Governance is hot. Most scandals in the corporate or government world are characterized as examples of failed governance. Most reviews of regulatory bodies include numerous recommendations on improving governance. This article deals with just one aspect of governance: managing the key regulatory relationships.

The overarching theme here is that good governance, like a Jane Austen novel, requires everyone to know his or her place. Appreciating one’s role, both externally and internally is essential.

External Relationships

There are three important relationships between a regulator and external entities.

Regulators and Government share the same goal: serving the public interest. However, in regulating a profession or industry, it is the regulator’s task to protect the public through ensuring ethical and competent practitioners. The government’s role is to provide oversight to ensure that regulators are doing their job. The delicate balance is for regulators to ensure that government has sufficient information and confidence in the regulator while maintaining the independence necessary for self-regulation. Government has many tools to ensure that regulators are, in fact, doing their job.

Regulators and the Public. The public is the ultimate beneficiary of the regulator’s activity. The challenge is that the public is a diverse and, for some subgroups, passive entity. In fact, regulators often only deal with representatives of various portions of the public. As such, regulators need to constantly ask themselves what the overall public would want in each regulatory decision made. Regulators also should be aggressively transparent. Posting information on the regulator’s website, while important, will not reach many portions of the public. Maintaining a consistent message is also important for a successful relationship with the public.

Regulators and Stakeholders have an ambiguous relationship. A regulator benefits enormously from having interested stakeholders provide feedback on proposals and raising regulatory issues. However, at the same time, regulators need to guard against giving undue influence to vocal stakeholders over silent groups that are just as important (or in the case of clients, arguably more important). Representatives of regulators also need to resist the temptation to share information with active stakeholders that is not available for passive ones. In some cases, regulators need to ensure that they do not over react to the tactics of aggressive stakeholders. Finally, any appearance of a conflict of interest between a representative of a regulator and a stakeholder can be quite damaging.

Internal Relationships

Often managing internal relationships within a regulator are more challenging than the external ones.

Boards and their Committees need to operate effectively. Committees are intended to serve the Board (sometimes called a Council) and not vice versa. Except for statutory firewalls (discussed below), Committees need to avoid being territorial. It is the job of Committees to make recommendations to Council, but generally not to make decisions on Council’s behalf (except sometimes in cases of emergencies). Committees have the right and duty to make specific recommendations; failing to do so provides Council with too little assistance. However, providing Council only with conclusions without identifying the major issues and key options is also unhelpful. The trick is to find the right balance between providing too little or too much assistance.

One exception to the above is where the legislation gives a committee the exclusive jurisdiction to deal with a matter. Typically, this arises in matters dealing with individuals (e.g., registration, complaints, investigations, discipline, etc.). Here the Board must maintain a firewall preventing itself from encroaching upon the exclusive jurisdiction of the Committee in making the decision.

Chairs and the Board and its Committees. The Chair (or President) is the leader of the Board. Leadership flows from example and moral suasion arising from both the person and the office, not from issuing decrees. The Chair often presides at Board and some Committee meetings. Sometimes the Chair is an ex officio member of other Committees. The Chair usually acts as the spokesperson for the Board and often the regulator as a whole. However, such communications need to be consistent with the direction given by the Board. Where there is a substantive issue between a Board or Committee member and the regulator, the Chair is the point person for the former.

Individual Board Members work together as a team. Their interactions need to be courteous, constructive and respectful. Board members have a duty to diligently review the issues and background materials and to participate in the decision-making process. While Board members may have preliminary views on issues, they should not make up their minds until the debate, giving consideration to the viewpoints of others. However, once a final decision is made, Board members speak with one voice and are not to criticize or express publicly their disagreement with the decision made. A fundamental failure in any of these obligations can be a ground for removal.

Board Members and Staff need to appreciate the other’s role. Board members set policy and establish the direction of the organization. Staff provide resources to the Board for the making of decisions and then implement them. Serious problems occur if Board members engage in operations or if staff make major policy decisions. In the former situation, inconsistent and ineffective execution of the regulator’s activities result. In the latter circumstance, necessary checks and balances are absent. Many Boards find it difficult to monitor the performance of the regulator and its staff without slipping into actual operations. The trick is to deal with patterns and outcomes rather than individual actions.

Issues between Board members and staff should go to the Chair, who addresses them with the Chief Administrative Officer / Registrar. The CAO or Registrar will then deal directly with the pertinent staff member. Chaos ensues if Board members issue directions to individual staff members.

There are often some firewalls for staff members, usually the Registrar. Typically, these arise in the handling of complaints and investigations.

Appreciating the roles of the various entities, external and internal, is critical to governance success.

FOR MORE INFORMATION

This newsletter is published by Steinecke Maciura LeBlanc, a law firm practising in the field of professional regulation. If you are not receiving a copy and would like one, please contact: Richard Steinecke, Steinecke Maciura LeBlanc, 401 Bay Street, Suite 2308, P.O. Box 23, Toronto, ON  M5H 2Y4, Telephone: 416-626-6897 Facsimile: 416-593-7867, E-Mail: rsteinecke@sml-law.com

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