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Posted on April 21st, 2014, by

The introduction of self-regulation naturally increases costs companies spend on regulatory functions and staff because external regulation by government inspectors, for instance, does not need funding from the part of corporations[1]. In contrast, self-regulation means that corporations have to create their own regulatory bodies and to perform regulatory functions constantly that will need substantial financial resources[2]. In addition, self-regulation will need training of internal inspectors and maintenance of the staff to conduct self-regulatory functions. Thus, corporations introducing self-regulation should come prepared to the rise of costs spent on regulatory functions.

On the other hand, corporations should be aware of benefits of self-regulation, which may outweigh costs[3]. For instance, the efficient self-regulation can help corporations to identify problems that deteriorate their marketing performance. The elimination of those problems can bring considerable benefits that may cover costs spent on training of inspectors, compliance groups and introduction of self-regulation.

4 The weakness of self-regulation’s legal background compared to laws and common legal norms

Self-regulation is grounded on internal rules and norms, which corporations may negotiate with the government. However, self-regulation always remains a set of internal rules set within the organization, while there are legal norms that function and are valid nationwide[4]. In this regard, laws and legal norms always remain superior to internal rules set within organisations in terms of their self-regulatory policies.

Therefore, corporations may face the problem, if their internal rules elaborated in terms of self-regulation turn out to be not valid under the existing legal norms and rules[5]. For instance, some rules established by corporations in terms of self-regulation may violate the privacy right of employees[6]. As a result, such internal rules are not valid and may be a reason for a lawsuit being filed by employees of corporations. Thus, corporations may face considerable troubles, to avoid which they have to adapt their internal self-regulatory rules to existing legal norms and stands. In actuality, corporations develop self-regulatory rules in close cooperation with the government that minimises the risk of such problems and controversies between internal self-regulatory rules and existing legislation[7].

5 Particularistic rules in terms of self-regulation as weakening factor of laws that are universal

Particularistic rules established within corporations in terms of their self-regulatory policies undermine the confidence of employees of corporations and other stakeholders in the universal applicability of laws[8]. In other words, internal self-regulatory policies and rules may seem to substitute the law, while, in actuality, the law remains superior to internal rules. Nevertheless, the existence of internal rules and regulations along with the law may undermine the universality and supremacy of the law. The supremacy of law cannot be challenged by particularistic rules[9]. However, this may be the case of self-regulation because employees working in corporations have to obey to self-regulatory norms and rules, for instance. As a result, employees may view internal rules and norms as being superior to the law that undermines their confidence in the law and its supremacy.

[1] Ibid.

[2] Ibid.

[3] Ibid.

[4] Ibid.

[5] Kaserman, D. L., and Mayo, J. W. (1995). Government and Business: The Economics of Antitrust and Regulation. Fort Worth, Tex.: Dryden Press, 185

[6] Hunt, M. S. (1975). “Trade Associations and Self-Regulation: Major Home Appliances,”¯ In Regulating the Product: Quality and Variety, edited by Richard E. Caves and Marc J. Roberts. Cambridge, Mass.: Ballinger Publishing Company, 78

[7] Ibid.

[8] Ibid.

[9] Walley, N. & Whitehead, B. (1994). “It’s Not Easy Being Green,”¯ Harvard Business Review, 48

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