Regulators need ethics too
REGULATION has become one of the great expansion industries of the 21st century. The cry of many politicians seems to be: if it moves, regulate it. They figure it’s safest (and simplest, for them) that way.
But, in a profound and pleasantly short paper, Chris van der Walt of ISS Compliance argues that SA is being force-fed a diet of business ethics through regulation — but that scant attention is paid to the ethics of regulation. As he puts it, unethical conduct by a single corporation affects many, but a lack of regulatory ethics affects everyone.
Business ethics consists of three principles — utility, right and justice. An individual will favour one of these; the same applies to a company. An individual’s bias is influenced by his personal value system, a company’s bias by the nature of its business.
Utility requires conduct that will generate the most good for the largest number. The principle of right means an emphasis on conduct that least interferes with individual rights. Justice means just that — the fairest and most equitable solution.
In SA, utility is the weapon of choice for regulators — regulate to bring the most benefit to the biggest number with the available resources. This has become so entrenched that it’s no longer questioned. As Van der Walt asks, it may bring the most votes, but is it really the best way?
The trouble is that utility-based regulation can’t accommodate everyone. So it aims to satisfy the majority, which almost always brings it into conflict with whether it is right and whether it is fair.
A feature of regulation is the punitive powers applied. Take a look at those available to the South African Revenue Service. The more power used, the more we work to overturn the existing order. It is a feature of the human condition that the value we accord institutions diminishes in proportion to the force applied by the institution.
Regulation often relies on offences and penalties. That brings about breaches, and criminals, and that requires more regulation. But, by itself, more regulation isn’t the answer to problems.
And there is a new belief in a holy trinity — licensing, supervision, enforcement — all under the same roof. Dispenser, prosecutor and judge in one. The imposition of administrative sanctions, such as the enforcement committee of the Financial Services Board (FSB), has become all too pervasive.
It’s as though we’re being told that one institution (the FSB) doesn’t trust another (the justice system). This really isn’t good for society.