Regulating the Regulators
Context:
- One of the most important governance changes of the 20th century was the creation of statutory regulators.
- These organizations are becoming increasingly well-liked as a different kind of governance on a worldwide scale. Regulators must be effectively governed in order to realize this potential. These organizations are governed by governing boards (GBs).
Five GB-related design elements can greatly enhance the governance of regulators:
- First, the law often establishes a board run by another board, an authority run by another authority, a council run by another council, and a commission run by another commission:
- For instance, a board called the Securities and Exchange Board of India is established by the Securities and Exchange Board of India Act, 1992.
- A board of members is responsible for the overall supervision, guidance, and management of this board’s business. The former board is an entity, whereas the latter is its governing body (GB), to put it simply.
- But most laws don’t make a distinction between the two. Due to the possibility of role confusion or reversal, it will be challenging for the GB to direct the entity, set its goals, and hold it accountable for achieving those goals.
Second, diversifying the governing body to uphold managerial responsibility
- It is typically challenging for an entity to make decisions about itself or how it operates objectively or to hold itself responsible for its actions or results.
- Because of this, decisions involving a corporation, such as process design, are delegated to the board of directors.
- The main duty of GB is to take on the role of a hands-on principle and hold the management accountable.
- However, if a GB only consists of managers, it might be difficult for it to hold the management responsible. As a result, The GB needs enough external representation.
- The majority of statutes do not address this representation or the necessary link between the regulator and society in its governance.
- One of the most effective methods, for instance, is having a few prominent individuals serve as part-time members (PTMs) of the GB. Together with the other members of the governing body, they participate in its meetings, cast ballots on its behalf, and make decisions.
Third, downplaying politics’ influence on the Governing body:
- On the GBs of regulators, the government normally has a few official nominations.
- The opinions of such candidates are given disproportionately more weight in the decision-making process because they are the representatives of the minister who is answerable to the legislature.
- Furthermore, the government frequently participates in the market and is subject to pressure from a variety of interest groups.
- The official nominee might not always be able to take an impartial stance on all issues before the GB.
Fourth, guaranteeing the regulator’s independence by securing a fixed tenure
- The ability of a regulator’s leaders, specifically WTMs (including the chairman), to resist the influence of persuasive interest groups and the demands of fear and favor from all directions is crucial to the regulator’s independence.
- Such power is hindered by these offices having terms of three to five years. A person with the necessary skills would not work for a regulator for more than three to five years.
- Three years is a fairly brief period, and by the time the members have acquired the necessary knowledge, skill, and effectiveness, one term will have already ended.
- Younger people who have proven their competence in the relevant subject must be recruited for a reasonable period of time if the regulators are to maintain true independence.
Separating roles and duties for better control is the fifth strategy.
- In India, a regulator normally fulfills three tasks: executive, quasi-judicial, and quasi-legislative.
- Each of the several sorts of functions and powers should be the responsibility of a different organizational unit, according to the statute.
- In order to serve as mutual checks and balances and handle public law issues regarding the separation of powers, these units should function independently of one another.
Conclusion:
- The Governing Body should have the ability to assign executive and administrative obligations to various organizational members, who would carry out the tasks for the regulator in the manner required.
- Such delegation would encourage better accountability and improve the organization’s ability to deliver services on schedule.
