Demanding regulation to better define the market

Leading environmental campaigner George Monbiot is surprised that many businesses actually welcome and often call for regulation by government. And at first glance it does seem odd that a corporation might argue that it can’t be trusted; regulation is the method by which irresponsible corporations are punished after all.

Yet having said that, and as others have pointed out, corporations are legally obliged to act in the interests of shareholders and those interests are often narrowly defined as profit. All corporations operate within marketplaces that are defined by the regulatory environment.

I once spoke for a client on a fairly unique fringe of the insurance industry at a time when regulation when under discussion. I argued that we should embrace a government sponsored regulatory regime, rather than support calls for self-regulation.

There were three main reasons to support regulation. Firstly, we were committed to ethical practice, so we had nothing to fear and the endorsement of an independent regulator’s logo would be a selling point. Secondly, less responsible insurers who cut corners and so enjoyed lower costs than us would be forced to compete on a level playing field. Thirdly, it would be an opportunity to present a first draft of the new regulations to government and whoever writes the first draft has enormous influence over the final draft. In other words, provided we didn’t push our luck, we could redefine the market to suit our preferred business model and eliminate our less ethical competition.
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