Government Regulation

Like it or not, we live in a regulated society. Our homes, apartments, and condominiums are built according to code. Automobiles, airplanes, and boats must conform to a variety of governmental standards. The production and sale of food, cosmetics, likewise, subjected to numerous regulations.

At first glance, one might argue that regulations established by local, state, or national governments exist to provide an orderly society that protects the rights and well-being of all citizens. Regulations, however, are not self-enforcing but defend on regulatory agencies created for this purpose. Unfortunately, these agencies tend to increase in number and scope while perpetuating themselves through time. The result is a bureaucratic maze whose disadvantages now seem to outweigh its benefits.

During 1978, the accounting firm of Arthur Andersen & Company was hired to study the incremental costs incurred by 48 Business Round table member member companies to comply with the regulations of just six federal government agencies and programs. This study found that the 48 participating companies experiences incremental costs of $2.6 billion in 1977 to comply with regulations of just the six agencies involved. Beyond the costs of compliance with government regulations, other impacts must also be noted. For example, innovation and technology can be slowed down by too much regulation. Productivity declines are partially the result of numerous and often conflicting regulations. With productivity declines and increased cost, prices increase and the inflation spiral continues.

This discussion serves to point out some results of the continuing trend of more involvement of government in practically all organizations. Although the objectives of many regulations may be worthy, we seem to be approaching a situation of regulatory overkill. To reverse this trend, attitudes toward regulation will have to change significantly, both in the private and public sectors. This will require much time and effort, and managers of the future must provide the leadership to accomplish the task.


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