It's been a very good week for the Corpocracy.

First, there was the Supreme Court decision overturning the conviction of Arthur Andersen for destruction of incriminating Enron documents, which is likely to make it harder to prosecute executives for corporate fraud.

Even under the old standards, convictions were anything but a slam-dunk. That again became clear as the week wore on with the jury still deadlocked on charges that Richard Scrushy presented a misleading picture about HealthSouth, which by any common-sense standard he surely did.

But the week's big news was the resignation of William Donaldson as chairman of the Securities and Exchange Commission, and the nomination of Rep. Christopher Cox to succeed him.

In the wake of a series of corporate scandals that undermined faith in the integrity of American business and the fundamental fairness of American markets, Donaldson revived a once-elite regulatory agency that had become politicized, demoralized, starved for funding and embarrassed by more aggressive state regulators. But he cut his tenure short because of waning support from the White House and escalating friction with the commission's two Republican members, who not only were able to block key initiatives but had begun to quibble about the wording of every order and regularly oppose enforcement actions recommended by the professional staff.

It is the Cox nomination, however, that signals the return to pliant directors, misleading financial statements, disenfranchised shareholders and runaway executive salaries. Cox's philosophy of corporate governance is that investors who don't like how a company is run should simply sell their shares and put their money somewhere else. Look for Cox to make it easier and cheaper for companies to issue new shares of stock, even when they have no business doing so, while soft-peddling enforcement against big brokerage and insurance firms that merely aid and abet corporate fraud but don't actually do it themselves.

The proposed new chairman of the SEC is a leading proponent of the idea that accounting rules are simply too important to be left to the professionals but ought to be subject to the discipline of the political marketplace.

A decade ago, when the Financial Accounting Standards Board was first considering requiring companies to treat grants of employee stock options as an operating expense, our man Cox helped lead the congressional effort to block FASB's initiative.

Around the same time, FASB was preparing to shut down an accounting gimmick popular with high-tech firms that used stock rather than cash to buy other firms. Experts had long complained that the "pooling of interests" accounting hid the true costs of mergers and acquisitions. But threats by Cox and other members of Congress to pass legislation blocking the change forced FASB to weaken the new rule and delay it until the stock market bubble had already burst.

Cox was also part of the congressional cabal that thwarted then-SEC Chairman Arthur Levitt when he tried to push through a rule preventing accounting firms from doing lucrative consulting work for companies whose books they audited. After the story of the Andersen-Enron debacle came out, several members of the cabal stepped forward to acknowledge they were wrong about that one. But Cox, who relied heavily on political contributions from the accounting industry, was not among them.

Cox was also the author of legislation that would have made it virtually impossible for shareholders to bring suit against companies that misled or deceived them. With the increase in frivolous lawsuits brought by unscrupulous lawyers, some sort of reform was clearly warranted. But Cox's proposal would have shielded executives and directors who fed happy talk to investors and analysts without checking to see whether it was true. Happily, the Cox "hear-no-evil, see-no-evil" defense was largely written out of the final bill.

Cox has repeatedly demonstrated a preference for sacrificing investor protection to the larger cause of promoting economic growth. He is more ideologue than pragmatist and an unabashed partisan to boot. Those hardly seem like the necessary qualifications to succeed Bill Donaldson, a champion of the investor, a paragon of independence and a general all-around pro.

Steven Pearlstein can be reached at

SEC Chairman William H. Donaldson will step down officially on June 30, bad news for investors who value protection.