The Governmental Nature of Self-Regulation - Essay Example

Running head: Self-regulation Self-regulation [The of the appears here] [The of appears here] Self-regulation can be seen as taking place when a group of firms or individuals exerts control over its own membership and their behavior. In Britain it is encountered in a number of professions and sports and in sectors such as financial services, advertising, insurance, and the press. A host of arrangements can be seen as self-regulatory and variations in the characteristics of self-regulatory regimes can be identified. A first variable is the governmental nature of self-regulation. An association may self-regulate in a purely private sense--in pursuit of the private ends of its membership--or it may act governmentally in so far as public policy tasks are delegated to private actors or institutions. Both forms of activity may, indeed, be combined. The process of self-regulation may, moreover, be constrained governmentally in a number of ways--for instance by statutory rules; oversight by a governmental agency; systems in which ministers approve or draft rules; procedures for the public enforcement of self-regulatory rules; or mechanisms of participation or accountability. Self-regulation may appear to lack any state involvement but in reality it may constitute a response to threats by government that if nothing is done state action will follow.( S.Dawson, P.Willman, A.Clinton and M.Bamford, 1980). A second variable concerns the extent of the role played by self regulators. A full role may involve the promulgation of rules, the enforcement of these on the ground, and the monitoring of the whole regulatory process. Self-regulation, however, may be restricted to one of these functions where, for instance, rules are drafted by a self-regulatory organization but are enforced and monitored by a public agency. Self-regulation may merely operate as an element within a regulatory regime. (Bernardo Bortolotti, Gianluca Fiorentini, 1999). The degree of binding legal force that attaches to self-regulatory rules is a third variable to be noted. Self-regulation may operate in an informal, non-binding, voluntary manner or it may involve rules of full legal force that are enforceable in the courts. Finally, self-regulatory regimes may vary in their coverage of an industrial sector--they may apply to all those who participate in an activity (perhaps because screening or licensing of entry is applied) or they may cover only those who join an association voluntarily. (P.Bartrip, 1996). Following the failed laissez-faire experiment in the nineteenth century, a raft of regulation was created to protect the health and safety of UK workers. Regulations mushroomed and multiplied, driven forward by the increasing power of trade unions and sympathetic governments. However, by the 1970s considerable reform to the complicated array of workplace regulation was underway. These were the conditions underpinning the Robens Committee review of safety at work (Robens 1972), which culminated in the 1974 Health and Safety at Work Act (HASAWA). This Act not only changed the approach to industrial safety in the UK but its influence extended to other countries, particularly Australia. The committee’s main aim was to replace the inherited mass of detailed, prescriptive regulation with a more rational, broad, goal-based regulatory framework (Robens 1972). The Robens Committee proposed a single comprehensive unifying and enabling piece of legislation that would lay out the basic duties of both the employer and the employee. Safety was to become primarily a matter of ‘self-regulation’ rather than prohibitory, external regulatory control (Robens 1972). However, the report was, at that time, criticized on a number of grounds, and later by Woolfson and Beck (1995) and James (1992). According to Nichols and Armstrong (1991): The Robens report was largely written by administrators, the kind of people for whom, maybe, the thought comes hard that the real safety and health problem is to protect workers against the inherent ‘unnatural’ excesses of a society dominated by the market; a society in which some men are paid to squeeze as much production as possible out of others … Most of all, they (the authors of the report) never realized that in a society deeply divided between those who control and those who are controlled, goodwill, however much of it exists, is simply not enough … people who do the producing must have the power to ensure that their safety is put first. Nonetheless, the HASAWA (1974) was adopted and to date, it has provided the basic framework for the regulation of OHS in the UK and a model for many other jurisdictions. (W.G.Carson, 1974). The HASAWA is characterized by a ‘voluntaristic’ approach whereby the state retreats from regulatory intervention and supports self-regulation by industry. The rationale for self-regulation is explained by the Robens Report : A principal theme of this report is the need for greater acceptance of shared responsibility and more reliance on self-inspection and self-regulation and less on state regulation. This calls for a greater degree of real participation in the process of decision-making at all levels. (R.W.L.Howells, 1972). However, ‘real participation’ was not secured via the HASAWA, but through a later legislative victory won by the trade unions following a long campaign. The Safety Representatives and Safety Committees (SRSC) Regulations (1977) provided a strong platform for UK trade unions to assert their rights to a safe and healthy workplace. The importance of meaningful employee participation in workplace safety is well illustrated by the fact that the relative strength of capital (employers) and labour (trade unions) correlates with the apparent initial success of the Act in reducing workplace accidents and injuries during the late 1970s, while the subsequent rise in these statistics during the first half of the 1980s correlates with the ascendance of Thatcherite union-bashing policies (Nichols 1994). One interpretation of these findings is that when their role is legitimised by legislated rights that provide an effective counterbalance to the might of capital, trade union involvement will lead to an improvement in workplace safety. This view is supported by Reilly, Paci and Holl’s (1995) findings, despite finding a positive association between union presence and higher injury rates. Nichols (1994) explains this curiosity on the grounds that ‘history suggests that it is not trade unions that call forth unsafe work conditions but rather unsafe work conditions that call forth trade unions’. Indeed, a range of US studies show that unions are more common in high-risk industries (Dale H. Schunk, Barry J. Zimmerman, 1994). A range of structural and sectoral shifts have served to underline the ‘passed sell-by date’ of HASAWA, such as the shift away from large, single-entity employers to multiple small enterprises. The UK, like many other industrialized countries, has experienced a landslide shift towards smaller enterprises with a large proportion of (non-unionized) part-time workers. According to recent research the typical UK workplace size is just over 100 employees, with small to medium-sized enterprises (SMEs) accounting for 99 per cent of all businesses in the UK. Small businesses account for over 40 per cent of total employment in many industrialised countries. Consequently, a large proportion of the working population may find themselves subject to nebulous OHS rights and protection. (J.L.Williams, 1960). As more of an ideal vision than an actual reality, Robens’ notion of self-regulation embodies a sterile image of employers and employees cooperating in workplace health and safety - an image that fits well with the ‘happy-clappy’ land of consensual HRM. In this land, power differentials or opposing interests do not exist, nor do competing production and economic pressures. As Nichols (1994) has argued, Robens’ underestimation of the profit imperatives held by capital and the assumptions about consensus and equality in the employment relationship (two features not normally associated with it) serve to underline the shaky foundations of OHS in the UK - foundations that were soon to be disturbed by seismic political tremors. (B.M.Hutter, 1993). The Robens Committee produced a blueprint for a highly consensual approach to regulation and this in turn resulted in a particular vision of governmental rules. Central to Robenss consensualism was the notion of a natural identity of interest between the two sides of industry on health and safety matters. This notion, however, may have represented wishful thinking rather than a properly considered analysis. Others have condemned the idea. Patrick Kinnersly commented: Identity of interest is a dangerous myth which dovetails with the fiction that most accidents are caused by carelessness and can therefore be eliminated if everyone "pulls together". (A.Woolf, 1973). Robensuse of inverted commas in referring to the two sides of industry implied that there were not two sides at all. Nicholsand Armstrongdrew attention in 1991 to Robenss home-spun psychology that placed nalve trust in the goodwill of men like themselves notably administrators rather than those involved in business. In economic terms the notion of an identity of interest is highly suspect. In some circumstances it may be the case that the employer possesses incentives to avoid accidents just as the worker does. Thus in a chemicals or explosives factory where an accident might not merely injure or kill workers but is likely to demolish the plant, there is something close to an identity of interest. In many instances, however, there is no identity of interest: the accident imposes costs on the worker but does not damage machinery, slow the production process down, or impose other direct costs on the employer. Liability rules may compel the employer to bear costs but, even so, he or she may still have an incentive not to spend money on hazard avoidance up to the socially efficient level. Suppose employer E runs a woodworking factory with machinery that cuts off ten workers fingers annually. Assuming that the value of a finger is £l,000 (and that the accident does not damage the machine or slow the production process) the allocatively efficient level of spending on hazard-reducing guards would be up to £10,000 per annum (above that sum it is, in economic terms, more efficient to let accidents happen and compensate victims). Will E feel obliged to spend up to £10,000? In the real world E will not, because the operation of liability rules is such that E is not likely to have to pay out £10,000 to injured parties. Assuming that the courts would award £1,000 to each injured party, E might correctly anticipate that the injured parties will accept compensation in a lesser sum. They will do so if E makes an offer that realistically reflects the costs and uncertainties of pursuing a claim. The injured parties would have a number of hurdles to overcome in attempting to recover compensation: the costs of legal advice and lost time would be incurred with no certainty of recovering these; there could well be evidential problems in proving the required case or necessary lack of care; the relevant law might be vague and causation would have to be proved (for example that the injury was not occasioned by the employees own negligence or some cause unrelated to the employment). E will also know that some victims may not pursue claims for other reasons they may move house, emigrate, die, or simply lack the energy or resolve to pursue the matter. (A.I.Glendon and R.T.Booth, 1982) Taking all of the above factors into account, it may well be the case that E would consider purchasing a guard system if it cost £2,000 per annum but not if it cost £8,000 or £10,000 -at those prices it is economically rational to let accidents happen rather than guard against them. The example demonstrates why state regulation may be necessary in order to achieve what is, from societys point of view, the economically efficient level of spending on hazard avoidance. This is all the more so when managements are involved in highly competitive industries and place profits and productivity above safety. Gunningham quotesa commentator on the activities of the Chrysler Corporation: It was just a question of the Corporation deciding which is cheaper, to take some injuries, take some deaths, pay Workmens Compensation or spend a lot of money and make it safe. (B. Martin, 1969). When health as opposed to safety hazards are at issue, the conflict with profit becomes even more problematic. Safety hazards tend to involve highly visible and immediate accidents and costs. Health hazards, in contrast, produce symptoms after a considerable period of time. They accordingly have low visibility; they do not involve immediate halts to production or costly damage; the causal relationship between the illness and the employment may be especially difficult to establish and damages are far from easy to obtain. For such reasons, employers will incline to continue with the given mode of production rather than spend money to avoid health hazards to workers. In a competitive environment a firm will, of course, be obliged to consider the level of its costs relative to those of its competitors. In such an environment a firm is likely to spend on hazard avoidance where its interests concur with those of the employees but otherwise even the well-disposed employer cannot afford to invest in health and safety unless all employers are compelled to do so. This implies that a policy of voluntarist self-regulation is likely to produce a high incidence of diseases and deaths. (H.W.Heinrich, 1941). In economic terms, therefore, Robenss notion of an identity of interest is ill founded. It may be, however, that Robens spoke of the identity of interest in a social or moral sense as if assuring the reader that nobody really wants accidents to happen. The problem is that Robens failed to pay regard to the variety of employers to be encountered in the real world. Some employers may genuinely wish to avoid imposing risks on their workers and may be disposed to take energetic action to avoid or reduce hazards. Others, however, may have less feeling for the welfare of their employees or, even if favourably disposed, may lack the resolve or application necessary to turn these feelings into action. Even assuming that those at the top of an organization are disposed, as a matter of policy, to comply with health and safety rules, such inclinations to comply may not be channelled effectively down to the relevant staff at the shop floor level. (P.W.J.Bartrip and P.T.Fenn, 1983). How, then, is the Robens approach, with its questionable underpinnings, reflected in the HSCs and HSEs rule-making processes? A first product is the tripartite procedure which infuses nearly all levels of HSC and HSE policy and rulemaking. The HSC is tripartite in composition and so are the HSC and HSE advisory committees and working parties that are set up on a standing or ad hocbasis and which have an important role in developing and co-ordinating policy proposals on particular topics or industries. (R.Baldwin, 1987). Tripartism is said to be useful in producing an agreed approach to regulatory issues and it provides channels for consultation. There are limits, however, to the representativeness of such processes and tripartism can provoke the accusation that large or well-organized firms and groups are well represented in policy-making in contrast with smaller, less well organized firms. This, it could be argued, leads to a regulatory bias in which officials tend to see those to be regulated as better informed, organized, and disposed than is the common reality. This does not mean that HSC and HSE consultations are worthless, but it does suggest that such a tripartite process produces distortions and has a limited role to play in providing relevant information to those affected by a new rule or policy (or in providing the HSC or HSE with convincing due process claims). It leads to accountability only in so far as it gives a voice to certain involved parties and is quite weak in representing the interests of non-unionized or poorly organized members of the general public who must rely on the local authority representatives to put forward their views in HSC and HSE policy-making. (R.Baldwin, Rules and Government, 1995) A further aspect of tripartism is its providing a degree of resistance to regulatory rules of a radical nature. Since the consensual approach is built on attaining agreement, parties who oppose a rule or policy may exercise something akin to a veto. Where the solution to a regulatory problem demands an innovative or rigorous approach this may be less forthcoming from a system run on tripartite lines than from, say, a Morrisonian agency in which consultation occurs but in which the members of the board are not appointed to represent defined sectors of industry or society. (S.E.Finer, 1952). The methods of monitoring compliance are distinguished by the fact that it is the enforcement agency which undertakes the assessment. This is in direct contrast to self-regulation, which would place the main responsibility for health and safety and environmental control on a business and its employees. To varying degrees this has always been the case. Nevertheless the Robens Committee felt that the responsibilities of people in the workplace should be re-emphasized and argued that self-inspection should occupy a central position, with the activities of the regulatory agencies being supplementary. Moreover, it was argued that inspectorate resources should be concentrated on problem areas and spot checks rather than regular, systematic assessments. (A.I.Glendon and R.T.Booth, 1982). The intention of self-regulation is that business will undertake its own audits and impose its own rules and disciplines for health and safety and environmental control. There are a number of advantages to this system. For example, it is cost-effective; it is said to foster good business-government relationships; and it is sufficiently flexible to be adapted to different situations. Other advantages centre on businesss superior access to information relevant to regulation and its superior resources to monitor compliance. But while all of this may be very convincing in theory, the whole system is in practice dependent upon the willingness of business to self-regulate. The views of the Robens Committee seem to be premised on an idealistic view of human and corporate behavior. (Western Mail (Cardiff, Wales), 2005). This approach assumes that an organization, and those within it, can be trusted on its own to maintain ideals of health and safety as equal to, or even above, those of profit, productivity, and more comfortable industrial relations. The more cynical argue that noncompliance may be calculated, the argument being that business has little incentive to comply, especially when the compliance costs are simply for the purposes of health and safety or the environment and have no other beneficial spin-offs. Moreover, businesses vary with respect to their capacity, ability, and willingness to collect information and to comply. The evidence of this research suggests that while self regulation might be desirable it was not sufficient to maintain acceptable levels of compliance. Even in those cases where inspectors were in close and frequent contact with the regulated they still felt the need to check and recheck levels of compliance. This was the case even where self-regulation included the continuous monitoring of, for example, emissions. Indeed, the proactive programmes organized by FI, IAPI, and RI were very much geared to monitoring industrys self-regulation. But as HSCs 1987-8 Annual Report states [e]ven major companies with the resources to carry out self-inspection continue to make serious mistakes (A.S.Wohl, 1983). There were a number of reasons for this. A central reason was that monitoring compliance--even more so than defining compliance--was a continuing activity, so inspectors wanted to check that a businesss own methods of assessing compliance were adequate and not in danger of becoming complacent. Moreover, they needed to keep in touch with developments in a workplace so that they knew about possible closures or new works and knew those responsible for health and safety or environmental control. (G.Rhodes, 1981). It is difficult to quantify the impact of inspectors activities; hence it is hard to assess the effects if they were to be withdrawn. In many respects, ones predictions on this subject depend upon ones views about the ability and willingness of business to comply in the absence of agency vigilance. Regardless of ones optimism or pessimism concerning willingness to comply, it remains the case that if inspectors were to cease their regular assessments of firms then business would lose a valuable source of advice and education, this being especially the case for smaller firms who generally cannot afford to employ specialist advisors. Likewise inspectors would themselves lose valuable ties and sources of information. (H.P.Marvell, 1977). From 1979 in the UK, the new Conservative government embarked upon the wholesale deregulation and the privatization and liberalization of industry. In October 1992, the UK government launched the Deregulation Task Force, which conducted a review of an initial 400 pieces of regulation. The fruits of the exercise are shown in the 1997/8 Health and Safety Commission (HSC) annual report, where it is noted that fifty-three sets of regulations and Acts had been removed as part of the ongoing programme of legislative reform. Bain (1997:187) cogently sums up the reform campaign: (Dennis E. Mithaug, 1993). The deregulatory bandwagon, which has been rampaging along the highways and byways of US and British industry for several years now, shows few signs of stopping of its own volition. The fact that health and safety legislation has been assailed during its unruly progress is not because the vehicle accidentally strayed from its designated path, rather that these regulations were targeted as part of the overall ‘search and destroy’ mission. (M.Beck and C.Woolfson, 2000). Part of this ‘search and destroy’ mission has been the restrictions placed on state enforcement agencies. In the 1980s, the government’s goal of limiting the cost impact of new health and safety legislation on business was supported by its instruction to the HSC to consider the economic implications of any proposed new regulations. In addition, during the 1990s the government pressurized the agency to adopt a less rigorous approach to enforcing the legislation. Under a new code for enforcers, inspectors were advised to adopt a more sympathetic attitude to business problems and to adopt a ‘softly softly’ approach to the enforcement of health and safety legislation. (R.Gray, 1996). More recently, the HSE/C has been subject to requests from the government to take on a greater advice-giving role, rather than involvement in policy formation. Effectively, the HSC has been under continual attack not only in its underlying philosophy and ethics, but also in financial terms with swingeing cuts to budgets during the 1990s. In 1993, the status and muscle of the agency atrophied when the enforcement operations were subjected to ‘market testing’ to see if the private sector could provide services more cheaply, and the job of chairing the HSC was relegated to part-time status by the government. (S. Tombs, 1992). The underlying ethos of maintaining minimal state intervention and allowing employers relative freedom to priorities the imperatives of profit and cost-cutting is particularly well illustrated by the UK’s reactions and responses to European influence. Without doubt, many recent improvements to OHS regulation in the UK do not arise from domestic pressure but emanate from Europe. European Directives such as regulations on minimum wage, working time and parental leave have cumulatively led to a degree of improvement in workers’ employment rights and protection across Europe. However, consecutive UK governments have sought to weaken and dilute European Directives with a range of exclusions, provisos and opt-outs. One example is the EU Working Time Directive, which produced the UK Working Time Regulations (WTR) (1998). The thrust of the WTR was to place an upper limit on employee working hours (an average of 48 hours per week) in response to health and safety concerns about the ‘long-hours culture’ and the absence of rest breaks in some industries. Eurostat (1995) figures revealed that full-time UK employees worked the highest average number of hours in EU member states, with almost one-fifth of full-time employees in the UK working more than 48 hours per week - nearly treble the EU average and a little over Ireland, the next highest contender. (W.G.Carson, 1974). UK figures for 1998 show that one in eight full-time employees routinely worked more than 48 hours per week, with the highest concentration amongst managers and those employed in construction. The propensity to work long hours does not appear to have been dented by the WTR. Goss and Adam-Smith (2001) report from a study of 416 private sector companies that only 13 per cent of companies had responded to the WTR by reducing the hours of work. The most common response was individual agreements (81 per cent of employers surveyed) - usually containing some form of ‘opt-out’ from the WTR restrictions on hours of work. The ubiquity of ‘opt-out’ arrangements within individual agreements over working hours is further illustrated by a recent DTI report, which found that the large majority of companies surveyed were using individual optouts. This situation reflects the positioning of occupational health and safety on government and employer agendas. Despite the wealth of evidence that links long working hours to ill-health and confirmation from the European Court of Justice that working time is an OHS issue rather than just a matter of general industrial relations, defiant policymakers have sided with business concerns over flexibility and efficiency. This is evidenced by the diluted form of the regulations, which came complete with a range of derogations and bare-faced guidance on how to exploit the loopholes. Despite the good intentions of European policymakers and the superficial attractiveness of the regulations, it appears that the UK government has successfully reshaped the nature, form and implementation of the UK Working Time Regulations to fit with the needs of capital. In the words of Goss and Adam-Smith, ‘the apparent protections offered by greater jurisdiction [of the European Union] may turn out to be janus-faced’. As Arrowsmith and Sisson (2001) note: (W.G.Carson, 1970). So far the most immediate effect [of the WTR] has been to encourage employers to seek ‘flexibilities’ and ‘opt-outs’ to minimise their impact by agreement with employees. (Louis Blom-Cooper, 1998). Interestingly, Goss and Adam-Smith report that individual agreements over working hours were most common in companies with trade union representation - a finding they explain on the basis that such compromises are made under conditions of ever-present job insecurity. As such, these agreements may constitute a pragmatic response by a growing proportion of the UK workforce who perceive long working hours as part of the price that has to be paid for relative security. The authors further note the uneasy position of trade unions, which may not approve of such agreements in principle but may have little choice other than to acquiesce. We can link this finding back to assumptions about employees’ freedom to choose and equity in the employment relationship, which bear little likeness to the reality of work and employment relations. (W.G.Carson, 1970). We now move away from legislation and regulatory frameworks towards the broader impact of free-market economics taking us into the fast-track environment of globalization, liberalization and privatization. This provides an opportunity to consider the relative strengths and weaknesses of neoliberal economic theory and free-market principles in fast-changing markets. (W.G.Carson (1970). S.Tombs (1990)). Conclusions Robenss consensual approach resulted in a distorted view of rules and enforcement -- almost a starry-eyed one. The Committee, we have noted, wanted to see not only a movement away from primary legislation towards secondary and tertiary rules, but the use of rules that were clear, intelligible, and constructive. Robens placed a high degree of faith in self motivation as an alternative to criminal prohibition a faith that we have seen commentators criticize and that, at the time, was too much for some parliamentarians to swallow. Thus Nichols and Armstrong recount how in May 1973 in the House of Commons a justifiably enraged Labour backbencher called Neil Kinnockscorned the reasoning of the Robens Report and its offering the solution that: If we have less law, we shall have more safety. Not only did Robens assume that employers would have the goodwill and energy to read, understand, and apply the rules but it was also assumed that clarity and intelligibility in rules was indeed feasible. (D.Lewis, 1974). In another respect, however, Robenss ill-founded strategy was due not so much to romanticism as realism. Thus we have seen that in making no case for increased inspectorate resources the Committee left itself little alternative but to place faith in self-motivation as opposed to external regulation. In sum, then, a good deal can be learned about governmental rule-making from the Robens experience. It demonstrates quite vividly how a mistaken analysis of regulatory problems can produce quite unrealistic approaches to rules and to expectations of rules. It indicates the importance of understanding the motivations of those affected by rules. It shows how those designing regulatory systems can quite easily make ill-founded assumptions about the potential of certain forms of rule-making process. It suggests that agencies set up with regulatory remits that are based on a particular philosophy may, for resource, structural, and legal reasons, find it very difficult to reshape the established regulatory regime into something more effective. Finally, it indicates how even simple assumptions on resources can dictate strategies on rule-making and enforcement. (Giandomenico Majone, 1996). 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