Mood of the Boardroom: CEOs losing sleep over regulation

Dame Alison Paterson of Vector is concerned about regulatory uncertainty. Photo / Richard Robinson

Nearly 36 per cent of the business chiefs surveyed by the Herald listed regulatory challenges among factors most likely to keep them awake at night. On average, they also ranked regulation as the domestic factor most likely to affect business confidence.

For many, it is an area of uncertainty. This is particularly so in the energy sector. "Regulated monopoly businesses face a price reset from April 1, 2015," said one sector chief. "The draft decisions from the regulator are projected to have a negative impact on business.

"The constant changing of regulatory requirements without any analysis of impact on business is damaging to revenue and wasteful of productive business focus."

Dame Alison Paterson, a Vector director and company chairman said: "The credit rating of Vector was adjusted from BBB plus to BBB on the basis of regulatory uncertainty. That just about says it all."

When the CEOs were asked what they considered the single biggest factor that would assist their business to remain internationally competitive, "regulatory stability" was a recurring response. A chief in the finance sector said less regulatory complexity and demands would help. An unstable regulatory environment is detrimental to business certainty and a barrier for potential investors. It should be no surprise then that 80 per cent of CEOs are in support of a Regulatory Standards Act aimed at improving the quality of regulation in New Zealand. Just five CEOs (5.8 per cent) were not.

The proposed act, currently before Parliament, would encapsulate a set of regulatory principles that must be followed when legislating, against which the finished product can be measured. Its intended effect would be to heighten regulatory scrutiny throughout the process, which should lead to more coherent regulation by its end. Progress through Parliament has stalled as Treasury has undertaken further investigation into regulatory improvement, and the Productivity Commission embarked upon an inquiry into the design and operation of regulation in New Zealand.

The commission's report, published in July, found New Zealand's regulatory environment plagued by "system-wide deficiencies", including a tendency toward over-regulation and failings with the monitoring of regulators.

The report went to Cabinet Ministers. The future of the Regulatory Standards Bill will depend on the response of the next Government.