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Supreme Court Says President Can Fire PCAOB

By Jason Beahm on June 29, 2010 | Last updated on March 21, 2019

Yesterday, June 28, the Supreme Court issued a 5-4 decision in Free Enterprise Fund v. Public Company Accounting Oversight Board. As is frequently the case, the Justices issued a narrow ruling. In fact, the 5-4 was actually affirmed in part, reversed in part, and remanded.

The case involved the Public Company Accounting Oversight Board, the board appointed as part of the 2002 Sarbanes-Oxley Act, which was passed after the accounting scandals of the early 2000s. The opinion was written by Chief Justice Roberts. Justice Breyer dissented, joined by Justices Stevens, Ginsburg, and Sotomayor. The Justices ruled that it was unconstitutional for the President to be unable to fire the members of the Public Company Accounting Oversight Board, but the Court otherwise left intact the board and the Sarbanes-Oxley Act.

The Public Company Accounting Oversight Board was designed to oversee accounting firms after the disaster and fallout from Enron and WorldCom's accounting scandals. The Court found that because the board is overseen by the SEC (whose members can only be removed for cause), the Sarbanes-Oxley Act interfered with Presidential authority.

In the end, virtually no one seemed satisfied with the decision, even the supposed winner, as the petitioner had hoped that the entire board would be found unconstitutional.

The majority opinion delivered some notable quotes from Roberts on the matter, including:

Since 1789, the Constitution has been understood to empower the President to keep these officers accountable--by removing them from office, if necessary....This Court has determined, however, that this authority is not without limit.

We are asked, however, to consider a new situation not yet encountered by the Court. The question is whether these separate layers of protection may be combined. May the President be restricted in his ability to remove a principal officer, who is in turn restricted in his ability to remove an inferior officer, even though that inferior office rdetermines the policy and enforces the laws of the United States?

No, the majority ultimately decided:

We hold that such multilevel protection from removal is contrary to Article II's vesting of the executive power in the President. The President cannot "take Care that the Laws be faithfully executed" if he cannot oversee the faithfulness of the officers who execute them.

Therefore while the average citizen may see little impact from the Court's decision, the end result is that the President has the authority to remove members of the Public Company Accounting Oversight Board, without showing "good cause."

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