Integrity is a popular topic within corporate governance. Every society wants its business community to have incorruptible directors, ethical business practices and honest customer contacts. In its role as an internal supervisor, the supervisory board ensures that the integrity within the company is safeguarded. In a previous column I have drawn attention to the role of external supervisors in the Caribbean. It involves a multitude of external authorities and inspectorates that monitor an industry or sector on behalf of the government. Examples include the financial sector, health care or the construction world. What about the integrity of these external regulators? There’s hardly any literature on this subject. What can you expect from them as a business sector or industry that is being supervised? I’ll mention six things.

First of all, transparency regarding their vision and approach. The Central Bank, the Food and Consumer Product Safety Authority, a telecom agency such as BTP, the Public Health Inspectorate; they must all inform their target group on a regular basis about what their policies are and how they intend to put these policies into practice. This only happens to a limited extent.

Second, these external supervisory authorities also need to have their own governance in order. They must be able to show a form of internal control and accountability themselves. They need to have their own internal codes of conduct and adhere to them. They must report on this issue in their annual accounts. What is very important is that they explicitly specify how they intend to implement their statutory tasks: will this be done in an authoritarian manner or in consultation with their target group? How do they deal with supposed misconduct? Do they use publicity as a sanction tool, for example, or are they looking for less aggressive ways to steer the market? Do they have a public policy with regard to the application of their sanctions? There must be clarity on these issues.

Third, the people who are responsible for performing the external supervision must themselves be a model of integrity. An interesting question in this regard is, for example, whether these people should be able to push the limits of what is fiscally allowed as much as some others. Personally, I think that you may expect an external regulator, just like a member of the judiciary system, to be risk averse. After all, (supposed) doubts about the integrity of these people will reflect directly on the supervisory authority and therefore on the entire sector. We therefore may expect them to be at least as Catholic as the Pope.

Fourth, it must be crystal clear how supervised companies that are sanctioned can effectively lodge an appeal or objection to this decision. In my opinion, this process is far too random and costly at the moment. Moreover, it’s by definition a rearguard action. A victory is often a Pyrrhic victory and thus in fact a defeat, because the relationship with the supervisory authority is thoroughly disrupted.

Fifth, external supervisory authorities in the Dutch Caribbean must coordinate their policies with other supervisory bodies who have the same or a similar target group. In the Dutch Caribbean there are four financial supervisory authorities, four health care inspectorates, and so on. Caribbean companies that provide their services on all islands are driven absolutely berserk by the different requirements that are imposed on them in these various tiny countries and it costs an unacceptable amount of money to meet these different requirements. There’s insufficient synchronization, which is an absolute must.

Finally, in the sixth place, we may expect from external supervisory authorities that they adopt a ‘bottom up’ attitude in their relationship with their target group, instead of a ‘top down’ one. A supervisory authority must view its target group as clients, who must be helped to meet the (reasonable) requirements. Ivory tower behavior no longer has a place in our current times.

In conclusion, there is still a lot of work to be done. Those who are supervised in this world: unite and demand more clarity from your external supervisory authorities about their own integrity!

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What about the integrity of these external regulators? What can you expect from them as a business sector or industry that is being supervised?