The article Principles work better than rules by Neil Reynolds presents the convincing argument that attempting to solve an ethics problem in business by implementing rules is a wrong-headed approach.

A rules-focused approach lays a heavy burden on the ethical players. It diverts the resources of the regulated business to non-productive report writing. It diverts regulatory resources to non-productive reviewing of reports.

Everyone loses–except perhaps the cheaters who will have more opportunity to go unnoticed in the chaos of ineffective activity.

The key question is: do rules promote ethical behaviour? Not likely.

If rules don’t, then what will? The solution lies in creating the active participation and co-operation of a broad spectrum of stakeholders who care about an issue. Working together, they need to develop a workable solution.

The command and control approach to regulation that underlies legislation like Sarbanes Oxley is also part of the problem. Everyone knows about regulations that create the illusion of a safe operating environment. Ironically, compliance to these types of regulations reduces operator accountability. Unsafe operators do and will hold up their act of compliance on a safety matter and thereby claim, falsely, that their operations are safe.

Risk management methodology can help address these types of complex challenges. The development of a risk framework positions all stakeholders and other elements required for a solution within a unified model. This helps to define roles, establish accountability and suggest the best methods for monitoring results.

It supports development of both offensive and defensive aspects of the strategy for achieving results. It also provides a clear context to support consultation with stakeholders, and communications.