Calling Regulators to Account

Posted by June Rhee, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Friday December 14, 2012 at 8:53 am
  • Print
  • email
  • Twitter
Editor’s Note: The following post comes to us from Julia Black, Professor of Law at the Law Department of London School of Economics.

Since their inception, the accountability of independent regulatory agencies has been of concern to scholars of public law and political science. But whilst many decry the lack of accountability of regulatory agencies, others (albeit a minority) argue that accountability demands are counter-productive or subverted, prevent the agency from performing its role effectively or create cultures of blame.

The challenges of calling regulators to account are deep-rooted. The first key challenge is that of fluidity and ambiguity: the tension between independence, political control and political accountability creates an ambiguity in the responsibilities of the core executive and regulatory agencies which both, but particularly the executive, can seek to exploit. As a result, lines of responsibility and thus of accountability can be unclear, to say the least, particularly when things go wrong.

The second challenge is the scale and complex topography of the regulatory landscape. In many cases more than one regulator is engaged in regulating a particular sector and in achieving particular goals these tasks may be shared with different parts of government, or determined by the EU. In the UK, for example, over twenty regulatory organisations are involved in the regulation of farming. Attributing responsibility between these ‘many hands’ is inevitably difficult. Furthermore, ‘many hands’ can turn to ‘no hands’ in times of crisis.

The third challenge arises from the contestability and technical complexity of the regulatory task. Objectives are ill-specified and contested, and regulators’ substantive decisions usually require highly specialised knowledge to evaluate. Fourth, whilst some regulatory activities, such as consultation on rules or formal enforcement actions, are highly visible, most activity occurs between these two poles. Regulation is a continuous process of negotiation, compromise and challenge – on both sides of the regulator-regulatee relationship. It is very hard for outsiders to penetrate or have visibility of that process. Moreover, the move to ‘new governance’ strategies which rely more on the professional judgement of regulators may render those processes more opaque.

Finally, accountability is a two-sided relationship: the accountee has to accept the ‘right’ of the accountor to hold them to account. Regulators, like the firms they regulate, may go through the formal processes whilst not changing anything in practice. However, for the most part, regulators are used to being held to account, and whilst they may not enjoy the process, they do engage with it, not least to maintain their own legitimacy and reputation. Indeed, regulators frequently engage in consultation and reporting practices which go beyond those required by statute.

The ability of an accountor to meet these challenges depends on its ‘accountability capacity’ and the institutional position that it has with respect to both the accountee and other accountors. Institutional position means not only the legal powers the accountor possesses to call an agency to account, but also its legitimacy and authority: the normative or cognitive acceptance by others (including the accountee) of its ‘right’ or appropriateness to call to account, and the strategic position that it has, political or otherwise, to do so. Accountability capacity refers to the resources that the accountor has to call the regulator to account. In particular, it has to have, or have access to: information, technical expertise, financial resources, and appropriate organizational processes and practices to manage information and respond dynamically to changing circumstances.

The institutional position and accountability capacity of accountors is highly variable. At least in the UK, there has been no ‘grand design’ of the current political structures of accountability, rather each has evolved and continues to evolve. The executive is trying to manage the tensions between delegation and control through procedural controls implemented as part of the ‘better regulation’ agenda, for example a requirement that all proposals be approved by a unit in central government. Even if these procedures do not directly apply to the independent regulatory agencies, they provide an important context in which the activities of such regulators are assessed by other accountors. As for Parliament, it has a strong institutional position as accountor, but its capacity is limited and it has struggled to organise itself in such a way as to perform a systematic and on-going accountability function with respect to the ‘regulatory state’. Focusing on the National Audit Office, its capacity to engage in the forensic investigations and technical analysis which are the necessary bedrock of any accountability process is significant, but its institutional position limits its ability to act as accountor, notwithstanding its considerable capacity, and its institutional position can at times seem confused, with both Parliament and the government arguing the NAO is acting on its behalf. Finally consumer panels which have legal mandates to represent the views of consumers to specified regulatory agencies can play an important accountability role, but their capacity is variable and their institutional position also unclear. In particular the balance between independence and engagement is a difficult one to strike, as is the role of the consumer body as a participant and its role as an accountor.

However, regardless of how well designed a system could be, or how capacities could be enhanced, the political accountability of regulatory agencies will always be complex and contested. Regulators operate in a broader context of multi-level and polycentric regimes in which responsibilities are widely dispersed. The core executive will continue to try to play a double game of delegation and control with respect to regulatory agencies, and to blur responsibilities whenever convenient to do so. The role of accountors can also blur into one of engaged participant, prompting the inevitable question of ‘who guards the guardians’. So tensions abound – but unless those tensions start to have pathological effects on the agency itself, they need not be a bad thing. For without those tensions both regulators and their accountors will become complacent, which will be to their detriment, as well as ours.

The full paper is available for download here.

 

Add your comment below:

(required)

(required but not published)

RSS feed for comments on this post. TrackBack URI

 
  •  » A "Web Winner" by The Philadelphia Inquirer
  •  » A "Top Blog" by LexisNexis
  •  » A "10 out of 10" by the American Association of Law Librarians Blog
  •  » A source for "insight into the latest developments" by Directorship Magazine