Government Enforcement vs. Compliance Programs in the Global Economy

Global connections

Government Enforcement vs. Compliance Programs in the Global Economy

2014-snell-roy-speaking-headshot-200By Roy Snell

We talk a lot about the government’s oversight of business.  It gets a lot of negative press.  But imagine, if you will, an environment in which the government does not enforce the rule of law.  Or imagine countries in which the government owns most businesses.  Countries that own most businesses have similar problems to those countries with little to no enforcement. What is the difference between businesses self-regulating and governments self-regulating? I would say the difference in independence is near zero.  The conflict of interest would be a very strong deterrent to self-regulation.

Countries with little to no enforcement of the rule of law are not big players in the global economy.  It hurts their economy because players in the global economy would rather do business where the rule of law is enforced by an independent entity free from conflict. There are benefits to being a well-regulated country.  Civilized society depends on it.  Economic success depends on it.  So which is the most advanced country in the world with regard to regulatory enforcement for business?  It is an interesting question that could be argued many ways.

What could be better than the government running around trying to catch bad players?  What is the most effective way to prevent, find and fix ethical and regulatory missteps on a real time basis?  I would argue that it is the country with the most compliance officers and compliance programs.  They would have a material edge.  Compliance programs catch problems much more often and much earlier than government enforcement.

Players in the global economy are attracted to business opportunities in trusted countries.  Government enforcement and regulations are inefficient and haphazard.  Countries that own most businesses are not much better off than countries where business is self-regulated.

Enforcement folks just can’t be everywhere all the time.  It’s a post-mortem approach.  Enforcement is not very effective at prevention.  Therefore it stands to reason that countries that head off regulatory problems on a real time basis with in-house compliance programs are going to be the most trusted.  Countries with the most businesses with compliance programs will be the most successful in the global economy.

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