IS IT EXCESSIVE CORPORATE INFLUENCE OR EXCESSIVE EU REGULATIONS??

Over-regulation, ineffective and poorly designed rules exist that are negative to enterprise and society’s efficiency. The OECD distinguishes between four different kinds of costs associated with regulatory failures:

1.  Regulations that protect companies from competition.
2. Regulations that prevent companies from growing and exploiting new markets.
3. Regulations that generate excessively high compliance costs for both companies and governmental actors.
4. Regulations that contribute to companies becoming less capable of adapting to technological change or consumers’ needs.

Items 1, 2 and 4 give rise to indirect dynamic effects that negatively affect companies’ entrance, investments and production dynamics, which leads to poorer economic growth. The indirect economic costs that ensue from a heavy regulatory burden on a country’s enterprises are considerable and probably more important than the direct costs related to complying with the rules (item 3).

A heavy regulatory burden negatively impacts new companies’ into the market and thereby contributes to reduced competitive pressure and less entrepreneurship. Furthermore, significant negative effects on production dynamics arise in connection with the regulations affecting the businesses’ ability to adapt. This causes friction that reduces the enterprises’ ability to adjust to external changes, which in turn leads to substantial allocation losses. A regulatory burden that impedes progress and increases the risks in investment decisions contributes to higher yield requirements. This means that the yield requirements increase as the regulatory burden increases, which has negative repercussions on investments. Altogether, these negative, indirect effects result in lower economic growth.

The expanding role of goverments in the marketplace has become a hot topic in many executive suites around the world. The total value at stake amounts to US$ 3.6 trillion a year of earnings before interest, taxes, depreciation, and amortization (EBITDA) worldwide

The business value at stake from government and regulatory intervention is huge: about 30 percent of earnings (Earnings before interest, taxes, depreciation, and amortization (EBITDA)) for companies in most industries,and higher still in the banking sector, where the figure tops 50 percent. Translating those percentages into euros, dollars, or yen can yield eye-popping results: one European utility found that the ongoing value at stake from regulation was €1.5 billion, or about €30 million for every employee involved in handling the company’s regulatory affairs.

Telcoms, transport and logistics companies, energy providers, retailers, pharma companies, and health care providers have long been subject to extensive government intervention. These industries continue to represent most of the regulatory value at stake around the world. Indeed, with a total of some $3.6 trillion a year on the table, an effective strategy for engaging government clearly has a place on the agendas of most CEOs.

Value at stake across industries (Billions US$ )

1. Banking and insurance: 970
2. Telecom: 510
3. Transport and Logistics: 510
4. Electrical Power, Natural Gas: 370
5. Retail: 320
6. Consumer Goods: 270
7. Healthcare: 240
8. Automotive: 190
9. Basic Materials: 100
10. Pharmaceuticals: 90
11. Petroleum: 50

Companies with the most effective public policy programs seek an ongoing engagement with policymakers. The secret to their approach is simple. They know that in politics “You are either at the table or on the menu.” Having a company’s interest on the “menu” can result in more taxes and regulation than a business can profitably digest. Shaping nascent policy ideas long before they become law helps companies minimize uncertainty in their business. This can help protect a company's revenue streams, business practices, and ability to best serve its customers and pursue opportunities to expand into new markets.