Ask Securities and Exchange Commission Chairman William H. Donaldson whether he's a reformer, and he pauses. After several seconds of reflection, Donaldson concedes that he probably is -- but not the "wild-eyed" kind.

The multimillionaire former chief executive of the New York Stock Exchange and Aetna Inc. took control of a demoralized, chaotic agency in February 2003, after the well-publicized resignation of predecessor Harvey L. Pitt amid questions about his handling of political controversies. Donaldson, 73, inherited record numbers of high-profile enforcement cases as well as a raft of proposed new rules needed to carry out a landmark corporate reform law.

"When I came to this job, we had a situation in which the American public was pretty disillusioned with the business community and the financial community," Donaldson said in a recent interview. "There was this wave of malfeasance, and reform was needed. We needed to pull up our socks and really face up to preventing these sorts of things from happening again."

Today, the SEC will vote on one of his key proposals, a plan that would require hedge funds -- investment pools for institutions and wealthy individuals -- to open their books to the agency. The commission is likely to vote 3 to 2 to approve the plan, despite opposition from Republican commissioners as well as Federal Reserve Chairman Alan Greenspan and Treasury Secretary John W. Snow.

Donaldson, one of the founders of the investment bank Donaldson Lufkin & Jenrette (now part of Credit Suisse First Boston), has been effective in restoring the SEC's reputation and improving the quality of information investors receive, scholars and consumer advocates said. But how Donaldson proceeds with a few key, and so far intractable, issues may determine his legacy, they and other longtime SEC watchers said.

"What you needed in the agency was a conciliator among multiple constituencies, someone who was going to get the agency back in the good graces of the public and the people on Capitol Hill," said Donald C. Langevoort, a securities law professor at Georgetown University. "What he has to get the most credit for is a good political ear."

But now Donaldson is in the middle of an issue where conciliation may be impossible -- a proposal that would give dissatisfied shareholders more power to nominate board candidates under limited circumstances. Business and shareholder advocates are deeply dug in on opposite sides of the issue, and supporters say they fear that Donaldson may punt.

"Bringing the proxy access initiative forward was the most important act of leadership in his tenure," said Damon A. Silvers, associate general counsel at the AFL-CIO, which has generally supported Donaldson. "Appearing to look for an excuse not to carry it forward is, I think, the greatest failure of his tenure."

Donaldson's legacy so far includes nearly four dozen rules on issues including mutual fund governance and the duties of auditors. It's unclear how much more time he will have to build on his record. The reelection of President Bush is uncertain, and Donaldson has frustrated some conservatives by occasionally breaking the commission's deadlock and casting his vote with the two Democrats on the panel rather than his two fellow Republicans. As a result, even if Bush is reelected, there is speculation -- which he denies -- that he may leave before his term ends.

In describing his view of what he has created, Donaldson said he is most of all trying to make the agency more proactive -- to move away from reaction and routine inspections and to uncover risky trouble spots before they explode.

"Part and parcel of that is having the capacity to look around the corner and over the hill and anticipate problems before they happen," he said.

Donaldson arrived at the agency during a period of great turmoil, but also great opportunity. Lawmakers had voted to increase the SEC budget by more than 60 percent after scandals at Enron Corp. and WorldCom Inc. devastated average investors. While the SEC drew fire for not spending $100 million of its allotment in 2003, agency leaders argued they were hiring cautiously to maintain quality.

Between September 2003 and June 2004, the SEC hired 460 new lawyers, accountants and other staffers. An additional 130 will start by the end of the fiscal year. The SEC is on track to spend all but $20 million of its $811.5 million appropriation this year, according to an agency spokesman.

"Donaldson's chairmanship began like a breath of fresh air," said Joel Seligman, dean of the law school at Washington University in St. Louis and the author of an oft-cited history of the SEC. "He will always be remembered for his achievements with the budget and the staff size and for his support of enforcement."

So, too, Donaldson has won points for improving communication among the SEC's five commissioners, who had begun to publicly snipe at one another in 2002. While they sometimes part ways on regulatory approaches, commissioners mostly have refrained from lashing out at one another, compared with the sometimes rancorous relationships during the term of predecessor Pitt.

Under Donaldson, the SEC has moved forward on initiatives to clean up Wall Street and the $7.5 trillion mutual fund industry.

After New York Attorney General Eliot L. Spitzer uncovered abuses in mutual fund trading in September 2003, the SEC worked quickly to head off legislation on Capitol Hill with its own reform agenda. To date, that list includes new industry codes of ethics, requirements on fee disclosures, and a number of other steps yet to be voted on by the SEC -- in all, an "ambitious" agenda, said Sen. Richard C. Shelby (R-Ala.), chairman of the Banking Committee.

Barbara L. Roper, director of investor protection for the Consumer Federation of America, praised Donaldson for shaking off pressure from industry giants Fidelity Investments and Vanguard Group and casting the deciding vote last month to force mutual fund boards to have independent chairmen.

"That was an issue where it would have been very easy for him to back down," Roper said. "He stuck by his guns on it."

Donaldson, whose preferred operating style is consensus, stressed that division within the SEC is rare. Of 1,607 votes taken since Donaldson came on board, he said, the commission was unanimous in all but 17 -- about 1 percent.

By far the most politically sensitive issue on the SEC's agenda is reform of the ballot process -- a step the agency last considered in 1977 before lobbyists successfully fended it off.

Donaldson set the stage for reform in a series of talks last year emphasizing the role of corporate board members as guardians for average investors. But after the SEC staff, examining the issue at Donaldson's behest, drafted a compromise plan giving dissatisfied shareholders more power to nominate board members under limited conditions, Donaldson hesitated and has yet to schedule a vote on the proposal.

The Business Roundtable, the U.S. Chamber of Commerce and some members of the administration have lobbied SEC commissioners against the proposal.

Donaldson recently said he refuses to be rushed or put on an "artificial timetable."

SEC commissioners, including Democrat Harvey J. Goldschmid and Republican Paul S. Atkins, said they still believe a compromise on the ballot issue could come this year. But the situation just becomes trickier as the election nears.

"By continuing to delay, he made it more and more difficult for himself," said Silvers of the AFL-CIO. "You've got to finish the job."

Some speculate that even if President Bush is reelected, SEC Chairman William H. Donaldson may leave before his term ends.Donaldson arrived at the Securities and Exchange Commission during a period of great turmoil. At right is Deputy Attorney General Larry D. Thompson.Chairman William H. Donaldson says he is trying to make the Securities and Exchange Commission more proactive, uncovering problems before they explode.