REGULATION OF BUSINESS
Week 6

Recap
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Control and monitoring of business activities:
Governance
Concept of governance meaning, elements and what amounts to good governance
Corporate governance – internal organisation and management of a company
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Key aspects of accountability, transparency
Main theories – principle/agent approach
Stakeholder theory
Corporate governance in UK Cadbury 1992 to UK
Combined Code 2010

Key factor – primarily internal control and self regulating codes of conduct. Critique – impact/effect of process Regulation of Business Outline
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Control and monitoring of business activities: Regulation of Business –
Judicial Control
 Governmental Regulation
 Self Regulation
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Judicial control (general obligations)
Government Regulation (statute law, agencies, penalties, government agenciesminimum standards, buyers choice).
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Government regulation and relations with business
– (tort, customers – protection, standards – prevention – penalties, criminal sanctions, punitive damages). Regulation in Business
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External focus
Mainly governmental
Why do governments regulate business activity? Protect the interests parties other than decision makers (3rd parties) How?
1. Compensation for loss, injury, contractual breaches, human rights
2. Information and choice to buyers and consumers 3. Establishing minimum standards of conduct for business in relation to 3rd parties

Regulation in Business Compensation
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Regulating business activity through Compensation:
General obligations:
Personal injury and property damage are violations of individual rights – “torts” e.g.
Negligence (an unintended act or omission which results in injury)
The state sets the standards
Individuals may enforce
 Compensation for loss, injury suffered
 Compensation forces business to maintain a “duty of care” 

Regulation in Business Compensation
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Contractual obligations:
Compensation for breach of promise
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the “injured” party in the position they would be if the contract had been performed

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Compensation – deterrent i.e. an incentive for companies to act appropriately
Is this always enough?

Regulation in Business
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Damages to punish?
Court powers
Government Regulation and powers
Court Power
Court power to impose damages in addition to those required to compensate for loss or injury
Likely if obligations are breached intentionally or recklessly Punitive Damages
 Available in the UK?
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Regulation in Business
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Compensation – damages for a past event/injury. Government – How to prevent future violations? Control business activity through prevention
Statute law (legislation)* (see e.g.
Consumer Protection)
Government agencies
Buyer choice - competition
Monitoring activity
 Preventative process
 Penalties
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Regulation of Business
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Quality Standards
Elements to protect buyers from harm complements competition, regulation and disclosure – not always sufficient
Quality standards
Imposed on suppliers, sellers
 Procedures
 Production

of goods and services

International Governmental
Regulation
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Protection and enforcement domestic, regional, international. Domestic – judicial/government o •

E.g. Tort law, Consumer Protection Act

Regional
e.g. European Union o Treaties, regulations e.g. Health & safety, directives
e.g. Product Liability Directive

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International o o

International Standards Organisation (ISO)
Organisation for Economic Cooperation and
Development (OECD) – product liability policy )
(harmonisation)

Regulation in Business – Business
Self Regulation
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Non-governmental methods of controlling business conduct:
Commercial relationships o 

Corporate reputations o 

Long/short