. A high degree of regulatory integrity helps achieve decision-making which is objective, impartial, consistent, and avoids the risks of conflict, bias or improper influence. The nature of some regulatory decisions can at times involve higher risks to the integrity of the regulatory process, for example, due to pressures from the affected interests or the contentious and sometimes politically sensitive nature of the decisions. Establishing the regulator with a degree of independence (both from those it regulates and from government) can provide greater confidence and trust that regulatory decisions are made with integrity. A high level of integrity improves outcomes of the regulatory decisions. Regulators should have provisions for preventing undue influence of their regulatory decision making powers.
5.Principles for the degree of independence 6.Independence | -
Independent regulatory decision-making, at arm’s length from the political process, is likely to be appropriate where:
there is a need for the regulator to be seen as independent, to maintain public confidence in the objectivity and impartiality of decisions;
both government and non-government entities are regulated under the same framework and competitive neutrality is therefore required; or
the decisions of the regulator can have a significant impact on particular interests and there is a need to protect its impartiality.
The autonomy of regulators (organisational, financial and decision-making) situated within a Ministry should be safeguarded by provisions in their empowering legislation.
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All regulators should operate within the power delegated by the legislature and remain subject to long term national policy.
| 7.Maintaining trust | -
Where legislation empowers the Minister to direct an independent regulator, the limits of the power to direct the regulator should be clearly set out. The legislation should be clear about what can be directed and when. Any direction made by the Minister or politicians should be documented and published. In the case of economic regulators, legislation should not permit powers to direct by Ministers.
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Any communication between the Minister, the Ministry and an independent regulator should occur in a way that does not compromise the actual or perceived independence of regulatory decision making.
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The criteria for appointing members of a regulator’s governing body, and the grounds and process for terminating their appointments, should be explicitly stated in legislation. The process should involve the legislature or judiciary for greater transparency and accountability.
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Government and or the legislature (Parliament/Congress) should establish and publish for each regulator a policy (such as cool-off periods) relating to post-separation employment of senior regulatory staff and members of the regulator’s governing body.
| Decision-making and governing body structure
for independent regulators
. If consideration of a regulatory function leads to a decision to establish an independent entity then the decision-making and governing body structure for that entity must subsequently be determined. In particular, there is the issue of whether a single person should be appointed as the regulator or whether a number of people acting as a board or commission should jointly perform this role. Where decisions should be taken collectively a particular sub-committee or sub-group may be most appropriate to make the decision based on expertise. In the case of economic regulators, a board or commission is preferable.
. Issues relating to the decision about institutional arrangements include:
ensuring clarity about the relationship between the accountable political authority, the governing body and the Chief Executive Officer (CEO). This is important to maintaining the integrity of the structure that has been put in place;
determining the membership of the governing body, including the role of stakeholders and selection processes. This affects the extent to which the regulator is, and is seen to be, objective and removed from any undue influence from regulated entities or political will; and
participation of relevant stakeholders in the decision-making process should be facilitated and assisted through open and transparent procedures.
8.Principles for decision-making and governing body structure for independent regulators 9.Decision-making model | -
The governing body structure of a regulator should be determined by the nature of and reason for the regulated activities and the regulation being administered, including its level of risk, degree of discretion, level of strategic oversight required and the importance of consistency over time.
| 10.Relationship between the responsible the Minister, governing body and the Chief Executive Officer | -
There should be a clear allocation of decision-making and other responsibilities between theMinister, the governing body and the Chief Executive Officer (CEO) or individual in charge of the organisation’s performance and implementation of decisions.
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Where a regulator has a multi-member governing body, the CEO or individual responsible for managing the organisation’s performance and implementing regulatory decisions should be primarily accountable to the regulator’s governing body.
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11.Membership of the governing body | -
To avoid conflicts of interest, where there is a need for formal representation of specific stakeholders in strategic decision-making, stakeholder engagement mechanisms such as an advisory or consultative committee should be established, rather than making those stakeholders members of the regulator’s governing body.
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Ministerial representatives are accountable to the Minister, and their presence on the governing body of an independent regulator can create role conflict. They should only participate in meetings of the governing body of independent regulators in a non-voting capacity and only when necessary.
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The role of members of the governing body who are appointed for their technical expertise or industry knowledge should clearly be to support robust decision-making in the public interest, rather than to represent stakeholder interests.
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Policies, procedures and criteria for selection and terms of appointment of the governing body should be documented and readily available to aid transparency and attract appropriate candidates.
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