From the President’s Desk
By Terri Polley, FAF President and Chief Executive Officer
Independence Day Special Issue

Happy Independence Day(s) from the FAF

On July 4th, people across the U.S. will celebrate the adoption of the Declaration of Independence with fireworks, picnics, and parades.

The Financial Accounting Foundation (FAF) also observes another “Independence Day,” albeit a few days earlier and without barbecues, bands, and pyrotechnics.

On June 30, 1972, the FAF Board of Trustees filed a certificate of incorporation with the Delaware Secretary of State as a not-for-profit organization. It followed the March 1972 issuance of the Wheat Report, a study commissioned by the American Institute of Certified Public Accountants (AICPA) that led to the creation of the FAF and the Financial Accounting Standards Board (FASB).

The Wheat Report proposed that “a new foundation, to be called the Financial Accounting Foundation, be established, separate from all existing professional bodies.” The report recommended the FAF “would be governed by a Board of Trustees composed of nine members, whose principal duty would be to appoint the members of the Financial Accounting Standards Board and to raise the funds of its operation.”

The history of the independence of the FAF—in particular, the process to appoint our Trustees—is an interesting one, evolving over time in a dynamic regulatory and economic environment.
The history of the independence of the FAF—in particular, the process to appoint our Trustees—is an interesting one, evolving over time in a dynamic regulatory and economic environment.

The Wheat Report originally proposed rules for who could and should serve on the FAF Board of Trustees. The report proposed that the President of the AICPA be appointed as a FAF Trustee.  Moreover, the other eight Trustees should be appointed by the AICPA board of directors, and should include:
  • 4 CPAs in public practice
  • 2 financial executives
  • 1 financial analyst
  • 1 accounting educator.
Finally, certain so-called sponsoring organizations were given rights to nominate candidates for the FAF Board of Trustees:
  • The Financial Executives Institute (today, Financial Executives International)
  • The National Association of Accountants (today, the Institute of Management Accountants)
  • The Financial Analysts Federation (today, the CFA Institute), and
  • The American Accounting Association.
The original appointment approach was a good start and gave the fledgling body the knowledge and experience needed to get the organization off the ground. Over time, though, perceptions grew that control of Trustee nominations and appointments by the sponsoring organizations were not consistent with the need for independence.

As the organization matured and gained the confidence of stakeholders, the approach to nominate and appoint Trustees also evolved with a goal of increasing the independence of the Board and the organization as a whole. The size of the Board of Trustees also increased over time to ensure that individuals with broader perspectives, more varied backgrounds, and more diverse experience sat on the Board.

A few key moments stand out:
  • In 1984, with the establishment of the new Governmental Accounting Standards Board (GASB), the FAF by-laws were amended to provide for the appointment of Trustees with state and local governmental accounting and finance experience to properly oversee the activity of the newly established GASB.
  • In 1996, U.S. Securities and Exchange Commission Chair Arthur Levitt recommended to the FAF Trustees that “a majority of its Board of Trustees [should] consist of individuals with strong public service backgrounds who are able to represent the public interest, free of conflict.” The Trustees devoted substantial attention to this recommendation, and subsequently increased the number of seats to include financial statement users and the public, while reducing the number of preparers and auditors. However, specific organizations (then referred to as “nominating organizations”) retained the ability to nominate a majority of the Trustees.
  • In 2008, the Board of Trustees further increased the independence of the appointments process by significantly expanding the universe of organizations invited to nominate FAF Trustees to access a broader population of nominees. The Trustees sought more nominations of individuals with business, investment, capital markets, accounting, accounting and business education, financial, government, regulatory, investor advocate, and other experiences. The process further expanded to include an invitation for the public to submit nominations.   
  • Also starting in 2008, the Trustees decided that they, rather than the nominating organizations, should have final authority for all appointments, under a process facilitated by the Board’s Appointments Committee. This decision effectively eliminated direct appointments by other organizations.
Presently the Board comprises 18 members from varied backgrounds—users, preparers, and auditors of financial statements; state and local government officials; academics; and former regulators. The Trustees include individuals with experience at private and public companies, small and large firms, and varied state and local government experience.
We’ve come a long way in ensuring that the composition of our Board promotes our independence, but it took a journey to get here.

Nominations come from many diverse sources—both organizations and individuals—to reflect the stakeholders we serve and the independence of the Board.  It’s important to note that all the original sponsoring and nominating organizations—and the organizations that they have evolved to—continue to actively participate in our nominations process.

This Board composition serves the FAF well, with each member bringing a unique perspective through different work experiences and areas of expertise. We aspire to achieve Board diversity and continually seek to refine our selections to best reflect and serve the broad range of FASB and GASB stakeholders.

We’ve come a long way in ensuring that the composition of our Board promotes our independence, but it took a journey to get here. To those who helped us along the way—from sponsoring and nominating organizations, to individual stakeholders and the public submitting nominations—we thank you and wish you a “Happy 30th of June!”

I welcome your comments on this or any other topic. Please write to me at

FAF President and Chief Executive Officer