Kia ora,
It is a pleasure to be speaking to you again today. As some of you recall, I am now well over a year into my role as Chair of Regulatory Practice at the Victoria University of Wellington.
I’ve spent a better part of that year meeting and having conversations with a lot of people in the New Zealand Regulatory community about the challenges and opportunities of our roles as regulatory practitioners.
Today, I will attempt to provide some more insights from a broader academic perspective to the excellent presentations we had today. In all, I plan to give you some food for thought.
I hope that through this presentation, I can inspire us to reflect on the impact of our everyday actions on the maintenance of the overall trust in the regulatory system—and in the government at large. I do so by discussing the metaphor of the social license to regulate, and will end by suggesting Kant’s categorical imperative as a means for making decisions in complex situations of discretion. Trust me, there is a logic in all this.
(What exactly is a social license?)
The origins of social license thinking take us back to, at least, the 17th Century. That was when Enlightenment scholars started to examine the reasons people subjected themselves to the dictate of governments.
Well-known thinkers such as Thomas Hobbes, David Hume, John Locke and Jean Jacques Rousseau were concerned about the amount of authority the government wielded over individuals. They wondered why individuals would relinquish some of their freedoms to others to rule them. They wondered why individuals subject to an organised government rather than choosing to live in a natural state of freedom.
While we don’t have time today to touch on all the nuances of the answers to these questions, we can deduce that these thinkers argued that in a natural state, individuals’ actions are bound only by their convictions. This gives each maximum freedom, but their freedom is at the same time limited by much uncertainty because they could be preyed upon by the lawlessness of others.
These thinkers, therefore, argued that to eliminate this uncertainty, people would have to surrender some of their freedom in exchange for the benefits of a political community. In this political community people would settle a ‘social contract’ under which individuals would subject themselves to a sovereign entity. The sovereign entity would have the authority to maintain social and political order. And if necessary, by the use of force.
Besides, so questioned these thinkers, should all authority for maintaining social and political order be invested in one entity, or would it be better to split it up somehow?
This gets us to another Enlightenment thinker, the French philosopher Montesquieu. He argued that if this authority is not split between separate entities, it will give one particular entity an absolute power and thus there would be no true freedom. After all, if the sovereign is lawmaker, judge and executive at the same time, then the sovereign becomes a despot by default.
In Montesquieu’s view, these powers should be distinct from each other and be dependent upon each other so that the influence of any one power would not be able to exceed that of the other two, either individually or combined.
So, why this recap of history?
It is important to understand that regulation takes a difficult position in constitutional democracies, such as New Zealand.
While regulators are typically seen as part of the executive branch of government, they have now attained a much larger influence than ‘just’ the executive powers. That is, regulators often do more than only enforce the law.
Almost as a rule, regulators are involved in operationalising the law, often through rulemaking, which can be considered a contribution to what the legislature does. And almost as a rule, regulators interpret the law and judge violations through adjudication, which can be considered a contribution to what the judiciary does. These roles may not be all vested in individual regulatory practitioners, but they are often vested within an individual regulatory Agency or organisation.
On top of that, regulators are appointed and not democratically elected. The implication of this is that citizens, who have surrendered some of their liberties under the social contract, have no direct influence in choosing who they want to have as their regulators.
Critical citizens may, therefore, argue that while they can choose their parliamentary representatives, they cannot choose who rules over their day-to-day activities. And they can argue that those who regulate them on a day-to-day basis are vested with too many powers.
Now, luckily for us, the regulators, not many citizens go to such lengths to criticise the regulatory system at large or some of the details of it that they encounter.
Yet, in all of this, it is important for us, as a regulatory community, to have some introspection on the position we hold, and remind ourselves not to take our positions for granted.
We, as regulatory community, are an essential part of the social contract that we, as citizens, have entered. As such, we’re in a sensitive position where we can either bolster that social contract or undermine it.
When we go about our daily business as regulators, we take it for granted that we are in the legal position to carry out our regulatory tasks. We feel we have a legal license to regulate, and that is enough to justify our actions. But is it?
But how does all of these take us to the point of the social license to regulate, you may be asking.
I would argue that it makes sense to, even just for a moment, reflect on the social license to regulate that comes with our roles. The concept of a social license is best understood as a set of demands and expectations, held by those we regulate, on how we should regulate.
Thus, our social license to regulate refers to the level of acceptance or approval we get from those that we regulate. It refers to how credible, trustworthy and reliable we are in the eyes of the public at large.
Now, why is it important for us to focus on our social license to regulate? In part, this is because the better we uphold this license, the more efficient we will be in bolstering the social contract into which we have all entered.
(… and then there is discretionary space)
Another reason why it is important to focus on our social license to regulate is that so much of the work that we are doing, as individual regulators and as regulatory community, is not clearly defined in our legal mandate.
Even more, how we should do the work we are doing is often even less clearly defined. Our legal license to regulate doesn’t cover all areas of regulation and regulatory situations that we may find ourselves in, and for this reason, we often have to act according to our discretion.
Throughout today, we heard examples of balancing freedom and constraints, of balancing could I/should I, of balancing a close relationship with those you regulate and maintaining regulatory independence. Such situations and how we ought to behave in them exactly are often not explicitly specified. In such situations we must rely on codes of conduct and, where they do not cover the subject matter, we are left to our basic instincts.
The examples of today, and as many of you will have experienced in your work, point out the difficulty of dealing with discretionary space. And our social license to regulate is particularly vulnerable when we must rely on our discretion.
There are good reasons why we are given regulatory discretion. Discretion allows for making tailored and case-specific decisions, which is helpful simply because not every possible situation can be regulated on paper.
However, over the years concerns have arisen about how much a regulator’s personal biases affect her or his decisions. There have been arguments that these biases may lead to arbitrariness and inconsistencies in discretionary decisions.
Even worse, poor use of regulatory discretion may result in a loss of public trust. Research has indicated that a loss of public trust in regulation and government can lead to lower levels of compliance with rules and regulation. So, a tiny amount of trust lost might trigger a chain reaction that may lead to more and more loss of confidence in regulatory bodies.
(Talking about trust)
As regulators, we sometimes forget that trust exists both in the form of individual relationships and as a club good. In a relational sense, trust may either come as a belief or as an experience.
You may believe you can trust someone because of her or his credentials. Then you base this belief either on the person’s qualifications, or their past achievements, or on anything else that indicates the person’s suitability for the job. It is on this same basis that people may trust organisations.
Another form of trust is trust that grows over time. Here a person decides they can trust someone based on the relationship they have built up with the person over time. Again, the same holds for trusting organisations.
But much more is at stake here. If people have trust in one regulatory practitioner, it will affect how trustful they will be towards another. Likewise, if people have trust in one regulatory agency, they are more likely to trust another one as well. In this sense, trust is a club good. Trust is something we create together.
But the reverse also holds.
If people’s trust in an individual regulatory practitioner gets betrayed, they will not only lose trust in that practitioner but will approach subsequent regulatory practitioners with a degree of suspicion. If their trust in an Agency gets diminished, they may be less willing to trust another Agency, and perhaps the regulatory system as a whole.
The ripple effect of one practitioner’s or agency’s actions could, thus, affect us all. For that reason, one cannot lean back and be grateful if a regulatory problem occurs somewhere else. A loss of trust because of a regulatory problem elsewhere may quickly spill over to your daily practice.
Not only do we build trust together, we must nurture it together, and we have to restore it together if need be.
So, how can we bolster our social license to regulate?
How can we make sure that those we regulate sees us as credible, trustworthy and reliable?
The first step is, of course, to stick to your legal license to regulate. There are many guidelines and work protocols to fall back on. New Zealand has in place a good set of standards of integrity and conduct, guidance for dealing with situations of bribery and corruption, and how to deal in situations where interests conflict.
But what to do if there’s no guideline or protocol? Well, there are a few good practices we see around the world that may be helpful to us here in New Zealand. For example, principles of good enforcement procedures in the UK expect regulatory practitioners to provide advice and discuss the situation first before taking formal enforcement action—unless, of coure, immediate action is necessary.
Such discussions may help to resolve points of difference, or at the very least help to understand each other’s perspectives. It may also help to explore the different paths towards compliance. What recurs in these good practices is this notions of trying to see things from the other’s perspective.
And indeed, research supports that gaining trust often asks for putting yourself in some else’s position and trying to truly understand their perspective. Of course, that does not mean you have to agree with that perspective.
And on the positive side, taking the other person’s perspective may even help you to arm yourself against arguments they may come up with to justify the situation.
Seen in such a light, the process of gaining trust may very well have more benefits than ‘just’ bolstering your social license to regulate. It may also strengthen your position as a regulatory practitioner.
(Lessons from moral philosphy)
I want to round up with a practical lesson from moral philosophy that I tend to apply myself in situations where I am not completely sure what to do. That is, in situations where I have a lot of discretionary space.
Moral philosophy is about asking questions about what is right and what is wrong. It seeks to find answers to the question about how people should live with one another.
For a long time, moral philosophers have struggled with some of the questions that we have addressed today. If I can do something, should I do it? And, if I can do something, when shouldn’t I do it?
Over the centuries, there have been many attempts to answer these questions. But one of the answers that stands out for me is Emanuel Kant’s categorical imperative.
When in doubt about what to do, he suggests to only act in such a way that you would like to see all people act.
Kant stated this is a bit more complex, however. He put it as: ‘Act as if the maxims of your action were to become through your will a universal law of nature.’ Here a maxim is any simple and memorable rule or guide for living.
Thus, Kant asks us to pause and reflect on the could I/should I question, rather than going fully on the auto-pilot of our gut feelings.
Let’s take as an example a situation where those you regulate ask you how they can achieve compliance. There is no clear written rule about their specific situation. Nor is their clear rule about how you should act.
Here your maxim could be: ‘I refrain from helping those I regulate to achieve compliance’.
The universalization of that maxim would be: everyone may refrain helping those they regulate to achieve compliance.
If you will the universalization of that maxim, the situation would become: no-one will ever help those they regulate to achieve compliance.
But would it be possible that you will ever find yourself in a situation where your well-being depends on being helped by those that regulate you to achieve compliance? If you honestly have to answer that question with ‘yes’, you find yourself in a pickle. After all, if you stick to your maxim, you would even in that situation wish to not get help. This goes against the logic that we all wish our own well-being, and thus your maxim may ultimately go against what you would wish for yourself.
Now, I’m not expecting that you will go through all these steps every time you find yourself in a difficult situation of discretion, but it may be good to keep it in the back of your mind to deal with difficult ‘can I/should I’ questions.
But what I do like you to consider is to think about all the hats you wear throughout your day as regulator. Sometimes you wear your executive helmet, sometimes your judicial cap, and sometimes your legislator hat. I suggest to also add the moral philosopher’s tam to your wardrobe, and put it on when your face these kinds of difficult situations.
Of course, this reasoning does not excuse us from situations where our maxims, that is our judgment of what we consider as being reasonable conflicts with what others consider as being reasonable. It, therefore, makes sense to now and then discuss our maxims with those around us. Do my colleagues share my views? Should you adjust your outlook? May it help to work collectively towards broadly shared maxims within your organisation?
Pausing and relying on codes of conduct and guidelines when facing situations where you must rely on your discretion, trying to see things from the other’s perspective, understanding the powers that have been given to us, understanding the complex role we have in our constitutional democracy, and seeing trust as something we create and nurture together, are important building blocks towards strengthening our social license to regulate.
Thank you very much for your attention. I understand this is all but an easy ending of this fantastic day. I hope my presentation, like the other excellent presentations we heard, will add something to think about when you reflect on those difficult ‘can I, should I’ questions.
Thank you.
From the Regulatory Frontlines 