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Posted on April 21st, 2014, by

Corporate inspectors also have better training compared to government or external inspectors because corporations are interested in the employment of well-qualified professionals, who can monitor the conduct of employees and operations conducted within the company[1]. Corporations, being interested in the efficient self-regulation, invest substantial funds into training of their inspectors and compliance groups. Corporations are fully aware of the fact that such investments are essential because the higher is the qualification of inspectors the better is their performance. Hence, corporations train inspectors and compliance groups to improve the efficiency of self-regulation.

Moreover, corporations can enhance self-regulation through additional training of inspectors or through the employment of more inspectors[2]. Anyway, they can regulate performance of inspectors to prevent their possible negative impact on the organisational performance, if there are too many inspectors controlling the corporation, or when there are not enough inspectors to monitor and control the corporation[3]. Such self-regulation turns out to be highly efficient because it matches needs and specificities of corporations.

4 The greater power of corporate inspectors

Corporate inspects have the greater power compared to government or external inspectors because corporations grant them with rights and functions which are not available for government inspectors, for instance[4]. In fact, corporations can set their specific rules in terms of self-regulation that grant inspectors with larger possibilities and greater power to conduct inspections and regulation. The only limitation for corporate self-regulation is the existing legislation protecting human rights and liberties. Therefore, potentially, corporations can grant their inspectors with as much power as the existing legislation admits and until human rights of employees are not violated[5]. In contrast, government inspectors and external auditors are consistently restricted in their inspection and regulatory functions. In fact, government inspectors cannot access restricted areas or get sensitive information which revelation may violate the intellectual property right of corporations, for instance. Government inspectors and external auditors’ work is strictly regulated and limited to prevent the misuse of their power and corruption[6]. Instead, corporations do not need to impose such limitations on their inspectors because there is virtually no risk of corruption, while monitoring and inspection conducted by internal inspectors are deeper compared to external auditing or government monitoring of corporations.

5 The high efficiency of internal compliance groups

Internal compliance groups are very efficient because they allow monitoring internal business operations, performance of employees and quality of products and services. Internal compliance groups comprise an important part of self-regulation[7]. At this point, the independence of internal compliance groups is extremely important for the efficient self-regulation. In fact, the function of internal compliance groups is to reveal existing problems and poor performance of employees or units of corporations and to help them to tackle those problems. Internal compliance groups have better understanding of the corporate structure and performance[8]. Therefore, they can better assess the performance of the corporation and find out problems, which may remain unnoticed for external auditors or government inspectors. Internal compliance groups enhance the performance of corporations since self-regulation involving the use of internal compliance groups allow corporations to uncover actual problems and find plausible solutions fast.



[1] Ibid.

[2] Kaserman, D. L., and Mayo, J. W. (1995). Government and Business: The Economics of Antitrust and Regulation. Fort Worth, Tex.: Dryden Press, 179

[3] Ibid.

[4] Maloney, M. & McCormick, R. (1982). A Positive Theory of Environmental Quality Regulation, Journal of Law and Economics, 35, 105

[5] Ibid.

[6] Ibid.

[7] Pirrong, S.C. (1995). The Self-Regulation of Commodity Exchanges: The Case of Market Manipulation, Journal of Law and Economics, 38, 144

[8] Ibid.

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