Policy Recommendations - Corporate Governance and Business Ethics

It is relatively easy to provide naive policy implications. Less regulation is less costly. Whatever regulation there is should be simple. It should be intuitive so that the regulated can understand it. There should be a well-defined rationale which is communicated to the public and helps create legitimacy for the law. Transparency is preferable, but information overload may reduce transparency. Complexity will be less costly when directed at an audience which can handle it e.g., the auditing profession (Schuck 1992). All else equal, top-down regulation in the civil l tradition is more costly than bottom up approaches based on self regulation, best practice codes and common law. Since the costs of complexity are large, it will often be optimal for society to make laws less complex even when there are potential benefits of more detailed rules. Obviously, trade offs can arise when (if) there are significant benefits of complex regulation. But there is almost no chance of optimal regulation if the costs of complexity are ignored.


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Corporate Governance and Business Ethics Topics