Autonomy of selected regulatory agencies and its implications on corporate governance

Abstract

PURPOSE: The aim of the study was to ascertain the degree of autonomy that regulatory authorities have in their operations from the central government. The study was also aimed at identifying how regulators comply with corporate governance practices and how they aim to mitigate factors which might influence their autonomy DESIGN: In order to ensure that the objectives mentioned were achieved, the study was designed around a purely qualitative approach of data collection. Semistructured interviews were carried out with 8 participants, consisting of 7 participants from regulatory authorities and 1 participant representing the central government. The central government interview was used to corroborate evidence provided by the regulators FINDINGS: The findings indicate that although authorities are always striving to be more autonomous, there will always be a certain influence which is exerted from central government. While it was indicated that from an operational aspect the government has no influence whatsoever, the administrative aspect of regulators is in fact influenced by the central government. Additionally, the issue of funding still remains a problem within regulators were a number of authorities still make use of government funding to operate. Furthermore, corporate governance practices such as role clarity, accountability and transparency are of utmost importance to the governance of the regulators. The findings indicate that although Maltese legislations already cover these aspects, regulators are still ensuring that continuous compliance is always adhered to by implementing corporate governance standards within the authority thus maintaining autonomy. The findings also indicate the importance of factors such as the principal-agent relationship and the selection of Board members. It was identified that few regarded the principal-agent relationship as a potential risk to autonomy and therefore lack the knowledge of how this can be mitigated. Participants also identified that it is the government that selects and appoints Board members within the authority. The findings indicate that the CEO should never be involved in the selection of the Board members. However, a grey area here was identified when it comes to a situation where the CEO is also the Chairman of the Board. CONCLUSIONS: The study concludes that the notion of full autonomy is a myth that can never be achieved. Regulators are striving to be more autonomous however they are still far away from achieving this goal. IMPLICATIONS: The study raises awareness on the need of regulators to be more autonomous. It is hoped that recommendations put forward in this dissertation allow regulators to strengthen their extent of autonomy.