Job Protection, the Constitution and Federal Pay

The Supreme Court, in a 5-4 decision this morning, ruled that one particular part of the way the Public Company Accounting Oversight Board was set up under the 2002 Sarbanes-Oxley Act violates the Constitution.

The board, whose members are appointed by the Securities and Exchange Commission, is a quasi-governmental entity with broad powers to oversee firms that audit public companies.

At issue in the case was, according to a summary of the decision issued by the court, the fact that "board members were insulated from presidential control by two layers of tenure protection: Board members could only be removed by the commission for good cause, and the commissioners could in turn only be removed by the president for good cause." It's acceptable to have one layer of protection against removal by the president under the Constitution, the justices ruled, but two simply doesn't cut it.

"We hold that such multilevel protection from removal is contrary to Article II's vesting of the executive power in the president," the court's majority opinion stated. "The president cannot 'take care that the laws be faithfully executed' if he cannot oversee the faithfulness of the officers who execute them."

So why did Congress choose this kind of structure for the board in the first place? At least a partial explanation is buried in the opinion: "Congress created the board as a private 'nonprofit corporation,' and board members and employees are not considered government 'officer[s] or employee[s]' for statutory purposes. The board can thus recruit its members and employees from the private sector by paying salaries far above the standard government pay scale."

The board chairman's current salary is $673,000, according to the opinion. Other members get $547,000.