Also worth looking at is the draft EU charter (which some countries mutilated/rejected as limiting the rights of politicians to do the dirty). I think it’s the best I’ve seen since such declarations were written, including rights to good administration and environmental protection. It beats the draft charter planned by the dems (see New Matilda and humanrights.com.au (supported by Mal Fraser).

Official PDF version here.

My HTML rendering and some notes here.

But I still think the adaptive responses sought under principle-based regulation cannot be obtained without some uncertainty, it just goes with the territory. And getting the right amount comes down to incentivising the regulators.

There may be jurisdictions where less uncertainty is applied, however the question is whether this represents better regulation or just different objectives.

I still think the knub of the problem is to incentivise regulators in a principles-based world so that this style of regulation can reach its full potential.

The issue of eliciting the optimal amount of uncertainty from regulators, given the objectives we have, is probably a seperate matter to whether production would shift to another jurisdiction. If the objectives are the same, but achieved without uncertainty, then we ditch principles-based regulation in that instance. However if the objectives are different, then we judge whether our objectives that much better.

In principle you’re right. In practice it’s not so clear. Boards are just uncertain of what they should be doing. Is an aluminium company liable for all that CO2 they emit? They go on emitting it, but might put the next smelter somewhere where directors’ duties are clearer.

On top of this we have a very rules based legal culture, so you’ve got lawyers running round advising the boards not to do this and that, and covering their own arses and trying to convert the principles into codes of practice and rules that will leave their boards safe – all at the risk of considerable dysfuctionality.

And this is at the heart of correctly incentivising the regulator, whose performance is extremely hard to measure. As Jennifer suggests, the regulator may not provide enough guideance about about the principles it espouses. But if the regulator can be incentivised to do so, then it should rationally choose ‘enough’ guideance, leaving the Boards and compliance committees to figure out the rest, as intended.

That can be a good thing, but also makes it harder for a Board of Directors to work out how to balance shareholder vs compliance/ risk management. If a Board becomes too fearful of regulation, then the regulatory framework has added to compliance costs, albeit indirectly.

I suspect that Hillary is trying to sound Presidential – you know “A Commander-in-Chief never discounts any strategic option”.

Dum dum ta dum dum ta dum ta dum ta da da! (Hail to the Chief that is)

its difficult to be confident of whats best.

There is the point that hedge funds seem to have largely side-stepped the mess banks have got into because they weren’t so hung up about complying with pretty deterministic capital adequacy rules.

Arguably that highlights the real regulatory dilemma in financial services, which is how to increase the scope of market regulation (ie the scope for companies to collapse without being bailed out) whilst managing the regulator’s inability to see ‘innocent’ investors cop any sort of loss. Whether there are strict rules or principles, I think the consequences are probably the most important part.

I tend to think that the best outcome is broadly what happened at Northern Rock, with the shareholders losing everything and the government taking it over – ordinarily, it should be able to sell it a profit as well. I am a little less comfortable with Bear Stearns, where the situation seems to have been more like the government helping a private firm make a windfall (although of course it may not prove to be that!).