Who regulates the regulator?
1 Aug 2002
'Enronitis' is in danger of becoming endemic around the world's financial capital markets.
The financial irregularities uncovered at the disgraced energy company Enron, compounded by the cavalier attitudes displayed by its auditors Arthur Andersen, sent shock waves through the markets - even before the discovery of the out and out fraudulent activities within the global telecoms giant WorldCom.
Hardly a day goes by without the shares of one blue chip corporation or another coming under pressure as a result of rumour and speculation surrounding their accounting practices. Is all this panic, or just healthy scepticism?
It depends what side of the fence you're sitting, of course. Seeing your savings slip away can certainly concentrate the mind on calls for stricter, and clearly independent, auditing; but boards of legitimately run companies that fall foul of ill-informed gossip can rightly feel aggrieved, arguing that the checks and balances already in place are sufficient to put minds at rest. Unfortunately, the financial markets are far too volatile at the moment for that seemingly rational argument to hold much sway.
The same could also be said of the world's chemicals markets. Not simply because stocks in the global chemicals majors make up a sizeable proportion of the financial markets themselves, but because the industry - at least in Europe - is arguing against what it sees as over-regulation of its activities.
The new president of CEFIC (the European Chemical Industry Council), Eggert Voscherau of BASF, has called for a reduction in the regulatory burden on the industry. His specific target is the forthcoming EC White Paper on chemicals, which is expected to have the aim of reducing the risks posed by chemicals to health and the environment.
Putting the defence for the industry, Voscherau pointed out that 'this year we have met our commitment to report at European level on all the 15 performance indicators that we defined back in 1998. Among other things, we've seen a 21 per cent reduction in lost-time injury frequency rates and a halving of releases of heavy metals to water and sulphur dioxide to air.' All very commendable, even allowing for a slight caveat over the phrase 'performance indicators that we defined'.
Although Voscherau is not proposing that the industry regulates itself - indeed, it has actively worked with the EU to improve the legislation under which it operates - he does nevertheless emphasise the impact of the regulatory burden on the European industry's competitiveness compared with its global competitors in the US and Japan.
However, when he says: 'We are concerned that the public at large is increasingly sceptical about the benefits of technical progress', he reaches to the heart of not just his industry's problems, but perhaps those too of the financial markets. When public confidence is lost - for whatever reasons, rational or irrational - the way back can be long and hard.
