The voters have spoken, and many corporate watchdogs are worried about what policymakers in Washington heard.

The re-election of President Bush and the strengthening of the Republicans' majority in Congress have put pro-business politicians firmly in charge. That could spell the end of the post-

Enron

movement to reform corporate governance via new laws and regulations, many observers believe.

"The reforms are over. It's going to be problematic as to what you're able to hang on to," said Lynn Turner, the former chief accountant of the

Securities and Exchange Commission

and the director of research for proxy adviser Glass Lewis.

Specifically, Republicans' gains could imperil both the effort to force companies to expense stock options and the proposal to give shareholders greater access to corporate proxy ballots, Turner and other capitol observers say. It could even lead to the ouster of William Donaldson, the reform-minded SEC chairman, and the rolling back of some of the provisions of the landmark Sarbanes-Oxley Act, some believe.

But even before the election, the reform movement

appeared to be losing steam. The

proposal by accounting regulators to require all companies to recognize the cost of options on their income statements has already drawn

serious opposition in Washington, including a vote over the summer in the House of Representatives that would override the new proposal.

Similarly, business groups have

balked at the new proxy access proposal. The uproar over the proposed rule, which would allow shareholders to place director nominees on company issued proxy ballots if certain conditions are met, forced SEC Chairman Donaldson to back off from his initial support.

Business interests in general have become more vocal in their opposition to further reforms and have begun to call for a re-examination of some of the recently passed rules.

NYSE

CEO John Thain, for instance, has complained that the new rules have encouraged companies to go private or to avoid the U.S. markets. And many small and medium-sized public companies have complained about the costs of complying with the new rules.

"We think there's a growing sense among businesses, lawmakers and others that the pendulum has swung too far," said David Hirschmann, a senior vice president at the U.S. Chamber of Commerce.

Even corporate watchdogs admit that they face an uphill battle to keep policymakers focused on the need for reform. "We need to remind members of Congress why these proposals were necessary," said Sally Greenberg, senior counsel for Consumers Union.

Further dimming the reform movement's prospects is increased scrutiny on the SEC's Donaldson. Conservatives have grown dissatisfied with Donaldson over his backing of increased regulation. A number of recent proposals, including the new rules governing hedge funds and mutual funds, were passed only because Donaldson sided with the agency's two Democratic commissioners.

The Bush administration and Congress are likely to frown on similar outcomes at the SEC, observers say. Indeed, Donaldson could be forced out unless he reaches out to his fellow Republican commissioners, which would likely entail fewer and less restrictive regulations going forward, they say.

"He's walking the plank to some extent," said a former congressional policymaker who is close to Republican lawmakers. Republicans' Election Day gains will "slow down the momentum Donaldson had hoped to build behind additional reforms," added the former policymaker, who asked not to be named.

Many believe Donaldson wants to push through the proxy access rule to secure his legacy, but doing so could shorten his stay on the commission and lead to his replacement by a more conservative chairman who might try to roll back the reform.

"We're very concerned about

the prospects for shareholder access," said Ann Yerger, deputy director of the Council of Institutional Investors, which represents public, labor and corporate pension funds. "We're optimistic something will happen in the not-too-distant future, but the road seems a lot rockier" than before the election, Yerger added.

The options proposal also could face dim prospects post-election. In addition to the opposition already voiced to it, the proposal could put further heat on Donaldson and the SEC. Although the independent Financial Accounting Standards Board has sway over accounting rules and is behind the proposal, the SEC will have the final say over how, when and whether the new rule is implemented.

Opponents of options expensing -- particularly those in the technology industry -- have argued that requiring companies to recognize options costs would inevitably force them to abandon their broad-based options programs, which would hurt their competitiveness. That argument will likely carry a lot of weight with the administration and with Republicans in Congress, observers say.

"I don't think the White House ... or senior congressional Republicans are going to take lightly the idea that this accounting board is making a decision that's going to have a serious negative impact on the economy," said the former policymaker.

In addition, the U.S. Chamber of Commerce plans to push for a "technical correction" to Sarbanes-Oxley in the coming Congress. Among the items that political observers expect the Chamber to target are the ban on executive loans and the internal controls requirements.

"There are probably a number of areas

of Sarbanes-Oxley that should be looked at with the benefit of experience," said Hirschmann. "Anytime you do a major bill like that, it's normal that a technical corrections bill

will be done."

To be sure, few believe the election results will lead to a complete repudiation of the recent reforms. While Enron and

WorldCom

may be becoming distant memories, the whiff of corporate scandal still fills the air, Spitzer's recent crusade against the insurance industry being only the latest example. As long as similar fiascos keep making headlines, policymakers will have little leeway to roll back reforms, some say.

"It's disgraceful what's going on in our companies," said Ed Mierzwinski, the consumer program director for the U.S. Public Interest Resource Group, a consumer advocacy organization. "The climate is not right for letting them get away with what they want to get away with."

And even though Republicans made gains in Congress, that doesn't necessarily mean it will be more likely to oppose further reforms. Among the most vocal defenders on Capitol Hill of FASB's stock options effort, for instance, are Republican senators such as John McCain of Arizona, Alabama's Richard Shelby and Illinois' Peter Fitzgerald.

"We didn't know that Sen. Fitzgerald would be a champion for investors," said the Consumer Union's Greenberg. "It's hard to say" how the new Congress will act, she added.

Indeed, some think that Congress will have little appetite to roll back parts of Sarbanes-Oxley or even to step in on the options or proxy access fights.

While there is a "fair amount of muttering about the need to change or modify Sarbanes-Oxley, that's not going to happen," said the former policymaker. "Congressional Republicans are not interested in that and the administration is not interested in that."

Still, few believe that the reform movement will continue with the momentum it has had.

"I think we're into a whole new world. We'll just have to wait and see how it turns out," Turner said. "The investor community is probably going to be more challenged than it has been in the last dozen years."