Bryane Michael

Running Business Like a Government in the New Economy: Lessons for Organisational Design and Corporate Governance

Principal‐agent problems are largely responsible for poor corporate governance. Much work on private sector corporate governance reform seeks to address transparency, accountability and responsiveness to stakeholder interests under the new category of corporate social responsibility (CSR). Yet, these issues are not new. The public sector has been working on these issues for many years – especially in looking at ways of reducing malfeasance and also optimizing use of resources for the benefit of principals. Some lessons from public sector reform include promoting information dissemination, participation, and balancing powers between a corporation’s executive and supervisory entities. While firms should not necessarily be administered like governmental bodies, there are many lessons from public sector organizational reform and institutional governance that may be applicable to large‐scale public corporations.

Questioning Public Sector Accountability

The rise of accountability seems to promote more responsible, effective, and participatory public sector action, but its benefits are less unambiguous than they appear. Activities aimed at increasing accountability proliferate as they gain importance, making monitoring an end in itself at both the national and international levels. Economic and institutional explanations for the rise of accountability fail to explain its political nature, including negotiations over power, organizational boundaries, image, social value, or moral values. If such negotiations imply that some of the value of accountability is socially constructed, then activities aimed at promoting accountability must be undertaken with circumspection. Accountability that is only accountable to the idea of accountability must be questioned.

Fighting Corruption on the Transdnistrian Border: Lessons from Failed and Successful Anti-Corruption Programmes

In 2007, both Moldovan and Ukrainian authorities took firm steps to reduce corruption along the Transdnistrian border. This paper—aimed mainly at anti-corruption practitioners and scholars in public administration—discusses the background and underlying principles guiding the anti-corruption work being adopted by both governments in order to facilitate discussion about optimal anti-corruption programme design. This paper presents a set of tools used during the planning phase of the anti-corruption programme—outlining the methodology used to assess the extent of corruption on the Transdnistrian border, the problems of legislative transplants, a “contract test” for defining corruption offenses, a method of risk analysis, and a model of optimal anti-corruption programme organizational design.

Issues in Anti-Corruption Law: How Can Code of Conduct Laws Be Drafted in Order to Reduce Corruption in a Public Sector Like Romania’s?

International organisations, like the UN and EU, have encouraged their member states for years to increase civil servants’ compliance with particular codes of conduct. Romania represents probably one of the most advanced countries in attempting to legislate on civil servant ethics through its Code of Conduct Law. Yet, the Romanian Code of Conduct Law possesses significant weaknesses, emanating both from the inherent difficulties of using hard law in a soft law area (like civil servants’ ethics) and the Law’s silence as to specific procedures which government agencies should use in implementing the Law. Given these weaknesses, Romanian government agencies should adopt regulatory instruments which compensate for these weaknesses at the legislative level. In this paper, we present the provisions -- particularly related to the establishment of agency-level ethical doctrines -- which regulatory drafters can use to implement these codes of conduct in a civil law system without running afoul of the basic requirements of civil law jurisprudence for clarity and predictability. We discuss the legal basis in Romanian administrative law for the elaboration of specific ethics-related doctrines and the ways in which such a “doctrinal approach” to administrative ethics can help achieve the objectives of the flawed Code of Conduct Law. We specifically discuss the ways in which Romanian governments can adopt such regulatory instruments and the types of provisions which should be included in order to help overcome the flaws of the Code of Conduct Law.

What Does Brunei Teach Us About Using Human Development Index Rankings as a Policy Tool

The Bruneian Government has set an ambitious target to achieve a top 10 ranking on the UNDP’s Human Development Index (HDI) by 2035. To achieve its objective (described in a national strategy document called the Wawasan 2035), Brunei’s economy needs to grow by 6%-7%. Is setting an HDI target a good way to govern Brunei’s policymaking? Is it a good way to govern any country’s policymaking? In this paper, we look at the role HDI-rank targets play on economic and fiscal policy. We show that such a headline target (much like a profit target in a private company setting) automatically sets targets for growth in various economic sectors and fiscal policy targets. As such, HDI-rank targeting may provide a useful mechanism for co-ordinating development policies and for monitoring progress against a wide range development goals using only one number.

Implications of social responsibility investment for pension funds in Turkey

Purpose - This paper aims to present to capital market regulators (particularly in Turkey) with options for regulating the quickly expanding area of socially responsible investment (SRI). Design/methodology/approach - The paper takes a public economics perspective, focusing on the social risks concomitant with equity investment, and presents options based on an economic analysis of the various regulatory options available to capital market regulators. Findings - The paper finds that in the long run, the extent of national SRI-related regulation will probably depend on the extent to which the social, environmental, and other risks targeted by SRI represent social risks (which can be mitigated by regulation as opposed to other policy instruments). Practical implications - While Turkish private pension fund regulators should be mindful of wariness of other OECD member countries to regulate SRI, the particularity of the social risks faced by Turkish financial markets may militate for a unique national approach toward SRI regulation. Originality/value - This study represents one of the first attempts to address the issue of domestic SRI regulation and to present evidence-based conclusions in a policy oriented setting.

A Theory of Financial Services Competition, Compliance and Regulation

Do financial regulation advisors help their clients become more profitable? In this paper, we present a model where financial service firms may add to their own compliance teams or hire outside compliance advisors. We derive the conditions under which a financial services firm will want to hire a compliance services company, and show how much money they should spend. Financial services firms in competitive locations like Hong Kong and Singapore will particularly benefit (at least in the short run) from their services. We also show that their advice may lead to an embarrass de riches – whereby the lower compliance costs and higher profit advantages they confer may lead to more regulation. Regulators may furthermore tighten regulation – with the expectation that financial service firms will adapt somehow. We present a fresh perspective on the Menon Hypothesis, deriving conditions under which financial regulations help the competitiveness of an international financial centre. We provide five potential policy responses for dealing with ever ratcheting financial regulations.

Corporate governance and its reform in Hong Kong: a study in comparative corporate governance

Purpose – The purpose of this paper was to determine to what extent Hong Kong’s experience proves (or disproves) theories from corporate governance in the areas of family ownership, concentration, self-dealing in Hong, executive compensation and other issues. This paper – written in the comparative corporate governance tradition – uses data from Hong Kong to discuss wider trends and issues in the corporate governance literature. Design/methodology/approach – The authors use the comparative corporate governance approach – exposing a range of corporate governance theories to the light of Hong Kong data. The authors purposely avoid over-theorising – leaving the data to speak for themselves for other researchers interested in such theorising. Findings – The authors find that Hong Kong presents corporate challenges that are unique among upper-income jurisdictions – in terms of potentially harmful (shareholder value diminishing) family relationships, shareholder concentration and self-dealing by insiders. The a...

Does Objectives-Based Financial Regulation Imply A Rethink of Legislatively Mandated Economic Regulation? The Case of Hong Kong and Twin Peaks Financial Sector Regulation

Objectives-based legislation – or laws which focus on achieving particular and concrete outcomes – has become a new and important tool that financial sector regulators use to tackle large and varied financial system risks. Yet, objectives-based legislation – and the frequent principles-based regulation underpinned by such legislation – represents a stark departure from traditional ways of legislating. In this paper, we describe the problems and prospects of implementing objectives-based financial regulation in Hong Kong – in the form of a Twin Peaks regulatory structure. A focus on the objectives of achieving financial market stability and proper market conduct would require a different approach to legislating and regulating in Hong Kong (and most other countries). By describing the way Hong Kong’s legislators would adopt such objectives-based legislation putting a Twin Peaks regulatory structure in place, we hope to shed light on the broader trend in academic and practitioner circles toward thinking about how to use objectives-based legislation to tackle complex social risks. Such an approach may also reduce the use of patchworks of complex inter-agency agreements and rulemaking between traditional regulators as they try to solve large and difficult regulatory problems.

Playing the Shadowy World of Emerging Market Shadow Banking

For emerging market regulators, shadow banking represents an activity which they must control. For businessmen in economies like Russia, Argentina, Saudi Arabia and Mexico, shadow banking represents an important business opportunity. By extending credit to risky (but promising) activities through shadow banking, financiers in these economies can earn far higher returns for excess-cash than placing it in cash management accounts. In this brief, we describe ways that cash-rich individuals and companies can use shadow banking activities to help themselves (by earning more money) and help the economy (by extending credit in these traditionally credit-starved economies). Some of these activities include issuing debt which shadow bankers use as collateral, chopping project-lending into privately-placed share offerings, investing in trade, real estate and insurance securities as well as centring shadow banking activities in regulation-friendly jurisdictions.