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| Finding ways to manage without a regulator | ||||
Folly rather than malice is the cause of most trouble with the law. It follows that most business compliance problems could be resolved if adequate management systems were in place. This observation is behind a new approach to regulation, which holds promise of a much better relationship between government and business. The National Road Transport Commission, for example, is preparing to launch national schemes that will exempt transport operators from annual roadworthy inspections and road-side weighing enforcement if they can demonstrate that they have adequate management procedures that are capable of being audited. Many truck operators already have well developed maintenance schedules and load control procedures. They find that the spot checks of loads and annual roadworthy certificates are redundant and expensive. These alternative compliance schemes have been run as pilot programs in Victoria and NSW and the commission is now satisfied that they work. A similar pilot is underway in Queensland covering fatigue management. Victoria’s Environment Protection Agency has, for some years, been running a program of special licences for businesses that can demonstrate that they have adequate environment control procedures in place. They are exempted from monitoring and site visits from EPA inspectors. Eleven companies have taken up these licences, including Chemcor at the Altona Petrochemicals Complex and BHP’s Western Port rolling mill facility. The Victorian EPA believes community acceptance is a vital ingredient in successful regulation. To obtain one of its accredited licences, a company must therefore involve the local community in an environmental improvement program. The Victorian Government has in this, as in so many other areas of regulatory reform, gone further than any other government in the country. Indeed, legislation being drafted at present will break fresh ground globally in providing a formal legal framework for businesses to propose alternative compliance procedures to any state government regulation. The business would have to satisfy the department and the minister responsible that the alternative to statutory regulation achieved the same outcomes. To guard against a minister becoming captive of companies, alternative compliance mechanisms would be subject to the same kind of regulatory impact review as any new state regulation. This involves compulsory consultation with affected parties. Big food companies are likely among the first to use the new Victorian scheme. One problem with these schemes is that it is easier for big business to apply the resources than it is for small. The Victorian legislation deals with this by allowing representative business organisations to apply. The Victorian law is based on a report* by the Victorian Law Reform Committee chaired by state parliamentarian, Victor Perton. Perton contends the measure will be pro-competitive. For example, a new entrant with technology that automated monitoring or in some way removed the need for compliance controls would be able to seek its own arrangements. The alternate compliance mechanisms are, in this sense, are an advance on regulatory impact statements, which have been hailed by the OECD as the most effective regulatory reform. These now operate in several states and at a Commonwealth level. New regulation must be subjected to consultation with affected groups and with some sort of cost-benefit analysis performed, a process known as "reg-neg". It is suggested that this can sometimes lead to "regulatory capture" where the regulator gets too close to the businesses and agrees to guidelines which established businesses can meet but which pose competitive hurdles to new entrants. The Federal Government has proposed legislation that would extend the requirement for impact statements to all administrative orders and would also impose a "sunset" clause of five years, after which regulations and orders would lapse, unless specifically renewed. Orders would only be valid if they were included in a register published on the internet. This legislation is stuck in parliament, having been rejected twice by the Senate. A feature of the new approach to regulation is the focus of regulatory effort upon outcomes, rather than means. The changes to prospectus requirements several years ago are illustrative. The regulator used to have a check list covering every line item, including the type faces and sizes to be used. The law now carries only a broad requirement that a prospectus provide the information that an investor would require in order to appraise the investment. An interesting initiative came from the Australian Competition and Consumer Commission, which found that many businesses were getting into trouble because they did not have adequate management systems in place. It contacted the private standard setting body, Standards Australia. The result was a new standard on compliance programs which was published earlier this year. The standard outlines the elements a company needs to put in place in order to meet compliance obligations, covering such matters as the responsibilities of the executive in charge of ensuring compliance, the steps to take in identifying compliance issues and operating procedures. The approach bears some similarity to that used by the Australian Tax Office to combat the cash economy. It found that there was no point in running big advertising campaigns, because too many people did not think it was wrong to receive cash payments. Instead, it mounted a campaign on record keeping. If small businesses kept their records correctly, they would also meet their obligations to the tax office. The tax office is working collaboratively with the Master Builders’ Association to improve the record keeping of its members. It is interesting that many of these initiatives are coming from the government and the regulators, rather than from the business community. In some instances, regulators are seeking to enjoin business organisations as co-regulators. The Australian Securities and Investments Commission, for example, is working with the Financial Planning Association and other peak investment groups to establish minimum standards for investment advisers. The political will behind any sort of regulatory reform is being tested at present, so there is a good case for business organisations such as the Business Council of Australia to get behind the regulators and help develop new approaches to ensuring compliance. |
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