Stakeholder Relations

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To ensure that the independent agency regulates under the law to serve the collective interests of the stakeholders rather than the interest of one or a small group of stakeholders1, independent agencies should have arm’s-length relationships with regulated firms, consumers, other stakeholders, and politicians. Examples of mechanisms for ensuring arms-length relationships include appeal processes, transparency, restrictions on corruption and conflicts of interest, and publication of an explanation for every decision. Some countries provide oversight committees or advisory bodies for their regulatory agencies, but these should be approached with caution as they can become instruments of influence for politicians and special interests

Two main aspects of regulatory processes are the existence of mechanisms to receive stakeholders´ inputs and to solve stakeholders’ complaints in an intermediate, administrative body. Regulatory processes should allow stakeholders to present their opinions through open processes like public hearings. Stakeholder confidence can often be enhanced by having well-established, ordered, and open interactions between the regulator and stakeholders.2 However, formal hearings can be legalistic, costly, and slow, so regulators with a tradition of formal processes have begun using alternative procedures, such as negotiated settlements and arbitration. Some countries have experimented with informal processes, but issues of transparency lead many to add elements of formality.3

Footnotes

  1. See Stakeholder Relations.
  2. See Systems for Reporting Information and Public Access to Information for additional details about sharing information with stakeholders.
  3. One situation where difficult negotiations can occur is in the renegotiation of concessions or licenses. See General Concepts and Efficiency Impacts for information on this topic.