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Posted on April 21st, 2014, by

1 Lower costs of self-regulation

In actuality, the introduction of self-regulation results from numerous benefits which it brings to corporations and other organisations[1]. In this respect, one of the major strengths of the introduction of self-regulation is low costs of self-regulation compared to conventional regulation. Self-regulation is cheaper than conventional forms of regulation. However, self-regulation is cheaper for regulatory bodies but not for corporations proper[2]. What is meant here is the fact that the government, for instance, can cut spending on inspectors and regulatory bodies consistently due to the introduction of self-regulation. On the contrary, corporations have to increase their spending on self-regulation because they have to introduce new positions, technologies, and units to conduct self-regulation efficiently[3]. Thus, on the one hand, there is the government and regulatory bodies along with external regulators, who can save costs due to self-regulation, while, on the other hand, there are corporations, who have to invest funds to introduce self-regulation and to increase costs on its maintenance. However, self-regulation turns out to be beneficial for both the government and corporations.

Benefits of self-regulation for the government are obvious since the government can save considerable costs on regulatory bodies and policies[4]. Corporations also benefit from self-regulation because they can set rules of self-regulation and conduct self-regulation on their own without external inspectors[5]. In such a way, corporations can increase the efficiency of regulation because they will conduct regulation without rising barriers to their business development, while external inspectors and regulators often raise barriers and slow down business development. At any rate, the efficiency of organisational performance decreases, when external monitoring or inspection is conducted.

2 Greater inspectorial depth compared to government regulators and inspectors

Self-regulation provides corporations with a greater inspectorial depth compared to government inspectors because internal inspectors employed by corporations are more efficient and better acquainted with specificities of their organisation compared to government regulators and inspectors[6]. Internal self-regulation is more efficient compared to external one because internal inspectors know the organisational structure and specificities better than external ones[7]. Moreover, self-regulation is more efficient because internal inspectors can identify problems faster and easier compared to external ones[8]. In fact, external inspectors and auditors can fail to notice problems within organisations. For instance, many cases of white collar crimes remain unnoticed by government inspectors or external auditors, until corporations collapse[9]. Self-regulation decreases such a risk because internal inspectors have better knowledge and understanding of the organisational structure, functions of each unit, employee or executive. As a result, internal inspectors can conduct internal inspections deeper compared to external auditors or government inspectors. In addition, internal inspectors have access to areas and information, which government inspectors or external auditorsĀ  have no access at all or access may be restricted substantially that prevents government inspectors and external auditors from uncovering problems or white collar crimes.



[1] Jenkins, R. (2001). “Corporate Codes of Conduct: Self-Regulation in a global economy,”¯ Technology, Business and Society Programme, 2, 37

[2] Ibid.

[3] Ibid.

[4] Ibid.

[5] Ibid.

[6] Taylor, J. (1995). “Securities Firms Agree to Set Controls on Derivatives,”¯ Wall Street Journal, C1

[7] Ibid.

[8] Ibid.

[9] Ibid.

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