The Mechanism for Regulatory Capture

One of the mechanisms that facilitates Regulatory Capture is the transfer of personnel from the regulatory agency to the organisations they regulate (and vice versa).

When there is a large disparity in the salaries paid to public servants and to those paid in the regulated organisations, this leads to institutionalised corruption.

The problem of a large disparity in salaries was acknowledged by Henry Bosch in his book “The Workings of a Watchdog” {William Heinemann Australia – 1990}.

Henry Bosch was the Chairman of the National Companies and Securities Commission (NCSC) that was a forerunner of ASIC.

Watchdog p44

Henry Bosch notes on page 45 in relation to means of augmenting the Commission’s resources:

Three sources of help were of particular value. We were able to obtain some excellent officers from the private sector and to persuade some of their employers to subsidise their salaries. The Commission got some very useful people and no doubt the employers got some valuable experience on their return.

We also received direct contributions from the private sector. Meetings and functions were paid for, overseas trips subsidised, terminals for surveillance systems installed without charge and specialist consulting services given free or at very low rates.”

Those companies that provided such assistance to the NCSC no doubt expected a quid pro quo from the “Regulator” if misconduct was identified in their own organisation.

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This tab updated on 16 March 2015