Ready to step up: Robert H. Herz, FASB chairman, 2002-2007.

• Author: Heffes, Ellen M.
• Position: Domestic - Interview

"I'm ready to step up to the plate," says Robert H. Herz on beginning his five-year term as the newly appointed chairman of the Financial Accounting Standards Board. Formerly PricewaterhouseCoopers LLP's North America Theater Leader of Professional, Technical, Risk & Quality, his 20-plus years of broad experience includes technical, operational and board positions. A stint on the International Accounting Standards Board, and his education in both the U.S. and U.K. -- he holds a CPA and CA -- give him fluency in working with international standards.

Herz is beginning this high-visibility post at a turbulent time for accounting standard setting, and just prior to his July 1 start date, he spoke candidly with Financial Executive's Managing Editor Ellen M. Heffes about accounting standards, the state of financial reporting and his professional and personal goals.

Recent corporate reporting coverage has centered on Enron, Andersen, investor lack of confidence, the dot-com debacle, reliance on short-term earnings and investment bankers' and analysts' conflicts of interests. From the "inside," how bad is it, really?

RH: By and large, companies are trying, and do report properly. But the numbers of instances of accounting abuses and financial reporting scandals, and their effects on the system, have grown. This is causing some fundamental questions to be asked by all of us who are part of this system, [as well as] Congress and the public, and it is having an effect on the confidence in the capital markets. While the markets are fairly resilient, it is serious enough that everybody has to recognize that there are questions, and many of those questions are quite valid.

I'm a "glass-half-full" kind of guy. I think [questions are] healthy and that coming out of this process, we'll hopefully have a system with renewed dedication to everybody playing his or her role and taking responsibility in a highiy ethical and sound way. And, I think some structural fixes will be put in place that could also help.

There were some excesses in the system, and people who were not exactly clear about their roles [or] where the boundaries were. That led to some bad behavior.

That's part of the reason why I am excited about the FASB chairman job, because of the opportunity to contribute to the proper functioning of the capital markets. A key aspect of that is sound corporate information that's relevant, that's reliable and that people can trust.

Another aspect is financial reporting, and a very important facet of that is setting standards relating to accounting and financial reporting.

As for the numerous U.S. standards, often ambiguous and open to interpretation, one argument goes: "With over 15,000 registrants reporting, how many are 'bad apples?"' It seems only only a few, but they are so highly publicized.

RH: True, although the argument has been that, "It was only Cendant, Sunbeam and Waste Management." Then came Enron, and now the list seems to be...