An interesting legal battle is shaping up in the Supreme Court that could invalidate most or all of the Sarbanes-Oxley law, which is intended to make all public companies better at overseeing their internal accounting.

The main issue has to do with the governance structure of the board of the Public Company Accounting Oversight Board (PCAOB), which was set up at the time the law was passed in 2002 to oversee its successful implementation.

The plaintiffs argue that the PCAOB's board is not accountable enough and must allow for the president to appoint members to the board. Because this is currently not allowed, they argue the whole Sarbanes-Oxley law must be struck down.

Ironically, many companies who support this effort to strike down Sarbanes-Oxley (due to the higher costs of internal accounting oversight), also support blocking their own shareholders from having more of a say on who gets appointed to their own board of directors. What's good for the goose is apparently not good for the gander.

Sarbanes-Oxley's legislation, especially section 404, has been a bugaboo of business -- especially small business -- since its inception. Recall that the law was passed in the wake of the major scandals like Enron, Tyco, Worldcom, Parmalat, and others during the dot-com bubble.

At the time, President Bush and other politicians expressed outrage that so many large and well-known companies could have so easily perpetuated accounting fraud for so long, with no consequences -- until they were forced into the light. Most of these companies went under and, with them, the pensions and 401Ks of many hard-working and innocent executives and employees.

The political response to these events was to show voters that regulation would be passed to prevent big companies -- which voters might work for -- from being taken down by greedy executives. Sarbanes-Oxley wasn't intended to require anything other than what companies should have already been doing.

A chorus of complaints immediately rose from business against the law. "It's too expensive. We have to pay our accountants so much more than we used to." Until now, the law has managed to remain in effect.

Now, it is at risk of being struck down because of the governance structure of the Public Company Accounting Oversight Board, thanks to a new lawsuit by Jones Day lawyers Michael Carvin and Noel Francisco. The two argue that PCAOB's members are appointed by members of the Securities and Exchange Commission - not by the president. Additionally, they say PCAOB's members are beyond presidential discipline. As a result, they argue the governance structure breeds a lack of accountability. Bureaucrats appoint bureaucrats, thus making it harder and more expensive for entrepreneurs to effectively run their real businesses.

If the Supreme Court accepts their arguments, the entire Sarbanes-Oxley law might be scrapped and legislators forced to start anew.

It's interesting that, if lawmakers had to start again today, there could be much less political will to push for such a law today. Ironically there's been much worse corporate behavior has gone with the problems of

Bank of America

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,

Citigroup

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,

Fannie Mae

,

TheStreet Recommends

Freddie Mac

and the near failures of

Morgan Stanley

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and

Goldman Sachs

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than with the bad corporate behavior of Jeff Skilling and his cohorts.

It appears as though a little bit of failure meets with tough political action, while a lot of failure meets with political befuddlement and deferral.

Corporate behavior and such a widespread lack of attention to risk management almost killed the financial system. Therefore, politicians of both parties have been forced to beat back all regulation intended to impede business. Whatever the banks want, they've received. Suspending mark-to-market accounting so you don't really have to accurately value your loans? No problem. The thinking seems to go: This whole financial system almost shut down, so we have to do whatever's requested by the people who almost killed the system, in order to get the system back to where those people want it.

If these executives truly kill the system next time, maybe we can do away will regulation altogether.

The other big irony of this legal argument against Sarbanes-Oxley on the basis of the PCAOB board not being accountable enough is that many businesses who support it are also fervently against the idea that their own company boards should be more accountable.

These businesses - and their mouthpieces at the Chamber of Commerce and Business Roundtable - have opposed the SEC's proxy access proposal, which would allow company shareholders a process to follow to more easily nominate representatives to company boards. The companies have said their shareholders don't really understand what's good for the company's long-term interests. Therefore, companies must be given strict control over who sits on their boards -- although they still should be able to raise money from public shareholders.

I like to have my cake and eat it too as much as the next person but that is a bit much. Companies need to pick which argument they want to side with.

Sarbanes-Oxley is asking companies to do what they should be doing anyways: keeping an accurate accounting of what's transacting in their business. Despite my support for the law, however, I'm sympathetic to the argument put forward by the Jones Day lawyers.

After all, a board should be the mechanism to enforce accountability on a business or organization. If Sarbanes-Oxley is struck down as a casualty of a ruling in favor of better corporate governance, I can live with that.

However, businesses should then be willing to live with the corollary of such a ruling: Their own boards should be truly accountable to the will of the shareholders. Notice I didn't distinguish between short- or long-term shareholders. Anyone who owns stock in a company is a shareholder and deserves a say on who should sit on that company's board of directors, so that those directors truly represent those constituents and not the will of management.

It's unclear what the final outcome of these legal and political battles will be. But we can draw three conclusions: (1) Good governance does matter and should be allowed to operate for all public companies and governmental organizations; (2) it's the concern that greater systemic risk facing the financial system has been met with more lax regulatory requirements, rather than less, and (3) when it comes to promoting one's self-interest, companies will take whatever side of the argument is necessary to further their aims.

Eric Jackson is founder and president of Ironfire Capital and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd. You can follow Jackson on Twitter at www.twitter.com/ericjackson or @ericjackson