The Governance of Regulators

English
ISSN: 
2415-1440 (online)
ISSN: 
2415-1432 (print)
http://dx.doi.org/10.1787/24151440
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As “market referees”, regulators need to be constantly alert, monitoring trends as well as assessing the impact of their decisions. What should be measured? Is it possible to attribute impacts to regulators’ decisions? How to make effective use of what is measured? How should the organisational structure and governance be optimised? Addressing these questions effectively can ultimately determine whether trains will run on time, there is clean water in the tap, lights switch on, the telephone and internet work and there is cash in the ATM machines. To help regulators in their quest to better evaluate their performance, the OECD has developed a Performance Assessment Framework for Economic Regulators (PAFER) that looks at the institutions, processes and practices that help regulators improve their organisational impact, based on the premise that governance matters for the performance of regulators.

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Creating a Culture of Independence

Creating a Culture of Independence

Practical Guidance against Undue Influence You or your institution have access to this content

English
Click to Access: 
    http://oecd.metastore.ingenta.com/content/4217221e.pdf
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Author(s):
OECD
26 Apr 2017
Pages:
42
ISBN:
9789264274198 (PDF)
http://dx.doi.org/10.1787/9789264274198-en

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Regulators are the “referees” of markets that provide essential services to citizens; they guarantee that all actors respect the rules and work to achieve the best outcomes. This means that their behaviour must be objective, impartial, consistent and free from conflict of interest – in other words, independent. Yet, regulators need to engage with a number of stakeholders, who may also seek to apply pressure and exert undue influence on regulatory outcomes. The independence of regulators is thus constantly under stress. This report provides practical advice on how to address stress points and protect economic regulators from undue influence, drawing on the experience of over 80 regulators that participate in the OECD Network of Economic Regulators (NER). It presents a practical checklist to support behavioural and organisational change, and helps other stakeholders better understand and appreciate the role of regulators and how to interact with them.

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  • Foreword and acknowledgements

    Regulators oversee the functioning of markets for the improved quality and delivery of public services. In order to fulfil their function, regulators need to make and implement impartial, objective and evidence-based decisions that will inspire trust in public institutions and encourage investment. Undue influence, whether real or perceived, can undermine a regulator’s ability to behave in this way, impinge on its independence, and ultimately, on its performance.

  • Executive summary

    As “market referees”, regulators must take on board the views of legitimate interests as well as protect themselves from inappropriate or undue influence in order to correctly conduct their activities and achieve the right policy outcomes. Independence is a means to this end. Independence from both the government and regulated industry ensures that regulators’ decisions and activities are objective, impartial, consistent and expert. The capacity of regulators to act independently helps implement and refine the policy frameworks developed by government institutions that seek to improve the functioning of markets, sectors and environments through regulation.

  • Users' guide

    This guidance is intended to provide practical guidelines for governments and regulators on how to protect economic regulatory agencies (from here on regulatory agencies) from undue influence. It also aims at helping the executive, legislature, judiciary, industry, consumers, media and interest groups to better understand and appreciate the role of regulators and how to interact with them. It has an informal status of guidance and can be used by OECD members and non-members to guide their reforms.

  • Purpose

    This chapter discusses why independence matters and how this guidance aims to help regulators and other government actors and stakeholders.

  • Rationale: When and why is independence necessary and why is this guidance needed

    This chapter provides an overview of when independence may be necessary and factors to consider in creating an independent and structurally separate regulatory body. It also discusses OECD data on the independence of regulators.

  • Guidance on creating a culture of independence

    This chapter presents practical guidance for governments and regulators on how to protect economic regulatory agencies from undue influence and creating a culture of independence. The guidance may be applicable or adaptable also to other regulators. It is structured under five dimensions: role clarity, transparency and accountability, financial independence, independence of leadership and staff behaviour.

  • References
  • Methodology

    This guidance is based on a body of work developed by the OECD’s Network of Economic Regulators (NER) and the Regulatory Policy Committee (RPC). Discussions first began in the initial meetings of the NER given the increased pressures on regulators in an ever dynamic, complex and challenging climate. “Preventing from undue influence and maintaining trust” is one of the seven principles in the 2014 OECD Best Practice Principles on the “Governance of Regulators” which provided the rationale and considerations for regulators to be and act independently (OECD, 2014).

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