John Biggs, chairman and CEO of pension fund giant TIAA-CREF, today urged the U.S. Congress to authorize an independent agency with broad powers to oversee the U.S. accounting industry.

Biggs imagines that the new unit, with licensing and disciplinary authority over the accounting profession, would have an independent source of funding, such as a fee on financial transactions, to make the agency free of pressures from corporations or from the accounting industry itself.

To assure the independence of auditors and to avoid conflicts of interest, Biggs also recommended that companies change their audit firms regularly. “Clearly, had Enron been required to rotate its auditors every five to seven years, it is unlikely that misleading financial reporting would have continued, or that members of the board’s audit committee would have been kept in the dark, as they claim they were.”

The Enron collapse also underscores the overuse and abuse of stock options in corporate compensation, Biggs observed. Sixty percent of Enron’s employees had stock options, yet the enormous cost of these options went unreported in the company’s earnings statement.

Enron’s downfall hopefully will make clear the pressing need for transparent accounting for stock options, regular rotation of auditors, and a strong regulatory body overseeing the accounting industry, Biggs told the lawmakers. If those significant reforms are achieved, the U.S. capital markets will be stronger in the long run, he stated.

TIAA-CREF has about US$271 billion in assets under management.