The Supreme Court gets it right by tweaking, but not overturning, the controversial legislation

AMERICAN business people of a conservative nature have been dreaming about driving a stake through the heart of the Sarbanes-Oxley act ever since the legislation was passed, back in 2002, in the wake of the Enron, Tyco, WorldCom and Global Crossing scandals. George Bush rightly described the legislation as “the most far-reaching reforms of American business practices since the time of Franklin D. Roosevelt”. But to its critics it is far-reaching in the wrong direction. The American Enterprise Institute, a right-wing think-tank, has dismissed Sarbox as a “colossal failure”. Ron Paul, a Texan libertarian, has argued that it puts America at a competitive disadvantage. The Wall Street Journal thunders that it has “imposed hundreds of billions of dollars in costs on business with no noticeable decline in financial scandals”. Newt Gingrich has urged Congress, the body that he once dominated, to repeal the act.

But how could it be killed? A few years ago a conservative group called the Free Enterprise Fund thought that it had found the answer. The heart of Sarbox is a body called the Public Company Accounting Oversight Board. The board’s job is to regulate the accounting industry—in effect, to audit the auditors. The Free Enterprise Fund argued that the board violated the separation-of-powers clause of the constitution, because its members are hired by the Securities and Exchange Commission (SEC), rather than by the president. They also argued that, because the legislation has no “severability clause”, a problem with just one part of the legislation invalidates the whole thing. …