Usually, they're supposed to respond to reader complaints, or investigate-and censure-reporters who have breached journalistic protocol, but I'm not sure they have any vetting authority.
On the other hand, the basic idea is not to repeat the same mistakes on an ongoing basis, which a public editor's analysis, and occasionally opprobrium, is supposed to accomplish.
After the Janet Cooke fiasco I'm amazed that the Washington Post would continue to be so lax in investigating charges of plagiarism.
And look at Jayson Blair! I mean, how many employers would really want a Jayson Blair to represent their good name under any circumstances? I can't think of any, in light of how he was living his life, as a coke addict on the job or whatever. No employer wants that. Or, if you're a newspaper, no one wants plagerism.