Corporate Governance

The SEC, Congress, and the Harm of a Rogue Inspector General (Part 2)

By J Robert Brown Jr.

So, who ought to appoint and remove the Inspector General?  

There are currently 69 Inspector Generals.  Many are appointed by, and subjected to the removal of, the President.  With respect to appointment, an Inspector General must be "appointed without regard to political affiliation and solely on the basis of integrity and demonstrated ability in accounting, auditing, financial analysis, law, management analysis, public administration, or investigations."

With respect to removal, the President may remove the Inspector General but must "communicate the reasons for any such removal to both Houses of Congress."  Moreover, Congress must be notified at least 30 days before any removal or transfer.   See Section 3 of the IG Act. 

The theory behind presidential appointment and removal is obvious.  The purpose is to increase not decrease the independence of the Inspector General.  The alternative -- one currently applicable to the SEC as well as other agencies -- is to put appointment and removal authority in the hands of the agency head that will be subject to investigation.  Under the existing system, it is hard to call the Inspector General independent, although the term is nonetheless tossed around.  See SEC Watchdog: Becoming Political Appointee Would Jeopardize White House Probe, John Solomon, May 11, 2010 ("Some, especially those at Cabinet agencies, are presidentially appointed and confirmed by the Senate. Many others are hired independently by their agencies."). 

This would suggest that presidential appointment/removal is preferable.  Yet the issue is more complicated, as we will address in the next post.

Full post as published by The Race to the Bottom on May 13, 2010 (boomark / email).