Working Paper No. 11-19:
A Modest Proposal: Abolishing Agency Independence in Free Enterprise Fund v. PCAOB

Author(s):

Neomi Rao

Date Posted: April 2011

Availability:
Abstract (below)
Full text (original)   PDF file
Full text (most recent) on SSRN

Abstract:

Free Enterprise Fund v. Public Company Accounting Oversight Board outlines a modest proposal for abolishing agency independence.  The Supreme Court’s decision creates a framework for challenging the constitutionality of agency independence and the restrictions on removal that shield the heads of independent agencies from presidential oversight.  In the course of assessing the constitutionality of the Public Company Accounting Oversight Board (PCAOB or Board), the Court provides the reasoning for undermining most forms of agency independence.  Yet the potential scope of the decision has gone largely unnoticed.  Most commentators have pronounced the decision insignificant for presidential authority.  This Article questions the conventional interpretation and demonstrates that the structure of the Court’s argument logically calls into question the constitutionality of agency independence.  Moreover, the Court’s remedy of severing invalid for-cause removal limits provides a workable approach for future cases—eliminating agency independence without eliminating the independent agencies.

Chief Justice John Roberts’ opinion sets out an ambitious proof that establishes several principles that follow from separation of powers:  (1) accountability for faithful execution of the laws requires presidential oversight and control of executive branch officers; (2) presidential oversight and control require the capacity to remove such officers; (3) Congress cannot restrict the President’s removal power.  The principles apply uneasily to the facts of Free Enterprise Fund, which ultimately leaves the Securities and Exchange Commission, an independent agency, responsible for the Board.  But the principles logically apply to the first layer of agency independence and suggest that for-cause removal protections for the heads of independent agencies are unconstitutional.   The Court makes clear that the President’s removal power is a constitutional requirement, but limitations on the removal power were created by the Court—opening up the possibility that the Court will reevaluate precedents such as Humphrey’s Executor in a future case.