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Supreme Court To Review One Small Aspect Of Sarbanes-Oxley
from the this-doesn't-seem-like-a-big-deal... dept
I'm no fan at all of Sarbanes-Oxley, the overly draconian corporate governance law that was passed in the wake of the Enron scandal. Obviously, given the financial messes that we're going through today, it did little to stop financial shenanigans. The reality is that the law did lots of superficial (but extremely expensive) things to basically have someone to pin the blame on, should anything go wrong -- but did little to actually prevent fraud. I'm all for good corporate governance, and efforts to root out fraud -- but Sarbanes-Oxley did no such thing. And, worse, it had pretty massive unintended consequences, such as adding millions to the cost (in pure economic waste) of going public, making it a lot trickier for startups to go public, even if they were completely ready under every other condition. Sure, we had too many IPOs during the dot com boom, but Sarbanes-Oxley made the barrier to going public much greater than it ever should be.
So, I was happy to see headlines suggesting that the Supreme Court is reviewing the law and could possibly throw it out. However, the details are a lot more mundane. Basically, some lawyers are challenging a very narrow part of the law, questioning whether or not it violates the "appointments clause" of the Constitution, which requires that certain officials be appointed by the President or a Cabinet member. So, in this case, officials to a board overseeing Sarbanes-Oxley were appointed by the SEC, rather than a cabinet level representative.
This is nothing to get worked up about.
You may recall, challenging various laws or appointments under this clause has suddenly become popular. We covered a very similar challenge to appointments to the Patent Appeals Board, as well as a similar claim about appointments to the Copyright Royalty Board (and it also came up as an issue during the debate over the TARP program. Of course, with the Patent Appeals Board, all it took was for Congress to make a quick fix to the law, making it so that the law required the Cabinet level member to make the appointment with the "help" of the lower level director who did the original appointments. In other words, nothing really changed other than who signed the appointments.
The only potential "difference" here is that if the Supreme Court sides with those saying this rule is unconstitutional, the entire Sarbanes-Oxley would need to be put back to a vote with any changes, and the thought is that this could open up the law to be fixed. Of course, that may be wishful thinking, as it would also open up the law to be made much, much worse -- and given the populist attacks on corporate governance and corporate malfeasance these days, it seems quite likely that what comes out would be much, much worse in terms of impact... but any oversight board would be appointed at the cabinet level.
