Thursday 20 December 2012

End 2012: regulatory proliferation and fatigue

A look back over this blog in 2012 would reveal a number of recurring themes, for example:

  • What is the role of the private sector in helping provide public goods in Africa -- what implications does an expanded role for (or set of expectations on) business have for policymaking? What strategic risks arise where firms take on a greater burden for example in social investment?
  • How can we improve business-government relations and communications, including to define better the distinct responsibilities of each in relation to building more peaceful, prosperous, participatory societies? What risks arise where business takes more of a lead on socio-political issues?

Inequality gap as a private sector issue, too

Yet if I could choose one macro-theme touched on in many posts, it is the challenge the private sector faces -- at least in the continent I cover -- from growing social inequality and diverging social indicators (in other regions, I would add here what I think is a trend of greater nationalist and protectionist sentiment, including among supposedly more open-minded younger people). Poverty-reduction and social policy are clearly the responsibility of governments; yet firms and financiers have an interest in building more inclusive, educated, employed, empowered societies -- if not to maximise market size and depth then at least to mitigate the risk of social disharmony creating serious future disruptions to commerce.

Regulatory proliferation

Instead of these issues (more in 2013), I'll return to the theme of regulatory proliferation -- what does it mean for influencing responsible business conduct -- while trying not to see as growing regulatory and compliance fatigue what is only my own end-of-year need for rest!

It is December -- a year since I started blogging on this site.

For many, blogging means daily inputs responding to issues and events. Instead I've conceived of this site as a weekly or fortnightly missive on trends at the intersection of business and society.

One reason I've had for eschewing daily posts is a consciousness of just how saturated most people I know are with information and analysis. This internet-accelerated quantity does not necessarily lead to better quality insights or decisions. Concentration and constant stimulation do not go well together.

Might this proliferation problem not also be the case when regulating business conduct?

At a recent conference (see previous post) one obstacle raised to better governance of natural resources was the proliferation of voluntary and other initiatives to regulate contract and revenue transparency, conflict-free minerals, and so on. Corporate actors can become focussed on narrow compliance or reporting issues rather than thinking clearly and strategically about how to 'do well while doing good'. The US Dodd-Frank financial regulations are frequently cited as far too complex and lengthy, and likely mainly to keep lawyers well billed.

This is not the place for reciting the academic literature from regulatory theorists; and if I do not here give enough caveats about 'of course business wants less regulation' it is only to avoid saturating prose. Also, as an ex-lawyer myself I hardly disown the need for 'hard law' rules. Simple directives alone cannot govern all complex market transactions; and one cannot rely on self-regulation alone. So of course there is a place for codes of rules -- for example, to control to whom a gunshop business may sell military-style weaponry. Also, it is strongly arguable that regulation of business and investor responsibility is only just getting going, so why retreat from norm-building now? Moreover, I'm sure to blog in 2013 about how public policy should be comfortable with or indeed encourage multiple sources of regulatory influence in an incorrigibly plural world -- all the better to promote business practices more aligned to the sort of society we want for our children.

Yet despite all this, it is not obvious to me that 'more' is 'better' when it comes to changing behaviours.

A former China correspondent recently told me how in his view the phenomenal and rapid process of modernisation in that country came not from reams of codes and stipulations and directives. In his view it came in large part from a gesture -- the expression of a simple but powerful idea, a permissive or steering indication -- by the remarkable Deng Xiaoping. This described a destination, leaving it to others to map the particular steps.

So I end my last 2012 post wondering whether the most powerful ordering force for reconciling business and social values and needs might not be highly specific codes and regulations -- although no doubt enforceable rules and some detailed guidance will always be needed. Instead, the most influential driver of responsible business conduct might be what Marti Koskeniemmi called the 'regulatory idea' of (in his case) international law.

Customers, citizens, insurers, investigators -- all these will, if trends continue, recognise and reward (or regulate) where a business is trying to mitigate social harms and multiply social goods. It will take rules to tidy-up and trigger-on parts of this trend, but the transformative potential and power of greater business-society alignment lies in the idea, not the individual sub-clause; in the destination, not the detailed sub-section.

Proliferation of rules and schemes is valuable if it assists in stimulating socially-responsible business and delineating public and private sector responsibilities -- not if it obscures the relatively simple notion: do no harm.

Jo

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