Acting in the public interest – a framework for analysis - ICAEW

In short: ‘carrot, stick or sermon’? 222An influence will be the extent to which behaviour that is beyond accepted values is, in thecircumstances under consideration, tolerable, and/or whether enforcement is needed?Panel 9.1: Traffic lightsAn example from the Netherlands reinforces the potential impact of considering alternativesto carrot or stick. There, and latterly in a number of other countries, there have beenexperiments with controlling traffic in urban areas by removing, rather than increasing,traffic lights, barriers and signs. In Section 7.1.1 an example was noted of chaos in Manhattanwhen power loss switched off traffic signals. This, presumably, was at least partly becausepeople were used to being told exactly what to do at intersections and had ceased to have tothink about interacting with others. The Dutch and other experiments work on the premisethat by removing the detailed controls and making cars and pedestrians interact in a lessspecified manner: in short replacing clarity and segregation with confusion and ambiguity,people will become more cautious and accommodating. The traffic world is replaced with asocial world, appealing to people’s intrinsic social norms. While the traffic planners concedethis would not work everywhere, results have been encouraging: traffic has continued toflow but accidents have reduced. 223What is needed, therefore, is a combination of ‘carrot, stick and sermon’, which mightotherwise be referred to as incentives for compliance, requirements for compliance, andinformation that persuades compliance.Panel 9.2: ICAEW approach to implementationThe approach used in practice by ICAEW illustrates the application of a combination ofapproaches. The ICAEW code of ethics, in common with that of IESBA, generally applies aprinciples based approach whereby the fundamental principles of behaviour (ie, social norms)within the profession are set out and then, within a framework, the professionals themselvesare left to determine potential threats to compliance with the principles and what safeguardscan be applied to address these. The element of self-assessment inherent in such an approachdoes work on the basis of how people ought to behave, rather than how some do, althoughthreats to compliance through conflicts such as self-interest, are recognised explicitly as anissue that needs to be addressed.However, there are a number of absolute requirements and prohibitions and these areenforced through monitoring and disciplinary regimes, which recognise that some peopledo not always behave as they ought to.Thus advantage is taken of the professional infrastructure to apply a combination of ‘sermon’and targeted ‘stick’.We also discuss combinations of these approaches in our thought leadership work, forexample, taxes, subsidies and tradable permits and/or requirements and prohibitions in thecontext of implementing sustainability targets. 2249.2 Sufficiency of authority and remitIf a case has been made for intervention in people’s affairs ‘in the public interest’, that meansthat somebody must do the intervening (Hobbes’ ‘leviathan’ 225 ) and those who are the subjectof the intervention must accept the authority to do so.As well as the means of implementation considered above, the regulator or other implementerneeds to consider whether what it believes the appropriate public interest action is, fits withits accepted remit and/or authority. This might be too narrow or misaligned with what theregulator, having taken all matters into account, believes would be the right thing to do.In those circumstances, a course of action might be along the lines of: ‘let’s do what wecan within our remit’, which will, assuming their initial analysis is right, be sub-optimal bydefinition. An alternative course of action, in the interests of transparency and, ultimately, the‘best’ solution, might be to publicise the issue in the interests of a debate on whether the remitand/or authority should be amended, or the objective allocated elsewhere. That is, there maybe elements of justification and persuasion.222Peter-Burth and Gotitz, ‘Review of “Carrots Sticks & Sermons”’, Rothschild, ‘Carrots, Sticks and Promises: A ConceptualFramework for the Management of Public Health and Social Issue Behaviours’.223Vanderbilt, ‘The Traffic Guru’.224ICAEW, Sustainability: The Role of Accountants.225Quoted in Faulhaber, ‘The Rise and Fall of ‘Self Interest’’.64Implementation