Mandatory Disclosure Is A New Breed Of Regulation
July 10, 2000
Corporations nationwide are dealing with the newest breed of regulation -- mandatory disclosure. New laws requiring the disclosure of such things as the lead content of products, toxic emissions from manufacturing plants, and on-time flight information have put corporations' reputations at stake. Some observers say these new regulations force changes in industries by shaming them into the desired actions. For example:
- A California law requiring warnings of exposure to "cancer-causing chemicals," called carcinogens, led to few warnings but significant reductions in the use of these chemicals -- for example, 10 china companies cut the lead in their glazes by 50 percent, and 14 plumbing supply companies began producing lead-free brass faucets.
- When disclosure of releases of chemicals on the Toxic Release Inventory (TRI) was required, Monsanto's chief executive announced he would cut his company's release levels by 90 percent within four years, and nationwide TRI releases have fallen 40 percent.
- Requiring the disclosure by airlines of on-time records and baggage-handling reports -- which other organizations then use to rank the best airlines in each category -- has led each airline to work to improve in these areas.
However, these disclosures may do more harm than good by giving consumers a false impression of the real risks. Many of the disclosure laws simply require posting the information without any context or interpretation. TRI data, for example, do not include information that would help people determine the immediate risks of using a certain product or living near a specific company.
Disclosures are also costly. Corporations pay for gathering information, redesigning products, and changing production processes. The government has to process, verify and release the information. All of these costs will ultimately be borne by the consumer citizens in the form or higher prices and higher taxes.
Source: Mary Graham, "Regulation by Shaming," Atlantic Monthly, April 2000.
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