Corporations Must Not Pay Government Regulators

Surprisingly, corporations are allowed to provide financial incentives for their employees to quit their jobs and become government regulators. They can provide bonuses, payouts and increased retirement plans for the employees when they quit to take a government job. This is essentially paying their employees to become the government regulators who in turn take a favorable view of their former employer when they get into government.

It all seems reasonable and justifiable from the point of view of the corporation and the employee. The employee is technically under no further obligation to the company. The company sees it as providing the government with a person who really understands the industry. And the government gets an employee with experience in the industry they are regulating.

However, these practices lead to an undue loyalty to the industry, and not a more general loyalty to all the constituents of the government. Also, it requires that the public trust the government that these cozy relationships will not go too far. That the government regulators, already lying on the bed with the industry, will not become more than just friends. The system undoubtedly has some benefits, but the risks of lost loyalty to the public are too great to allow this practice to continue.

The practice is not even that great for the corporations. The risk is that a former employee of Goldman Sachs in a regulatory role will favor Goldman Sachs to the disadvantage of all other firms. So now the other firms have to get in the game. Ultimately, there are short term winners, but most everyone loses in the long term.

This could be resolved by tightening rules adopted by the Office of Personnel Management, or by law. No person receiving a bonus or any other consideration for entering public service may be hired by the government. Conflict of Interest laws could be further tightened to prevent people who are leaving public service from taking jobs that have the appearance of being a reward for their public service.

 

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