Alumnus plays key role in reforming scandal-plagued markets
Released: December 17, 2003
Only hours after being named chief accountant of the Securities and Exchange Commission, Donald Nicolaisen received some poignant reminders of how tough his new job would become.
“The day it was announced I was joining the SEC, I started getting phone calls from average investors, people who had lost money in the marketplace,” said Nicolaisen, a 1967 UW-Whitewater alumnus of business administration. “They now had a name and a face, someone they felt they could contact.”
“It has been extremely disturbing to hear the stories of the loss of confidence in our system,” he added during a December interview, shortly before his address to 2003 UW-Whitewater graduates. “You really don’t have to go too far to hear it, because even business people are shocked by what’s happened in the marketplace. The SEC is an intense place to be right now. Fortunately, I’ve found the staff there to be an amazingly talented group of people who are dedicated to protecting investors.”
As the SEC’s chief accountant, Nicolaisen will play an essential role in reforming a federal market system damaged by two years of corporate scandal. Big names like Enron, WorldCom, Andersen and Tyco have fallen like dominoes after revelations of financial fraud and misconduct.
As a senior partner at PricewaterhouseCoopers in New York prior to the SEC appointment, Nicolaisen has more than three decades’ experience in the accounting industry. He said it would have been hard for him to imagine years ago how far astray some corporate behavior has gone. “If you were to try to narrow it to one thing, you would have to say it’s either greed or incredible complacency,” said Nicolaisen.
But Nicolaisen took the job with a strong sense of optimism. He said there is tremendous demand for reform in the general public and investor community, as well as new mandates from Congress that accounting and financial practices need an overhaul. He also believes the majority of business leaders want to do the right thing and are disappointed by the frauds and scandals that have been in the headlines recently.
“The time is right for change,” he said. “We can do, hopefully, things you wouldn’t be able to do in normal times.”
At the heart of the changes will be requiring greater oversight and responsibility for corporate boards and their auditing functions. Corporate executives will also have to attest more closely to the accuracy of their financial statements, and auditing practices across the board need to become stronger and more independent.
Another direction Nicolaisen wants to see is for accounting standards to move further along the continuum between “principles-based accounting” and an overly rules-based approach. He believes the right balance is to strive for “objectives-based standards,” which will require greater understanding of the ethical purposes behind the rules. That means streamlining and simplifying the rules where possible, to avoid the cat-and-mouse game of people trying to use loopholes to circumvent the intent of the rules. “Even though we have extremely detailed legalities and rules, business in American still relies a great deal on trust and honor,” he said.
And there is a great deal at stake in the reform effort. During his address to approximately 500 graduates and 3,000 visitors Dec. 20 at Kachel Field House, Nicolaisen noted that more than 90 million Americans, in ways great and small, participate in the capital markets. They many be investing to purchase a first home, to plan for retirement, to put children through college or simply to have a better life.
Nicolaisen, a native of Elm Grove, told graduates that they too will experience difficult times and face the opportunity to achieve change. “If you believe you can make a difference, you have to step up to the plate and be willing to take a shot at it,” he said.
“At times it may not seem that way, but I can assure you that the world needs you,” he added. “It needs your time, energy and enthusiasm. These are your assets and you must invest them wisely.”
- Brian Mattmiller ,npa@uww.edu
