Gerrit Zalm: maintaining standards

Gerrit Zalm, chairman of the International Accounting Standards Committee ­
the parent body for sharp-end standard setter the IASB ­ has accepted a job
leading a massive nationalised bank in Holland formed from Fortis and ABN Amro.
The potential conflicts mean it’s likely he will have to step down from his
standard setting role.

This is not the best time to lose someone in such a pivotal role. Fair value
accounting, something the IASB has persistently defended, has been under attack
from senior businessmen, bankers and even heads of state. Indeed, at the recent
G20 meeting it was expected that French president Nicolas Sarkozy would lobby
hard to have standards amended and bypass the IASB, potentially making it
irrelevant. Zalm had to write to every head of state asking them to protect the
independence of the IASB.

The pressure on the IASB is not over and Zalm’s replacement will need
enormous financial integrity and stature to tackle national leaders and resist
pressure to dilute the independence of standard setting. This is a critical
moment and potentially requires the rethinking of the chairman’s role so that he
or she might devote more time to the politicking and diplomacy that the current
circumstances demand of the role.

The search will be difficult because many observers believe the IASC will
have to go beyond Europe and the US for a candidate that can be presented as
neutral. This will make recruitment difficult. The crucial issues will be
finding someone who can support IASB chairman David Tweedie, because his job as
chief standard setter and chief accounting diplomat cannot be sustainable for
very long.

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Fiona Westwood of Smith and Williamson.