Corporate Governance

Free Enterprise Fund v. PCAOB: Regulation, the Free Market, and the Constitution (The Amici Speak) (Part 10)

By J. Robert Brown

Similarly, a number of amicus briefs were filed on behalf of the Plaintiffs, including the Mountain States Legal Foundation, a relatively short brief dealing with the Appointments Clause issue. 

More entertaining was the one filed by the Washington Legal Foundation which described itself as a center devoting "substantial resources to litigating constiutional and statutory cases over the last 30 years in support of the free enterprise system and in opposition to unlawful and excssive government regulation of business."  Whatever the general views of the Foundation, it was clear from the brief that rabid opposition to SOX was one of them. 

The brief largely provided a historical review of presidential opposition to limits on removal authority.  It was, therefore, part discourse on history and part polemic.  In the Summary of the Argument, the WLF had this to say about SOX:

• Indeed, the short history of Sarbanes-Oxley demonstrates that it deserves the same fate as the Tenure in Office Act and the Ethics in Government Act.  Sarbanes-Oxley has had a harmful effect on our businesses and economy.  Sarbanes-Oxley's requirements have raised substantially the costs of obtaining accounting and auditing services.  And small business have been forced to bear a disproportionate share of this burden.  Simply put, the practical effect of Sarbanes-Oxley has been to harm public companies, small businesses, and shareholders. 

Towards the end of the brief, the Foundation discusses the "harmful effects of Sarbanes-Oxley" and notes that the PCAOB, "unchecked by political will, has run amok among the accounting industry and our nation's public companies." 

As for the historical analysis, the brief was selective in the content discussed.  For example, after discussing developments in 1789, quoting Madison and noting some statements by Jackson, the brief moves on to Grover Cleveland, who took office in 1885.  Omitted was the only thing of consequence ever accomplished by Cleveland's predecessor, Chester Arthur (who never held elected office until becoming Vice President, gaining the top office only upon the assassination of James Garfield).  Arthur was in office when Congress adopted the Civil Service Reform Act of 1883.  The Law sought to protect government workers from political pressure and, incidentally, restricted the President's right to remove some members of the executive branch.  As is often the case with Chester Arthur, he is forgotten in the discussion.   

McKinley, Wilson, Coolidge (the brief skipping FDR with our only four term president apparently having no views on the matter), Truman (the brief skipping Eisenhower, Kennedy and Johnson), Nixon (the brief skipping Ford, Carter, Eisenhower and George Bush Sr), Clinton and finally, George W. Bush (who "strongly asserted his removal authority during the creation of the Department of Homeland Security.").   The brief did not reconcile the positions attributed to George Bush with the fact that the Justice Department had filed a brief on behalf of the PCAOB.  The analysis ended by claiming that "from 1789 to the present, the Executive Branch has vigorously and consistently protected its removal authority from congressional intrusions thereon." 

That the Foundation does not like SOX is clear.  That many presidents have resisted efforts to restrict their right to remove executive branch employees is beyond dispute.  The value of these points in determining the outcome of these issues?  Priceless.    

Full post as published by The Race to the Bottom on July 05, 2008 (boomark / email).