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Posted on April 21st, 2014, by

Self-regulation implies the internal control conducted by organizations but rules are set externally[1]. What is meant here is the fact that corporations have to meet standards set by government bodies. Corporations have an opportunity to negotiate those rules but still rules have to correspond to existing legal norms and requirements. For instance, a corporation cannot establish its own quality control system in the food or pharmaceutical industry, which is worse than standards set by the government or is different from those standards. In fact, products created by such corporation under such quality control system will not go to the market because the government agency responsible for the food or pharmaceutical sector will just ban those products.

4 More efficient command and control

Self-regulation contributes to the improvement of command and control within corporations because they monitor constantly internal business operations and conduct of each employee[2]. Such control increases the responsibility of each employee and facilitates the command, since decisions taken by top executives are transmitted fast to their subordinates and further down the organizational hierarchy ladder. The higher efficiency of command and control is achieved through inspections and monitoring along with the growing responsibility of managers and employees of corporations[3]. In such a way, self-regulation improves the discipline and responsibility within corporations increasing the efficiency of control and command.

VI Reasons of self-regulation success

1 The readiness of corporations to self-regulation

One of the main reasons of self-regulation success is the preparedness of organizations to self-regulation[4]. For instance, contemporary corporations often come prepared to self-regulation under the impact of the public pressure and positive examples of other corporations that have already implemented self-regulation models. Corporations attempt to improve the company-customer relationships and to form a positive brand image[5]. In such a context, self-regulation becomes an effective tool that helps corporations to reach those goals and makes corporations to come prepared to self-regulation. The readiness of corporations to self-regulation derives from profound social and economic changes since the role of the public opinion and social responsibility of corporations has increased substantially, while self-regulation helps to improve the public opinion concerning corporations and to enhance their social responsibility[6].

2 The public positive feedback to self-regulation

The positive feedback to self-regulation from the part of the public encourages many corporations to introduce self-regulation because the customer satisfaction and positive brand image comprise an important part of the marketing success of contemporary corporations[7]. The public opinion can affect consistently the performance of contemporary corporations. As a result, they are concerned with the formation of a positive public image, while the positive feedback from the part of the public encourages corporations to enhance their self-regulation. The positive feedback from the part of the public is the marker of the improvement of the public brand image and reputation of corporations[8]. Therefore, corporations grow aware of the close correlation between the positive brand image and good reputation, on the one hand, and efficient self-regulation, on the other.

3 The higher level of transparency brought by self-regulation and positive company-customer relationships

Self-regulation brings transparency into internal business operations that contribute to the improvement of the organisational culture and atmosphere within the organisation[9]. In addition, consumers feel more confident in corporations, which conduct self-regulatory policies compared to those corporations which rely on external regulators and inspectors solely, because customers believe the latter have something to hide, while external auditors and inspectors cannot always uncover all the information internal auditors and inspectors do[10]. The transparency brought by self-regulation improves the organisational culture and helps corporations to improve interpersonal relations between employees and managers. In such a way, corporations can improve their performance due to self-regulation.

[1] Lutz, S. et al. (2005) “Quality Leadership When Regulating Standards Are Forthcoming,”¯ Journal of Industrial Economics, 13, 115

[2] Ibid.

[3] Ibid.

[4] Ibid.

[5] Ibid.

[6] Ibid.

[7] Holmes, T. J. (1998). “The Effect of State Policies on the Location of Manufacturing: Evidence from State Borders,”¯ Journal of Political Economy, 106, 673

[8] Ibid.

[9] Ibid.

[10] Ibid.

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