After a series of celebrated accounting debacles, Congress enacted the Sarbanes-Oxley Act of 2002 (or Act), 116 Stat. 745. Among other measures, the Act introduced tighter regulation of the accounting industry under a new Public Company Accounting Oversight Board. The Board is composed of five members, appointed to staggered 5-year terms by the Securities and Exchange Commission. It was modeled on private self-regulatory organizations inthe securities industry -- such as the New York Stock Exchange -- that investigate and discipline their own members subject to Commission oversight.

On June 28, 2010, the United States Supreme Court held in Free Enterprise Fund et al. v. Public Company Accounting Oversight Board et al. that Sarbanes-Oxley unconstitutionally restricted the President of the United States in his ability to remove a principal government officer, who is in turn restricted in his ability to remove an inferior officer, even though that inferior officer determines the policy and enforces the laws of the United States. Pointedly, the Court held that without the ability to oversee the PCAOB, or to attribute the PCAOB's failings to those whom he can oversee, the President is no longer the judge of the PCAOB's conduct. He can neither ensure that the laws are faithfully executed, nor be held responsible for a PCAOB member's breach of faith. If this dispersion of responsibility were allowed to stand, Congress could multiply it further by adding still more layers of good-cause tenure. Such diffusion of power carries with it a diffusion of accountability; without a clear and effective chain of command, the public cannot determine where the blame for a pernicious measure should fall.

In referencing Wall Street's SRO's, in its recent PCAOB/Sarbanes-Oxley ruling, the Supreme Court presents us with a likely unintentional paradox -- and a troubling one at that.

Not one to apparently go down without a fight, in 2007, former American Stock Exchange Chairman/CEO Sal Sodano's legal team moved to dismiss the SEC's charges based upon the argument that the SEC lacked authority to proceed against him. Citing Section 19(h)(4) of the Exchange Act, Sodano argued that the SEC's authority to sanction him was:

to remove from office or censure any officer or director of such self-regulatory organization [if] such officer or director has willfully violated any provision... willfully abused his authority, or without reasonable justification or excuse has failed to enforce compliance.

Because 19(h)(4) only permitted the SEC to censure or remove a current officer or director, and, Sodano had not been an AMEX officer or Director since April 2005 (some two years before the proceeding was instituted), Sodano argued that the SEC could not pursue him now that he was no longer at the AMEX.

Maybe the Supreme Court got it right? Maybe it's time that we tugged on those ever-lengthening leashes and held more government officers -- principal and inferior ones -- accountable. Maybe its time that we demand more from our government and regulatory officials than going through the motions.

Accepting appointment to a government board or an organization should entail more than surviving a high stakes game of dodgeball. Such service needs to have consequences beyond raising your hand to vote and putting the title on your resume. As I said at the start of this article, some view the Supreme Court's PCAOB pronouncement as addressing rarefied air. I think not. I think that the ways of government, at all levels, including even the so-called quasi-governmental SROs, need far more accountability.

The way of Washington and state politics seems to be that we only fire folks after a disaster hits and their inadequacies are exposed. Of course, no one seemed to care all that much when they hired the crony to begin with. These things only seem to become issues when there is a hurricane or oil gushing onto our coastlines. No wonder there is so much talk about a good, old-fashioned House cleaning... and a Senate cleaning, and a government agencies' cleaning, and state legislatures' cleaning. Hopefully, the sanction for not doing your job in government or at a Wall Street SRO will be a quick kick in the butt out the door, not the measly censure after you've left.

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