Public Regulations or a Better Corporate Governance?

It is wellknown that capitalism can not be left on its own without some rules that might appease its darker face.

In the past decades and, in different industries, we have seen the effects of too a loose regulatory system that has played its role in the birth of bubbles and in the growing inequalities we are suffering. It is obvious that public regulations in general need to improve to avoid pathological evolution of some sensitive industries such as energy, telecommunication and finance.

But what we find now is not necessarily a better regulatory system but an increasing regulatory burden that does not always cope with the real underlying issues of the quality of Corporate governance.

An excessive and inadequate regulatory burden to avoid systemic risks in any industry, might become a risk in itself. That’s why regulations should be very much focused on guaranteeing a proper balance in Corporate Governance, the existence of countervailing bodies within the companies so that the actions of the executive teams can be adequately supervised and fostering that the profile of the persons in charge of both, the executive teams but also the supervisory bodies, have the right experience and the adequate personal values and moral convictions.

Luckily, lots of companies in many different sectors in the world, are already sticking to the best practices of building a solid governance model with constructive countervailing powers. These kind of companies are normally also very much aware of the need of hiring the best professionals and supervisors, not only in what respects to their knowledge and experience but also in what regards to their personal values and ethical behaviors.

These companies do not need so many regulations because the way they look at their economic role in society is already based on ethical values and they understand that there is no better regulation that the one that starts with their own governance model. Policy makers should consider those companies as role models and not as threats to the mainstream thinking.