OECD Regulatory Enforcement and Inspections Toolkit

Criterion 7. Transparent governance

Governance structures and human resources policies for regulatory enforcement should support transparency, professionalism, and results-oriented management. Execution of regulatory enforcement should be independent from political influence, and compliance promotion efforts should be rewarded.

Key questions:

• Is senior management of enforcement and inspection institutions appointed in a transparent way, based on professional competence, minimising political interference?

• Do key decisions, changes in processes, procedures and structures require collegial decisions and/or external scrutiny, avoiding excessive instability and discretionary managerial power?

• Are stakeholders consulted and represented in the governance of inspection and enforcement institutions, particularly strategic ones?

• Do inspection and enforcement structures have missions, powers, procedures and funding mechanisms that exclude conflicts of interest and conflicting goals?

• Are decisions at all levels based on transparent criteria and processes, allowing for consistency in enforcement decisions, and accountability?

• Do strategic decisions and changes require political approval (legislative, executive), while operational decisions are made “at arm’s length” and shielded from political interference?

Sub-criterion 7.1. Senior management of enforcement and inspection institutions is appointed in a transparent way, based on professional competence, minimising political interference

Chief executives and other senior managers in charge of inspection and enforcement structures should be selected for their professional competence, specifically as managers (and not only or mainly as technical specialists in the field of inspection). Selections based on political connections, patronage or other connections need to be excluded as much as possible. To this aim, selection and appointment processes should be transparent, including clear criteria, open advertisement, balanced selection committee rather than appointment by one sole senior political official without scrutiny, as is often the case. All possible care should be taken to minimise political interference.

• Evidence: policies and procedures for recruitment of senior management

Sub-criterion 7.2. Key decisions, changes in processes, procedures and structures require collegial decisions and/or external scrutiny, avoiding excessive instability and discretionary managerial power

Even with the best possible process for selecting managers, ensuring continuity of institutional practices, professionalism, strategic focus requires that senior managers have only limited powers to impose changes single-handed to inspection institutions. Significant changes to e.g. internal structure, strategic goals, indicators, risk-management and compliance strategies etc. should all require decisions by a collegial body – preferably an external, independent board.

• Evidence: official statutes and other official documents prescribing governance of inspections and enforcement institutions

Sub-criterion 7.3. Stakeholders are consulted and represented in the governance of inspection and enforcement institutions, particularly strategic ones

Representation of stakeholders (businesses, civil society organisations etc.) in the management board (or similar structure) has considerable added value as it ensures greater transparency, increased legitimacy, and ensures that the institution remains attuned to public concerns. Consultation of stakeholders should be the norm at least for strategic decisions (definition of goals and indicators, adoption of risk-management or compliance strategy etc.) – just as consulting stakeholders is required in all forms of Impact Assessment processes. Key strategic decisions in inspections and enforcement have at least as much relevance to stakeholders as regulations themselves, and can benefit as much from their input. This can be done through formal ad hoc consultations and/or through permanent representatives in a board-type structure.

• Evidence: official statutes and other official documents prescribing governance of inspections and enforcement institutions, annual reports

Sub-criterion 7.4. Inspection and enforcement structures have missions, powers, procedures and funding mechanisms that exclude, to the extent possible, conflicts of interest and conflicting goals

There are many ways in which mandates and missions, or funding mechanisms, can create conflicts of interest for inspection and enforcement. For instance, if funding is linked to the number of inspections, the agency will have an incentive to increase volume of visits, regardless of risk, efficiency and effectiveness considerations. If an agency both issues licences and does subsequent compliance checks, but issuing licences is revenue‑raising, it will have an incentive to disregard compliance issues when issuing, at the risk of safety or other public interests. If an agency both provides payable, competitive services (for which it competes with other providers) and has regulatory enforcement powers, it will have an undue advantage over competitors, as it can put pressure on regulated entities to purchase its services. Finally, when the same entity has several unrelated goals that compete for the same resources, it is essential to have some high‑level guidance on how to allocate resources between them. If one of the goals requires co-operation from regulated subjects, while the other may create conflicts with them (because of a different alignment of incentives), it would be needed to assess how best to manage this internal contradiction (splitting functions or teams, prioritising one of the goals, changing methods). If conflicting objectives are assigned to separate institutions which are supposed to co-ordinate with each other, it is also needed to assess how such conflicts should be managed.

• Evidence: legislation, official documents (statutes etc.), budget documents, annual reports

Sub-criterion 7.5. Decisions at all levels are made based on transparent criteria and processes, allowing for consistency in enforcement decisions, and accountability

Opaque and confidential decisions should be avoided. It is essential that all decisions be founded on clear criteria (e.g. risk proportionality), transparent processes, with possibilities to appeal etc. The aim is not only to ensure consistency between different officials, regions etc. – but also accountability, by allowing assessing the outcomes of decisions, knowing who took them, on which basis, etc.

• Evidence: official guidelines and annual reports

Sub-criterion 7.6. Strategic decisions and changes require political approval (legislative, executive) – but operational decisions are made “at arm’s length” and shielded from political interference

Strategic decisions include defining the institution’s goals and objectives, performance indicators, risk and compliance strategies, methodological documents (risk assessment and targeting, enforcement management, check-lists, etc.), structure, high-level resource allocation, terms of reference of staff etc. It is normal to have these require approval by executive or legislative branches of government, as appropriate. Operational decisions, however, which implement these strategic decisions (planning and targeting of inspections, allocation of tasks and staff, enforcement decisions) should be left strictly to the professional staff and management, without any interference from political office‑holders (or other parties). It is essential to have both legal rules, institutional mechanisms and practices to this effect.

• Evidence: official legislation and statutes of inspections and enforcement institutions, annual reports