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Regulators – Industry rejects or wannabes?

“Regulators are either industry rejects, or wannabes, neither of which makes for good regulators.” At least that is the opinion of one law professor at a recent lecture series I attended regarding the BP/ Deepwater Horizon oil disaster in the Gulf of Mexico. The comment was made during a discussion about what the responsibility and liability of federal regulators should be, such as those regulators from the agency formerly known as MMS (Mineral Management Service), who may not have performed their duties to the fullest of their abilities. I found the comment both offensive and intriguing at the same time. Offensive perhaps, because I have served as a federal marine inspector in the past; intriguing, because on some level, it rings true.

 

The implication is that a wannabe is more likely to look the other way in hopes of gaining favor with industry and ultimately securing a comfortable position. When I started out as a U.S. Coast Guard marine inspector years ago, an old-timer and co-worker told me, as I was writing a long list of deficiencies for a vessel, “You’re never going to get a job in this industry when you retire.”

 

This perception is not limited to the oil and gas and maritime industries. A few years ago a major airline was fined $10 million dollars for not taking defective airplanes out of service as required by an FAA directive.The error the airline made was relying on a “friendly” FAA supervisor who agreed that they shouldn’t have to take the planes out of service when he did not have the authority to make such a decision.Allegations made at the time were that there were many cozy relationships between the FAA and the airlines they regulate, with personnel making career moves between the two.

 

Part of the reason for the perception that a regulator with former industry experience is an “industry reject” is the disparity in salary between the government employee and his industry counterpart. A comparison given during the recent lecture was the government inspector’s salary of approximately $85K while the oil industry engineer he is regulating is making $300K. I’m not sure this is a fair or accurate comparison, but there is probably some truth to the concept. There may be some industry professionals who realize they have gone as far as they will go in the private sector and choose government service for a more structured, secure and lower-stress career. This does not necessarily amount to incompetence as implied by the term “industry reject.” People make career choices for many different reasons. With the proper leadership and management applied, actual “industry rejects” who do not measure up should quickly be made into “government rejects” as well.

 

So if regulators are either industry rejects or wannabes, the challenge for reformers is to figure out who, then, or what, makes a good regulator? A few year ago the U.S. Coast Guard instituted changes to its marine safety program in response to complaints from industry and Congress regarding a shift in focus toward security in the wake of 9/11, at the expense of the marine safety program. The jury is still out on whether the Coast Guard got to the root of its problems and only time will tell if the former MMS actually fixes its issues. But I’m not convinced that growing brand new, industry-free, regulators is a viable solution, or a wise one.

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