Steen Thomsen © 2012

Regulation

 

 

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Governments decide on the rules and regulations which structure markets, corporate governance, business and all kinds of economic activity. In particular they shape corporate governance by placing limitations on who can own what and how ownership is taxed. They also directly intervene in corporate governance by rules and regulations on board structure, diectors' duties, disclosure, management pay and a range of other issues.

 

 

 

The economic rationale for government intervention is to overcome market failure, but it not clear that all oreven most regulation can be explained int his way. There is also the risk of policy failures caused by self interested politicians, revenue maximizing bureaucrats and other distortions

 

Since policy makers and bureaucrats generally have little information about economic details, there is a clear rationale for general policies and creation of institutions rather than selective intervention into the working of the economy. Howver, regulatiion is in fact constantly growing and becoming more complex, which raises the question of overregulation. Beyond a certain point regulation is likely to do more harm than good. Examining the limits of regulation is an important task for governance research.

 

 

 

 

In a new book with Martin Conyon, Corporate governance: Mechanisms and Systems, I try to provide a grand view of the field.

 

 

 

Mechanisms such as ownership, boards, incentives and regulate work to provide companies with control and direction. Countries combine them to form systems.