adminDisregard of these sector rules and regulations by individual firms results in firms being sanctioned and facing penalties. Cases of firms taken to task for flouting industry rules and regulations are quite prevalent in the country.
In light of the corporate misconduct prevalent in the country, it is logical to ask whether the existing self-regulatory structures in different sectors of the economy are adequate, or properly enforced. The answer is an absolute no.
Apparently there is an obvious need by all industry sectors in the economy to revisit their self-regulatory frameworks and structures. There is need to align these self-regulatory processes to regional and international standards. Industry self-regulatory processes for a number of key players in the economy have not been updated for some time now, and it is important that these processes are cemented so that they play their role in helping restore good governance and the “ethics of doing business”.
Self-regulation is a trusted tool in growing good governance and ethical business practices because it anchors on complying with the “spirit” not the “letter” of the law. It is trusted because naturally it is expected to invoke the spirit of self-control and self discipline in individual firms and the whole sector.
Self-regulatory infrastructure is by its very nature closer to the industry being regulated as compared to Government regulatory frameworks. This proximity means that self-regulatory institutions will generally have more detailed and current information about the industry, something that is helpful particularly in rapidly changing business environments.
The proximity also entails self-regulatory institutions being able to quickly know who is violating which rule, and how. By comparison, Government regulators are often far removed from the sector and are in most cases lacking resources to make follow-ups. Being closer to the action, self-regulators are better situated to identify potential problems far more quickly.
Self-regulatory institutions can act with greater flexibility than Government regulators. They are not subject to the same kinds of procedural and due process hurdles that Government regulators go through. Government regulatory frameworks do not relish dealing with extremely complex industry issues, so these are best dealt with by self-regulatory bodies.
Self-regulation is likely to generate a higher level of compliance by firms in that sector. The greater the involvement of industry in setting the rules, the more those rules will appear reasonable to individual firms. Self-regulation may also generate rules that solve regulatory problems in ways more sensitive to industry practices and constraints, and hence it may be easier for firms to comply with them.
Self-regulation can harness the collective interests of the industry. This becomes more important when the sector intends to engage state authorities in lobbying for sector-friendly legislation or amendments on existing industry laws. Also through self-regulation, competitors are able to effectively police each other.
Self-regulatory bodies have a better ability to mobilise and secure needed resources to fulfill the self-regulatory function. State regulatory authorities are normally under-funded, thus compromising their ability to effectively carry out their regulatory duties.
Although self-regulation has these important advantages, it is important to note that it is also characterised by a number of disadvantages. Some people equate self-regulation to assigning a hyena to guard a goat pen. The greater flexibility afforded self-regulatory arrangements also means they may have the discretion to mete out only modest sanctions against violators of rules and regulations, a situation that may create discomfort with stakeholders.
Conflict of interest that may be embedded in self-regulation may also make it more likely that compliance with rules will be insufficiently monitored. For example, if industry’s interests are at variance with those of the society, then enforcement by self-regulators may not be as effective leading to a compromised overall good of the society.
There is also the possibility that self-regulation will be used by older, and more established companies in the sector or industry simply to keep out new market entrants. Unavoidable as it is, self-regulation becomes very effective when anchored on strong and effective Government regulation.
Bradwell Mhonderwa is an Ethics Coach and Trainer with the Business Ethics Centre. Send feedback to info@businessethicscentre. co.zw, or visit www.businessethicscentre.co.zw, or call 0772 913 875
leeroy
Online Reporter