Zimpapers Logo

and in the professions.
Zimbabwe is dotted with cases of firms being taken to task by industry self-regulatory bodies for violating industry rules and regulations, and there are professionals who were struck off registers after violating their professional codes of ethics.
Adherence to codes of ethics in professions has largely been satisfactory in the country although here and there, concerns have been raised on incidents of inappropriate behaviour exhibited by some professionals.
For example, the current service fees charged by legal practitioners are believed to be unrealistically too high.
Clearly, it is because of this observable professional discipline that Zimbabwean professionals continue to be sought after the world over.
The challenge has largely been with the business sector and in public institutions where there is a disturbing disregard for sector rules and regulations by individual firms and organisations.
This is a practice that was entrenched in the last decade when the economy experienced unprecedented economic decline that saw firms on a large scale abandoning orthodox means of doing business, opting for the “bush methods” ostensibly to ensure their survival.
Today these unorthodox practices seem to have become more entrenched and not many organisations are ready to let go of these malpractices because of the seemingly short-term financial benefits that come with such practices.
The folly of permitting firms to continue flouting industry rules and regulations, however, is “authenticating a perpetually unstable business environment” where underhand dealings, bribery, corruption, rent seeking and other inappropriate business behaviours will continue to hog the limelight dictating the way business transactions are concluded.
This resultantly causes skewed economic performance and impedes national development. In light of the prevailing corporate misdemeanours in the country, it is logical to ask whether the current structures of self-regulation in different sectors of the economy are adequate.
The answer is an absolute no. Apparently, all sectors in the economy need to revisit their self-regulatory frameworks and structures, or build and maintain new ones.
Self-regulation in all sectors of the economy needs to be cemented and promoted in order for it to play its critical role in helping restore good corporate governance and manage the ethics environment at industry level. Self-regulation is a critical tool in managing corporate governance and ethical behaviour in organisations because it is premised on complying with the “spirit” not the “letter” of the law.
Well-maintained and properly crafted self-regulatory frameworks invoke the spirit of self-control and discipline in the individual and organisation, ensuring this becomes the basis of a successful corporate governance and business ethics management process in the organisation.
It is the purpose of this article to highlight some of the advantages of using self-regulatory practices as corporate governance and business ethics enhancement tools in the different sectors of the economy.
Proximity
Self-regulatory infrastructure is by definition closer to the industry being regulated as compared to Government regulatory frameworks.
This proximity means that self-regulatory institutions will generally have more detailed and current information about the industry, something that is especially helpful in rapidly changing business environments. The proximity also entails self-regulatory institutions being able to quickly know who is violating which rule, and how that violation is being made possible.
By comparison, Government regulators are often far removed from the sector and are in most cases lacking resources to make follow-ups.
The situation is compounded by scenarios where you have the State regulatory authorities being manned by underpaid and demoralised officials who are bent on extracting bribes from violators without showing any genuine regard for the observance of the sector rules and regulations by firms.
Being closer to the action, self-regulators are better situated to identify potential problems more quickly.
Flexibility
Self-regulatory institutions can act with greater flexibility than Government regulators. They are not subject to the same kinds of procedural and due process hurdles that Government regulators go through, nor do they face the same political constraints.
Government regulatory frameworks do not relish dealing with extremely complex industry issues, so these can be best dealt with by self-regulatory bodies.
Compliance
Self-regulation may generate a higher level of compliance by firms in that sector.
The greater the involvement of industry in setting the rules, the more those rules will appear reasonable to individual firms.
Self-regulation may also generate rules that solve regulatory problems in ways more sensitive to industry practices and constraints, and hence it may be easier for firms to comply with them.
Collective industry interests
Self-regulation can harness the collective interests of the industry. This becomes more important when the sector intends to engage State authorities in lobbying for sector-friendly legislation or amendments on existing industry laws.
Also through self-regulation, competitors are able to effectively police each other.
Resources
Self-regulatory bodies have a better ability to mobilise and secure needed resources to fulfil the self-regulatory function.
The current critical shortage of financial resources being experienced by the Treasury in the country means State regulatory authorities will remain underfunded for some time, thus compromising their ability to effectively carry out their regulatory duties. Although self-regulation has these important advantages, it has some noteworthy drawbacks. Self-regulation is accused by some as being ineffective as it is as good as assigning a hyena to guard a goat pen.
The greater flexibility afforded self-regulatory arrangements also means they may have the discretion to mete out only modest sanctions against serious violation of rules and principles, a situation that may create discomfort with stakeholders.
Conflict of interest that may be embedded in self-regulation may also make it more likely that compliance with rules will be insufficiently monitored.
For example, if industry’s interests are at variance with those of the society, then enforcement by self-regulators may not be as effective leading to a compromised overall good of the society.
There is also the possibility that self-regulation will be used by older, more established companies in the sector or industry simply to keep out new market entrants.
l Bradwell Mhonderwa is the Managing Consultant of Business Ethics Centre, a corporate governance and business ethics management firm. Telephone 04-293 2948, 0712 420 090, 0772 913 875, or email [email protected]