Theories of Regulation and Corporate Social Responsibility Disclosures

This essay critically examines the government's stance on regulating corporate social responsibility (CSR) disclosures, employing public interest theory, capture theory, and economic interest group theory. It argues that the government should be cautious about imposing regulations like the “Corporations Act” on CSR disclosures, as these theories suggest potential pitfalls. Public interest theory posits that regulation arises from public demand to correct inequitable market practices, but its susceptibility to manipulation necessitates careful consideration. Capture theory warns against regulatory agencies being unduly influenced by the industries they regulate, potentially leading to biased CSR disclosures. The economic interest group theory highlights the risk of powerful groups manipulating regulations to increase their wealth at the expense of the public. The essay concludes that while CSR disclosures are vital, the government must ensure that regulatory actions are not influenced by market forces, safeguarding public interests and preventing misleading information.

Running head: ADVANCED FINANCIAL ACCOUNTING
Advanced Financial Accounting
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1ADVANCED FINANCIAL ACCOUNTING
Table of Contents
Introduction......................................................................................................................................2
Public interest theory.......................................................................................................................2
Capture Theory................................................................................................................................2
Economic Interest Group Theory of Regulation.............................................................................2
Conclusion.......................................................................................................................................3
References........................................................................................................................................4

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Introduction
The study aims to support the decision of government not to add any regulation such as
“Corporations Act” in the disclosures of “corporate social responsibilities”. Some of the main
discussions have been explained with the use of “public interest theory, capture theory and
economist interest group theory of regulation”.
Public interest theory
“Public interest theory” is an “economic theory” first developed by “Arthur Cecil Pigou”
suggests that the regulation is supplied in response to demand of the public pertaining to
“inequitable market practices”. With reference to the enquiry into CSR, the government needs to
ensure that such a theory should not be influencing the company’s disclosing their CSR values.
Despite of the support of the theory presented with the “interest of society in which it operates
rather than private interests of the regulator”, there can be no assumptions made for being
marketed to fragile. In addition to this, this theory needs to be contrasted with public choice
theory where the government will have a more cynical role in viewing the reasons for social
inefficiencies (Niskanen, 2017).
Capture Theory
Regulatory capture is recognised as an old theory of regulation which suggests that the
regulators/regulatory agencies will be captured by the industry in which they regulate. In such a
situation, the regulations benefit from the regulated industry at the expense of consumers. The
particular reference CSR disclosures, the government needs to ensure that bigger businesses
should not influence the regulators in publishing any misleading information to the public. In
addition to this, with reference to this theory, all the organisations are obliged to report for any
concern caused to the society are environment. The regulators should not be involved in any
form benefit the company’s and act at the expense of consumers different as the disclosures
associated to CSR (Black, 2017).

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Economic Interest Group Theory of Regulation
The economic interest group theory is recognised as a testable theory stresses that some
groups are able to involve in “organising collective action such that their wealth (demanders) is
increased, while the other groups to not find it cost-effective and resist having their wealth taken
away”. The relevance of this to the government’s enquiry into the CSR, needs to be insured with
non-influence of market forces to encourage the companies to act rightfully. This means that the
company (demanders), while disclosing their “corporate social responsibilities” should not be
operating in such a way that the wealth of public is affected due to their decisions (Berry and
Wilcox, 2018).
Conclusion
The significant discourse from public interest theory has been stated with the government
needs to ensure that such a theory should not be influencing the company’s disclosing their CSR
values. Moreover, this theory needs to be contrasted with public choice theory where the
government will have a more cynical role in viewing the reasons for social inefficiencies. The
reference to CSR disclosures pertaining to regulatory capture, the government needs to ensure
that bigger businesses should not influence the regulators in publishing any misleading
information to the public. In addition to this, with reference to this theory, all the organisations
are obliged to report for any concern caused to the society are environment. With relevance to
economic interest group theory company (demanders), while disclosing their “corporate social
responsibilities” should not be operating in such a way that the wealth of public is affected due to
their decisions.

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References
Berry, J.M. and Wilcox, C., 2018. The interest group society. Routledge.
Black, J. (2017). Critical reflections on regulation. In Crime and Regulation (pp. 15-49).
Routledge.
Niskanen, J. (2017). Bureaucracy and representative government. Routledge.