The Role of a Regulator is centrally important for the proper governance of any corporation. Regulators are equipped with the task of overseeing, monitoring and enforcing of laws, rules and regulations. One of the Key features of a regulator is to ensure compliance by all parties involved so that fairness, transparency and stability is maintained.
There are 3 Fundamental Policy Questions that need to be answered when addressing the Role of Regulators.
1) Who should Regulate?
There are two types of regulation. Self-Regulation and Government Regulation.
Self-Regulation involves the voluntary adherence to a set of rules, guidelines or ethical standards established by the company itself. Self-Regulation in a company works by establishing internal policies and guidelines that supports the ethical, social and environmental sustainability of the organization. The corporation has a responsibility towards its stakeholders to educate and create awareness about the internal policies governing the organization. To make sure that all stakeholders of the corporation are in compliance to these regulations relevant regulators within the corporation shall monitor and demand systematic reporting by implementing periodic audits and setting up committees accountable for overseeing compliance. This will enhance the corporations transparency and answerability.
Government-regulation refers to the creations and enforcement of laws and rules passed by the government. These laws and legislations cover areas such as anti-competition laws, labor laws, consumer protection laws and environment protections laws. Governments will also issue some frameworks that are not required to be followed by the corporations but provides guidance towards proper conduction of corporate activities and management. Government-regulations also includes the formation of different regulatory agencies each with powers granted by the government to operate within specific jurisdictions. These organizations are equipped with legal rights to release or withdraw License and permits and enforce the legislations accordingly.
2) How to Regulate?
The two ways to regulate can be through a principle-based approach or a rule-based approach.
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Rule-based regulatory approach refers to detailed rules, guidelines, frameworks or even laws that a kept in place to govern the activities of a corporation. In a rule-based system all the instructions are clear on how to conduct particular activities and it leaves no room for self interpretation. Rules are uniform in application and consistent as well as rigid and inflexible.
Principle-based regulatory approach emphasizes high level principles and ethical standards to guide the behavior and decision making process within an organization. There is a lot of flexibility in the regulations which allows adaptation and openness to self interpreted as the approach does not include fixed rules and systems. In a principle-based approach majority the regulatory processes depends on the professional judgment and ethics of the people in-charge of governing the corporation.
3) How to Enforce?
Enforcement can be categorized into 2 non-legal and legal enforcement. non-legal enforcement techniques include forceful or light-touch enforcement techniques and legal enforcement include criminal or civil prosecution.
Forceful Enforcement is compelling obedience from people within the organization. This usually surrounds the implementation of task forces and committees assigned with the responsibility of overseeing and demanding compliance to certain rules and regulations a corporation is supposed to abide by. In this approach of enforcement the people in-charge of implementing the regulations take a more strict route and the regulations become mandatory to be followed by all relevant stakeholders.
Light-touch enforcement is less serious approach to enforcement and does not usually involve conforming to strict rules, rather it is used to uphold enforcement within the principle-based approach of regularization. This is a more lenient, flexible and hands off approach to enforcing regulations and also requires minimal intervention.
Criminal prosecution, is required when persons commit an offence leading to a violation in criminal laws. This usually involves offences which are harmful for the general well being of a society. Such criminal cases can end with harsh sentences including prison-time.
Civil prosecution, revolves around the perusing of cases with the objective of resolving a disputes which falls in to the realm of civil law. These disputes among different parties usually ends with the court deciding to financially compensate the party which had incurred the loss.
In conclusion regulators play a crucial role in the whole governance process of all corporations existing in a country. Without regulators there won't be legal frameworks, rules or any guidance that would set a corporation on the straight path. Apart from the establishment of regulations the enforcement and compliance to these regulations cannot be guaranteed as well. Hence, the stability, fairness and transparency of all corporations depend immensely on the role of regulators.
