Daniel Malan is the Director of the Centre for Corporate Governance in Africa at the University of Stellenbosch Business School in South Africa and member of the World Economic Forum’s Global Agenda Council on Values.

Given the scale and complexity of the global economy as well as our knowledge about human nature, it would be extremely naïve to rely simply on spontaneous and voluntary ethical behaviour by individuals and corporations to ensure fairness or improve human dignity. Regulation, combined with serious enforcement, is required to guide our behaviour and ensure the rule of law.

However, this approach has often resulted in a cat-and-mouse game between regulators and economic actors. Law-abiding individuals and corporations spend inordinate amounts of time and money in search of legal loopholes in order to achieve technical compliance only, while others abuse the legal framework so that their criminal activities can remain undetected.

The Fourth Industrial Revolution has brought about a new challenge. This has been articulated in a white paper on values published by the World Economic Forum in November 2016: “Given the Fourth Industrial Revolution’s extraordinarily fast technological and social change, relying only on government legislation and incentives to ensure the right outcomes is ill-advised. These are likely to be out-of-date or redundant by the time they are implemented.”

The examples of social media and electronic cigarettes demonstrate this point. There are interesting similarities between them; both use advanced technology in innovative and fast-changing environments, and are therefore almost impossible to define with enough specificity to allow the lengthy regulatory process to run its course. By the time that a regulation is finally approved, the product or service has changed. And they relate to consumer activities that are social and – at least from the perspective of most consumers – relatively harmless compared to many other priority areas of the criminal justice system.

Since its launch in 2004, Facebook has been continuously embroiled in data privacy issues. The most current example is the case involving Cambridge Analytica and the 2016 presidential election in the United States. In 2013, Cambridge psychology professor Aleksandr Kogan obtained permission from Facebook to mine data through a seemingly harmless app that matched a personality quiz with the user’s Facebook likes and dislikes. The outcome is now well-known: Kogan sold 50 million American Facebook users’ information to Cambridge Analytica, and - according to the latter’s then-CEO, Alexander Nix - the way in which this information was used may have had a substantial impact on the outcome of the 2016 US election.

The following description about the process is still available on Cambridge Analytica’s website, even though the company has now been placed under administration and has initiated bankruptcy proceedings: “We consistently identified the most persuadable voters and the issues they cared about. We then sent targeted messages to them at key times in order to move them to action."

Facebook argues that there was no data breach involved. Kogan obtained permission and those Facebook users who took the quiz gave their consent. As one of the Facebook users who completed the quiz at the time, I can attest to the fact that I had to give my consent and that I was fascinated by the results. However, the subsequent sale of the data by Kogan to Cambridge Analytica violated Facebook’s policies. The ethical and legal issues involved in the case are complex, and the overall remedial action taken by the company has addressed the broader privacy agenda.

Facebook has taken steps to ensure more transparency in terms of advertisements, and has indicated that they will do this regardless of possible new legal requirements to do so, such as the Honest Ads Act in the United States. Facebook CEO Mark Zuckerberg has publicly supported more regulation, but has also expressed a preference for flexible guidelines, rather than the model provided by- for example - Germany’s Network Enforcement Act. According to the act, also referred to as the “Facebook Act”, social media companies have to remove offensive posts within 24 hours or face fines of up to €50 million.

In another area, the potential benefits of a switch from cigarettes to e-cigarettes have been confirmed by a report of the Royal College of Physicians in the UK: "Large-scale substitution of e-cigarettes, or other non-tobacco nicotine products, for tobacco smoking has the potential to prevent almost all the harm from smoking in society … promoting e-cigarettes… as a substitute for smoking, is therefore likely to generate significant health gains in the UK.”

E-cigarettes form part of an ever-increasing spectrum of electronic nicotine-delivering devices, which countries around the world are struggling to regulate. The classification of these items varies from consumer products with few restrictions (United Kingdom), to classification as tobacco products even when many of the products do not contain tobacco (Brazil) to outright bans (Uruguay). In South Africa, the regulatory confusion is demonstrated by the fact these products seem to be covered neither by tobacco legislation nor by medical substances legislation. Regulators seem to be confused by the technology, the speed of change and the ethical implications of new products that do not fit into existing categories.

The Forum’s white paper argues that the best way to ensure positive outcomes in such a complicated environment is to operate with a clear foundation of values, for example by focusing on basic principles like human dignity and the common good. This approach seems more effective than playing regulatory catch-up all the time. One is reminded of the following quote from Dr Seuss’ book Did I Ever Tell You How Lucky You Are: “Think they work you too hard? Think of poor Ali Sard. He has to mow grass in his uncle's backyard, and its quick growing grass and it grows as he mows it. The faster he mows it the faster he grows it."

Regulation and ethical commitment do not have to be trapped in the binary opposition described above. The principle of “comply or explain” allows a certain amount of agility by giving corporations the option to avoid mindless compliance by explaining when a certain principle does not apply to them.

Without denying for a moment that the global regulatory environment is complex and will require technical specificity in most areas, the additional challenge of the need to demonstrate an ethical foundation should not be underestimated.

Perhaps there could be a legal responsibility for Facebook to demonstrate how the dignity of their users is protected, or for e-cigarette manufacturers to provide evidence of the health impact on consumers, rather than simply presenting auditable algorithms or chemical formulae.

Rather than battling with the uncertainty brought about by the Fourth Industrial Revolution, regulators should embrace it. The legal requirement to demonstrate how ethical principles have been applied is not a sleight-of-hand, but an important shift to help us see the wood for the trees. And that – if you’ll excuse the mixed metaphor – is much more important than mowing the grass in your uncle’s backyard.

Edited by: Shawn Chou

Additional Reading

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♦ It’s Time for Facebook to Fix Itself

Original content can be found at the website of World Economic Forum.

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