Form Over Function: Unitary Executive Theory in Free Enterprise Fund v. Public Company Accounting Oversight Board (2010)

The Supreme Court, in Free Enterprise Fund v. Public Company Accounting Oversight Board (2010), held that the dual layers of for-cause removal protection insulating members of the Board limited the President’s ability to oversee the executive branch, and was therefore unconstitutional. The decision reflects an overextended application of the unitary executive theory (UET), particularly in its treatment of presidential removal restrictions. The UET posits that the President alone has absolute control over the executive branch, including federal agencies, and, as such, can fire any officers working in them. The case sits at the center of the long-running tension between presidential authority and the independence of administrative agencies.

In striking down the Public Company Accounting Oversight Board’s (PCAOB’s) double-layered removal structure, the Court adopted an overly strong interpretation of the UET, while incorrectly equating blanket presidential removal power with democratic accountability. This approach was misguided. The Court’s insistence on presidential removal authority reflects an unnecessarily formalist interpretation of the UET that is not functionally justified. That is, the Court in Free Enterprise Fund overemphasized maintaining an ostensibly textualist government structure, neglecting the practical concerns of actually running a 21st century government.

The PCAOB was created by the Sarbanes-Oxley Act of 2002 to oversee independent auditors of public companies, following major corporate accounting scandals, including Enron and WorldCom. Its members were appointed and supervised by the Securities and Exchange Commission (SEC), whose commissioners themselves operated under “for-cause” removal by the President. This double-layered removal arrangement was the basis of the constitutional challenge in Free Enterprise Fund. Writing for the majority, Chief Justice Roberts argued that such structure results in a “diffusion of power” which “carries with it a diffusion of accountability,” reasoning that, because the President could not directly remove PCAOB members, the members could not be held politically accountable for their actions [1].

This “diffusion of accountability,” though appearing to address functional concerns, is fundamentally formalist. The majority assumes that any limitation on direct removal necessarily undermines accountability without investigating whether the President in fact lacks control over the Board. This narrow conception of accountability contrasts sharply with Justice Elena Kagan’s account of presidential administration in her seminal article for the Harvard Law Review [2]. Kagan argues that accountability does not depend even primarily on the President’s removal power but on whether the public can identify the actors responsible for administrative action and hold them politically answerable. Indeed, in the case of Free Enterprise Fund, the PCAOB’s double-layered removal structure very much still preserves presidential accountability, as I will explain below.

Central to the Court’s formalist logic in Free Enterprise Fund was its rejection of the argument that the SEC’s extensive supervising authority over the PCAOB compensates for limits on removal. Although the SEC possesses broad powers, including approving the Board’s budget and modifying and overturning Board actions, the Court argued that “broad power over Board functions is not equivalent to the power to remove Board members” [3]. It further found that the Board could exercise “significant executive power” with “substantial independence” from the Commission [4]. Essentially, the Court found that the President’s executive power encompassed both an agency’s outputs—its rulings and regulations—and direct authority over its personnel.

This reasoning reflects a formalist approach that marks a departure from precedent
established by earlier cases such as Morrison v. Olson (1988). In Morrison, the Court upheld for-cause protections so long as they did not “impede the President’s ability to perform his constitutional duty” or “unduly trammel” executive authority [5]. Morrison thus recognized that some degree of insulation is compatible with the President’s executive powers. By contrast, Free Enterprise Fund largely abandons this functionality test and focuses instead on the structural problem of layered insulation itself, regardless of whether it actually interferes with Presidential control in a given case.

This change is an overly narrow interpretation of the Take Care Clause of Article II of the Constitution, which requires that the President “take Care that the Laws be faithfully executed” [6]. Unlike the President’s role as Commander in Chief, which requires direct and immediate control, his duties under the Take Care Clause are broad by nature and compatible with a range of institutional arrangements, including ones that rely on indirect supervision such as through the SEC. The Court, in Free Enterprise Fund, thus imposes a too-narrow interpretation of the Take Care Clause by mandating direct presidential control over all executive actors.

Moreover, equating accountability to the President with his removal power is unrealistic. Presidential removal is a rarely-exercised power; instead, “accountability” tends to operate far more often through day-to-day supervision and direction. The SEC’s authority to oversee, review and modify PCAOB actions would serve as sufficiently meaningful mechanisms of control, and, by discounting these powers, the Court adopted a concerningly narrow view of how accountability must function within the state.

In his article “The Place of Agencies in Government: Separation of Powers and the Fourth Branch,” Columbia Law Professor Peter Strauss highlights the limits of the Court’s reasoning in Myers v. United States (1926), which ruled that legislation requiring Senatorial consent for the President to remove executive officers is unconstitutional, thus supporting a stronger unitary executive. Strauss explains that the central constitutional concern in Myers was congressional aggrandizement, when Congress intrudes upon the President’s “ordinary political authority” by redirecting the removal power to itself [7]. The legislation in question, the Tenure of Office Act, required “senatorial concurrence in removal,” thereby expanding legislative power at the President’s expense [8]. By contrast, the indirect removal power and for-cause protections in Free Enterprise Fund do not grant Congress any direct role in removal decisions but establish double-layered protection within the executive branch itself. Under Strauss’ framework, such structure would not break the anti-aggrandizement principle established by the Myers decision.

Ultimately, Free Enterprise Fund reflects a worrying shift toward a more rigid formalist conception of the UET that discounts other methods of accountability beyond removal. By disregarding these alternative mechanisms, the Court risks severely eroding the power of independent agencies that rely on some degree of insulation to function effectively. Such agencies, intended to address complex issues ranging from financial to technological regulation, would face increasing vulnerability under this approach, threatening their future viability. Courts should therefore be cautious in further expanding such formalist approaches and evaluate what truly constitutes accountability within the state.
Bibliography

[1] Free Enterprise Fund v. PCAOB, 561 U.S. 477 (2010).
[2] Elena Kagan, “Presidential Administration.”
[3] Ibid.
[4] Ibid.
[5] Morrison v. Olson, 487 U.S. 654 (1988).
[6] U.S. Constitution, Article II, Section 3.
[7] Peter Strauss, “The Place of Agencies in Government: Separation of Powers and the Fourth Branch.”
[8] Ibid.