A question of clarity and certainty

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Try formalising a dress code and you will understand the importance of informal, cultural regulation.

Don Cruickshank, the Telecoms regulator, has proposed that the licences of BT (and other telecom companies) should be modified to include a general prohibition on anti-competitive behaviour. This proposal is strongly resisted by BT, who argue that practices which cause concern should be the subject of specific prohibition, which would be inserted in the company’s licence and which could be the subject of appeal to the Monopolies and Mergers Commission. Now read on.

The story of BT’s dress code deserves to be more widely told. After privatisation, the company decided it was time to shake off sloppy dress habits of the public sector. A directive went round telling senior employees that they should adopt suitable business dress.

The directive caused some resentment. Those who opposed it demanded greater clarity and certainty. When they went to the wardrobe in the morning, how could they know what would or would not represent suitable business dress. After advice from its legal and regulatory affairs department, the company agreed to promulgate a dress code. Senior male employees were expected to wear smart suits, shirts with collars, and ties.

It was not long before someone came to the office in a red suit. When criticised, he pointed to the terms of the dress code. The suit was undeniably smart: but it was the smartness of Stringfellows rather than the boardroom. So the dress code had to specify colour. Red was out, grey was in. But what of blue? Some blues were clearly acceptable. The Chairman’s favourite suit, in fact, was a fetching shade of navy. But bright blues could not be admitted. So how bright was bright?

BT research came up with the answer. Brightness is determined by how much light a fabric reflects. A machine could measure this, and one was soon constructed and installed in the reception areas.

But ties posed a more intractable problem. It was simply impossible to define which colours and motifs were acceptable and which not. A clearance procedure seemed the best answer. Anyone who bought a new tie could submit it to the dress code department, who had 42 days to rule on whether or not it was suitable business dress. This was difficult, since the appropriateness of a tie might depend on the context – the suit and the shirt that went with it. So decisions were rather conservative.

This raised the issue of an appeal mechanism. Of course all changes in the dress code had to be agreed by the main board. But discretion over approval of ties had been delegated to the dress code department. That made them judge and jury in implementing regulations they had themselves devised. This violated natural justice.

The company agreed that a small group of senior directors, with an independent fashion adviser, would hear complaints from employees who felt their ties had been unreasonably rejected. Some of these directors were heard to mutter that this was not what they were paid large salaries for. But since no-one knew what they were paid large salaries for, the criticism did not go much further.

But there was the more general problem of changing fashion. After all, it was not so long since every gentleman had gone to work in a wing collar and frock coat. Not only were other forms of dress now acceptable, but wing collars had probably ceased to be acceptable. Not the image of a modern information company. Paul Smith agreed to chair a standing working party to advise the company on fashion trends.

By this time, the dress code extended to 50 pages, largely impenetrable. No sensible employee read it, and when they were given a copy they were told that if they only behaved sensibly they would probably be all right. Knowledge of its contents was confined to the dress department, which by this time consisted to twenty people, mostly lawyers, the union representative who negotiated over it, and a few cranks who enjoyed pointing out inconsistencies and anomalies in the code.

Eventually a new management came in, determined to sweep the dress code department away. They quickly realised there were two alternatives. One was to supply a uniform to all employees. This was obviously an intolerable interference in personal affairs. The other was to sweep away the dress code and renew the instruction to everyone to wear suitable business dress. If anyone was in genuine doubt as to what constituted suitable business dress – and not many people were, – they were advised to have a word with Don, who had been given this role precisely because of his sound judgement and range of business experience. What Don said bound no-one, but to ignore his advice was injudicious and might prejudice advancement in the company.

The demand for clarity and certainty in regulation has great superficial plausibility, and it is because it is difficult to argue against clarity and certainty that it is best to proceed by analogy. The world is rarely clear and certain, and if it seems so today it will have ceased to be so tomorrow. It is no more possible or sensible to give an exhaustive description of what constitutes anti-competitive behaviour than to give an equivalent description of suitable business dress. When is it competative and when is it predatory to charge a low price? Or different prices to different customers? In both cases, you can exemplify things that are, and illustrate things that are not. But what you are trying to promote is an attitude and a style of behaviour. For those who understand that, formal rules are irrelevant; for those who do not, they have very little value.

The demand for clarity and certainty comes from two sources. It comes from naive people, who do not realise that effective regulation which eliminated discretion would ultimately lead to intrusion into every aspect of business life. And it comes from those who are very far from naive, and who understand that the sheer impracticality of what they seek would emasculate regulation in interminable legalism.

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