Regulation and leadership is not about explaining the rules


I wasn’t going to write tonight. Really wasn’t. Then, I read this article in the Wall Street Journal. If you don’t have a subscription, I’d suggest buying one just for articles like this.

It talks about the state of regulation. If we could only regulate everything, then bubbles and crashes wouldn’t happen, right? This view is conventional wisdom, which means it has a very good chance of not being correct. Which it isn’t.

I was recently told that we needed to send letters with certain wording before engaging candidates for an interview. Otherwise, I could inadvertently offer employment to someone to whom I had clearly not offered employment.  I suspect that this is not true. If it is true, then can we just stop it?

One could (almost) be forgiven for mistaking leadership with caution regarding compliance with relevant regulations. I’ve seen it happen. Leadership can be overly proscriptive, thus leading to a decline in personal responsibility. Thus leading to worse outcomes. What makes us think that overly proscriptive regulation might not have the same effect?

We can’t imagine every scenario for the people that report to us. The ‘principles’ that we teach won’t apply in every situation, especially regarding client requests. The temptation will be to massage the principles to include what we are currently thinking at a given point in time.

Brains are squishy and difficult to fit into templates. Encouraging good judgement works wonders even when we don’t agree with every decision. Why would those principles not apply when it comes to regulation?

Instead of tweaking words, let’s hold people (including the regulators themselves) accountable. Agreed?


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