Private Governance Failures and Their Consequences: Towards Enhanced Legal Control of Private Authorities in Finance and Security?
Focusing on credit rating agencies (CRAs) and private military and security companies (PMSCs), this chapter explores when and to what extent private governance failures subsequently lead to enhanced legal control of private authorities. While private governance failures create a functional demand for regulatory reform, the establishment and extent of enhanced legal control mechanisms are contingent on (1) the political net benefits that more legalised private provision of governance entails for public policy-makers in the aftermath of private governance failures and (2) public policy-makers’ (continued) dependence on failing but essential private authorities. This approach captures why regulation and legal oversight of CRAs and PMSCs have increased after their governance failures but are plagued with limitations and entail unintended consequences.
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