Changing the rules in business

In sport or in business, rule changes deserve careful consideration.

 
(Photo: Glentamara/Wikimedia)

We all agree on the need to play by the rules of the game. But what do we do when the rules need changing? Under what circumstances should the rules be changed? What should the process be? And what are the rules for changing the rules?

Last week, McGill philosopher Daniel Weinstock gave a talk on this topic, in a Business Ethics Speakers’ series that I host at the Ted Rogers School of Management. His talk was called, “Should business dictate the business of rule change in sport?” He was taking aim at the suspicion on the part of many sports fans that rule changes are sometimes imposed by for-profit professional leagues for mere financial reasons that have nothing to do with the spirit of the game.

Along the way, Weinstock suggested that if you look at the patterns of rule changes in professional sport, you see that there are basically four kinds of reasons given to justify such changes. They are: increasing safety, closing loopholes in existing rules, increasing entertainment value of the game, and improving the precision of adjudication by referees.

Sports fans will find it easy to think of examples of rules being changed by various professional leagues for just the reasons cited. But Weinstock’s framework can also be applied usefully to the broader question of how and when rules are changed in rule-governed domains more generally.

Weinstock’s first category is easy to apply to business: there are plenty of occupational health and safety regulations and consumer protection legislation that fall under this heading. Rule changes that fit the second category—loopholes—are also plentiful. The third category, entertainment, at first glance seems out of place. But think of it this way: Weinstock is basically referring to rule changes that are aimed at keeping the game productive, making sure it continues to produce the ‘good’ it is intended to produce. Seen this way, any regulatory change intended to promote efficiency or competition fits something akin to Weinstock’s third category.

Finally, there’s the fourth category, which has to do with improving the accuracy of referees. In regulatory terms, this includes rule changes that make it easier for regulators to do their jobs, including record-keeping and disclosure requirements of all kinds.

Are these the only valid reasons for making regulatory changes in the world of business? Probably not. But using something like Weinstock’s framework as a lens gives us a good start at making sense of the overall pattern of regulatory requirements to which business is subject. Not all rules are good ones, but neither are they arbitrary. Recognizing the patterns is the first step toward sorting the good from the bad.

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