The other argument about the removal authority is that the Commission, which is itself an independent agency, can only remove members of the PCAOB "for cause."  In other words, the President's influence over the PCAOB is even more attenuated.  As one appellate judge characterized it, the PCAOB was an independent agency within an independent agency.

Despite the appellate panel's concern, the issue is a red herring.  First, there is nothing inherently wrong with a double layer of insulation from the executive.  Whether or not subject to for cause removal, anyone appointed by the head of an independent agency is effectively insulated from the President.  Thus, for example, a number of agencies have the authority to hire a Chief Financial Officer.  See See 31 USCS § 901)(a). 

In some instances, the authority to appoint is expressly given to the President.  In other instances, however, the authority rests with the head of the agency.  See 31 USCS § 901(b).  Among the agency heads that have the authority to appoint a CFO?  A number of agencies that are independent.  See, e.g. Commissioner of Social Security, 42 USCS § 902 ("An individual serving in the office of Commissioner may be removed from office only pursuant to a finding by the President of neglect of duty or malfeasance in office."); Nuclear Regulatory Commission, 42 USCS § 5841(e) ("Any member of the Commission may be removed by the President for inefficiency, neglect of duty, or malfeasance in office. No member of the Commission shall engage in any business, vocation, or employment other than that of serving as a member of the Commission."); The National Transportation Safety Board, 49 USCS § 1111 (“The President may remove a member for inefficiency, neglect of duty, or malfeasance in office.”). 

In other words, the President has little or no ability to remove a CFO appointed by the head of an independent agency.  This is true whether or not the head of the agency is limited to removal for cause.  Moreover, in at least one instance, Congress restricted the right of an independent agency to remove to for cause, creating a double layer "for cause" restriction of the type at issue in FEF v. PCAOB.  This is the case with respect to the Board of Governors of the Postal System, an independent body.  See 39 USCS § 202(a)(creating an 11 person board with members only subject to removal "for cause").  It is the Board that is assigned the task of appointing an Inspector General and only the Board can remove the individual and only for cause.  See  39 USCS § 202 (3)("The Inspector General may at any time be removed upon the written concurrence of at least 7 Governors, but only for cause."). 

There are other, similar examples.  While in most cases the heads of the independent agencies are subject to for cause removal by the President, this is far from universal.  Nor are they always subject to removal by someone, as in the case of Morrison, who serves at the complete discretion of the President.  Thus, the Personnel Appeals Board within the GAO is independent, with members appointed by Comptroller General and receiving five year terms.  31 USCS § 751.  Only they can remove themselves.  See 31 USCS § 751(d)("A member may be removed by a majority of the Board (except the member subject to removal) only for inefficiency, neglect of duty, or malfeasance in office.").  In other words, there is no one subject to plenary presidential oversight who has a say in removal.

Similarly, the Legal Services Corporation has a board appointed for a period of years by the President.  The President has no power to remove.  See 42 USCS § 2996c(e) ("A member of the Board may be removed by a vote of seven members for malfeasance in office or for persistent neglect of or inability to discharge duties, or for offenses involving moral turpitude, and for no other cause.").  In other words, it is not uncommon to have situations where the President has little or no authority to remove, whether direct or derivative. 

A finding that the PCAOB restriction is per se invalid would throw these other arrangements into doubt and would be tantamount to the prohibition on the appointment by independent agencies of anyone deemed to be an inferior officer (as opposed to a mere employee). 

Finally, as the PCAOB notes on brief, the President's authority is not "completely stripped" away, only more attenuated. The president in fact retains ultimate authority over the definition of “good cause.”  To the extent members of the PCAOB act in a way that results in grounds for a good cause dismissal (as interpreted by the President), the President can treat the failure by the Commission to remove as itself good cause for removal of the commissioners. The President can fire the commissioner of the SEC until he or she gets the sought after result.  It is a blunt authority but so is any effort by the President to use the power to dismiss to induce personnel changes within an executive branch department.   

The question is not, therefore, whether it is harder for the President to engender the removal of the members of the PCAOB but whether the restriction (however difficult or hard) results in interference with the President's ability to execute the laws.  The answer to this question is clear.  The courts have already upheld in the securities area the use of self regulatory organizations.  These organizations carry out a regulatory function but allow for no presidential control over the persons who head the organization.  With respect to the PCAOB, the President's authority is substantially greater.  Any decision here that the PCAOB arrangement is unconstitutional would have to explain how and why self regulatory organizations are likewise not unconstitutional.  

Plaintiffs’ response? Labeling the assertion a non sequitur, they assert that “[t]he fact that a multi-member agency designed to be independent of the President has some power to remove hardly vests the President with such power, or as a consequence, with any derivative ability to even influence the Board’s execution of the laws.” Appellant Brief, at 17.  The  position does not really speak to a double layer of "for cause" removal restrictions, but instead challenges the right of independent agencies to appoint inferior officers of any kind.  This would apply not only to the members of the PCAOB but to the chief financial officers authorized under Section 901. See 31 USCS § 901(b).  There is no case that has held that independent agencies lack this authority.  More importantly, it is a position disconnected from the required analysis in Morrison.  Morrison does not speak to per se rules but instead requires a functional analysis that examines whether the particular restriction impedes the President's ability to execute the laws. 

We have posted on the DU Corporate Governance web site most if not all of the important documents on the case, including the assorted amicus filed in the case.