is critically important that standard setting not become a politicized issue. In general, heavy interference by some on Capitol Hill or some politicians in Europe may be counterproductive and may not further the process.”

While the IASB’s trustees don’t get involved with the technical aspects of accounting rulemaking, they are charged with establishing and amending the board’s operating procedures and due process, appointing board members and reviewing their performance, and setting and approving the board’s budget. In addition, the trustees are accountable to a monitoring board that is made up of international securities regulators.

Speaking from a governance perspective, Goldschmid said he is keen on the idea of developing one set of global standards, a project that the IASB and FASB have been working on since 2002. While he didn’t comment on whether he thinks it is a good idea for the SEC to require American companies to switch from U.S. generally accepted accounting principles to international financial reporting standards, he did say that convergence “is a good thing for the United States and for the rest of the world.” And he added that it is important that the United States “is playing a role in bringing about convergence.”

When asked if replacing a former accountant (Laskawy) with a former regulator would skew the trustees’ perspective, Goldschmid replied that he didn’t think it mattered. “I’m not sure that there are ‘regulator’ or ‘academic’ or ‘accounting profession’ perspectives, as much as there are judgments that good people with good minds ought to make about where the IASB should go in terms of independence and high-quality standard setting,” he said.

Goldschmid and de Silguy will begin their terms in January.