The new report “Being an Independent Regulator” has just been published in the OECD series “The Governance of Regulators”.
The crucial role of regulators as “referees of markets” implies that these public bodies are required to deal with public authorities, the private sector and end-users, balancing competing wants and needs. This is why their independence is so important. The aim of the discussion on the independence of regulators is to find a balance between appropriate and undue influence that can be exercised through the interactions with stakeholders, staffing and financing.
The OECD report identifies the critical points where undue influence can be exercised, exploring both the rationale of independence and its practical implications. To this purpose, the report is based, on the one hand, on a review of academic literature and, on the other hand, on a survey which involved 48 regulators across all economic sectors.
The report discusses some of the avenues for “developing a culture of independence”, first of all through formal arrangements which need to inform daily work and practice of regulator. In order to ensure independence, it is also important to attract, retain and motivate staff and to introduce safeguards to protect board and agency heads from undue pressure. Other critical points are budget allocation and management. In this respect, it is important to pay attention to the way in which funding needs are determined, appropriated and spent, regardless of the source of funding.