During his 28 months as chairman of the Securities and Exchange Commission, William Donaldson turned out to be something of a surprise. A longtime securities industry insider, Donaldson was appointed by President Bush to calm the waters after the controversial term of Harvey Pitt. But Donaldson, a Republican, repeatedly sided with the two Democratic commissioners to push through a series of post-Enron market reforms that irritated Wall Street and corporate America, but were applauded by investors' groups.
On June 1, Donaldson, 74, surprised the industry again, announcing he would step down June 30, saying he had accomplished most of his goals and wanted to return to his family in New York. Is the Donaldson legacy good or bad? And will the regulatory pendulum swing the other way under Christopher Cox, the conservative California Congressman Bush has nominated as the next SEC chairman?
"I have a positive impression of Donaldson," says Wharton legal studies and ethics professor Thomas W. Dunfee. "He was the right guy at the right time....There's perhaps a failure to appreciate the damage that all of the scandals have done to confidence in our financial services system. Donaldson was helping correct that by pushing the envelope."
But in certain areas, suggests Wharton finance professor Marshall E. Blume, Donaldson went too far. "Some of the regulations that he instituted were misguided. He implemented the Sarbanes-Oxley bill in a very heavy-handed way," Blume notes, referring to the reforms ordered by Congress in 2002.
Donaldson, founder of one of the best-known Wall Street firms, Donaldson, Lufkin & Jenrette, helped found the business school at Yale, was chairman of the New York Stock Exchange in the early 1990s and was chairman and CEO of Aetna Insurance. He took over the SEC in February 2003, becoming the third Republican on the five-member commission, which traditionally has no more than three members from a single party.
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