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Posted on April 21st, 2014, by

1 The efficiency of self-regulation

In actuality, self-regulation emerges as an alternative to the government regulation or other external regulations[1]. Self-regulations involve the internal control system and rules that help organisations to maintain their performance stable and to avoid the violation of laws and internal corporate rules. In the context of the corporate control, self-regulation can achieve greater inspectorial depth compared to the government regulation, for instance, because the internal self-regulation involves professionals, who are well-trained and acquainted with specificities of the particular organisation[2]. In the international pharmaceutical industry, for example, a number of the more reputable companies have corporate compliance groups, which send teams of scientists to audit subsidiaries’ compliance with production quality codes[3]. In such a way, corporations operating in the pharmaceutical industry use self-regulation to control the quality of products and processes. At this point, it is worth mentioning the fact that self-regulation can reach the greater inspectorial depth because the access of government or external inspectors or auditors may be restricted as corporations have the right to keep their technology in secret. Their intellectual property is protected by the law and external or government inspectors cannot always have access to the intellectual property of corporations and technologies that involve the use of that property[4]. In contrast, internal compliance groups and inspectors can access the technology and areas which are restricted for other inspectors. In such a way, the scope of control expands, if self-regulation is applied.

2 Government-corporation interaction and self-regulation

As it has been already mentioned above, self-regulation is an alternative to the government regulation. At the same time, the development of self-regulation normally implies the change of the government-corporation interaction because before self-regulation, regulatory functions were performed either by government bodies or independent external auditors or inspectors[5]. Instead, self-regulation leads to the delegation of regulatory functions to corporations[6]. As a result, corporations have to control and regulate themselves. Under enforced self-regulation, the government would compel each company to write a set of rules tailored to be unique set of contingencies facing that firm[7]. A regulatory agency would either approve these rules or send them back for revision if they were insufficiently stringent. At this stage in the process, citizens’ groups and other interested parties would be encouraged to comment on the proposed rules. Rather than having governmental inspectors enforce the rules, most enforcement duties and costs would be internalized by the company, which would be required to establish its own inspectorial group[8]. The primary function of governmental inspectors would be to ensure the independence of this internal compliance group and to audit its efficiency and toughness[9]. Governmental involvement would not stop at monitoring. Violations of the privately written and publicly ratified rules would be punishable by law[10].

Therefore, the government-corporation interaction under self-regulation implies the mutual work of corporations and government agencies toward the elaboration of individual set of rules for each company but they have to be coordinated with the government[11]. In such a way, self-regulation implies the two-fold interaction between the government and corporations. On the one hand, the government controls the elaboration of rules until the government and corporation come to agreement on key rules and norms of self-regulation that meet interests of both the government and the corporation. On the other hand, corporations can negotiate the rules that match their needs and interests[12]. As corporations give their feedback to the government, the government admits respective changes into the rules, according to requirements and needs of corporations but within the framework of existing legislation and national standards in the specific sector established by the government or public organisations. As a result, the government grants its regulatory functions to corporations that will conduct self-regulation but the transition occurs under the government control and command, although rules and norms of self-regulation meet specific needs and environment of the corporation that turns to self-regulation.

[1] Henderson, J. V. (1994). State Attitudes towards Air Quality Regulation. Providence, R.I.: Brown University, 149.

[2] Braithwaite, J. (1982). “Enforced Self-Regulation: A New strategy for corporate crime control,” Michigan Law Review, 80(7), 1466

[3] Ibid

[4] Ibid.

[5] Henderson, J. V. (1994). State Attitudes towards Air Quality Regulation. Providence, R.I.: Brown University, 149.

[6] Ibid.

[7] Ibid.

[8] Ibid.

[9] Gerber, J. (1990). “Enforced Self-Regulation in the Infant Formula Industry: A Radical extension of an ”˜impractical’ proposal,” Social Injustice, 17(1(39)), 99

[10] Ibid.

[11] Smart, B. (1992). Beyond Compliance: A New Industry View of the Environment. Washington, D.C.: World Resources Institute, 182

[12] Konar, S. & Cohen, M. A. (1997). “Information as Regulation: The Effect of Community Right to Know Laws on Toxic Emissions,” Journal of Environmental Economics and Management, 32, 111

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