360⁰ View of Compliance: The difference between Restriction and Restraint By Shankar Jaganathan

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360⁰ View of Compliance: The difference between Restriction and Restraint By Shankar Jaganathan


360 view

Need for Compliance

Sitting in the backseat of a cab my friend and I looked on shocked as our driver ran through a series of red lights. As my friend asked him to stop at the next red light, the driver wisely remarked, ‘At 11 in the night, stopping at red light is more dangerous. You never know when the vehicle behind you will ram into you.’  The rest of our journey was completed without a word being exchanged. Little did I realise that the silence was only temporary.

My friend who had just returned from a long stint in the United States remarked how vehicles there came to a halt at every pedestrian crossing even at 12 in the night, when not a single soul was sighted on the road. This observation soon ignited a debate on what ensures compliance? Cameras strategically placed to capture every violation and swiftly punish the violator or was it a sense of social responsibility? As most debates go, we soon realized that there is no one way to settle it. Further, we also concluded that this question is not restricted to only to a cab driven at mid-night; instead it encompasses everyone, 24 by 7.

While the danger posed by a speeding cab in the middle of the night could be fatal, actions of some of the other ‘drivers’ in our society is equally damaging if not more dangerous, for it affects a larger number of people. This opens up the age-old question is compliance triggered by a fear of penalty or the love for order?

The First Option

2300 years ago, Lord Shang a Chinese administrator separated a strong society from a weak one by seeing which of the two prevailed – externally enforced restrictions or restraint that comes from within. Preceding Chanakya the legendary Indian statesman by fifty years Lord Shang observed that in superior societies, family maintains the order. Next in line was the strong societies where officials enforced order, but where the king was required to step in, the society was weak.  In commercial context, restriction is the driver where the letter of law prevails while restrain is visible when the spirit of law is upheld.

The difference between the letter of law and the spirit of law is best illustrated by Milton Friedman and Cicero. Converting all costs into financial terms, Friedman advocated using cost-benefit analysis to decide whether one should comply with law. Using the example of a steel plant evaluating investment in pollution control equipment, he wanted the investment outflow to be compared with the penalty pay-out for non-compliance. If the penalty was less, he concluded non-compliance to be a prudent business decision. In contrast, Cicero the first century Roman philosopher advocated businessmen to look beyond their narrow financial gains and consider the social cost of their action. Cicero reasoned that a business survives only in a society and hence it had the responsibility to care for it. Incidentally Cicero was not an isolated voice. John Ruskin the great English philosopher voice the same opinion to a much larger audience.

In this day and age, especially after the 2008 global financial crisis, the debate between choosing the letter vs. the spirit of law is only academic, for no prudent mind today will advocate following the letter of law. However, this does not automatically translate in practice to compliance with the spirit of law. One can say with reasonable certainty that despite this near unanimity, restrictions are more effective in the world of business than restraint. It is just that the debate has shifted from a conceptual or philosophical level to a more practical plane. But what accounts for this divergence?

Next week, we will examine the reasons for divergence between words and action.

By | 2017-04-14T10:57:57+00:00 December 12th, 2015|Uncategorized|0 Comments

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