Page 79 - SBL Integrated Workbook STUDENT 2018

Approaches to governance

1.4 Arguments in favour of a rules-based approach

Organisation’s perspective:

 Clarity in terms of what the company must do – the rules are a legal requirement,
clarity should exist and hence no interpretation is required.

 Standardisation for all companies – there is no choice as to complying or
explaining and this creates a standardised and possibly fairer approach for all
businesses.

 Binding requirements – the criminal nature makes it very clear that the rules must
be complied with.

Wider stakeholder perspective:

 Standardisation across all companies – a level playing field is created.

 Sanction – the sanction is criminal and therefore a greater deterrent.

 Greater confidence in regulatory compliance.

1.5 Arguments against a rules-based approach

Organisation’s perspective:

 Exploitation of loopholes – the exacting nature of the law lends itself to the
seeking of loopholes.

 Underlying belief – the belief is that you must only play by the rules set (i.e. no
'buy-in' is required).

 Flexibility is lost – there is no choice in compliance to reflect the nature of the
organisation, its size or stage of development.

 Checklist approach – this can arise as companies seek to comply with all
aspects of the rules and start ‘box-ticking’.

1.6 Wider stakeholder perspective:

 ‘Regulation overload’ – the volume of rules and amount of legislation may give
rise to increasing costs for businesses and for the regulators

 Legal costs – to enact new legislation to close loopholes

 Limits – there is no room to improve, or go beyond the minimum level set

 Box-ticking’ rather than compliance – this does not lead to well governed
organisations.

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