Institutionalizing fairness in financial markets: Mission impossible?

This article analyzes the institutionalization of process‐oriented regulation, namely: regulatory institutions that allow firms to adapt regulation to their individual circumstances, while holding them to account for the adequacy and efficacy of their internal compliance systems. The article's main focus is on the strategies sought by compliance professionals to attain managers' receptiveness to regulatory expectations. It analyzes British financial firms' responses to a process‐oriented regulatory initiative, which sought to transform the widespread culture of product “mis‐selling” in this industry. Three key arguments and hypotheses are put forward: first, it is suggested that the existing theoretical literature on process‐oriented regulation overly stresses managers' rational, profit‐maximizing motivations for (non‐)compliance, whilst overlooking their emotive motivations. Second, it is proposed that managers' emotive resistance is expected when regulatory expectations challenge firms' “organizational identities” and thereby their individual identities. Third, it is hypothesized that when process‐oriented regulation poses a threat to organizations' identities, its institutionalization will entail delegation of the design and subsequent implementation of compliance systems to managers outside compliance, and reframing of regulatory expectations into existing businesses discourses and methodologies.     

Same Considerations,Different Decisions: Motivations for Split‐ticket Voting among Swedish Feminist Initiative Supporters

This article explores why supporters of small, non‐established parties choose to vote for different parties in the elections to the European Parliament (EP) and elections to the national parliament. It uses individual‐level data with open‐ended questions from an online survey on supporters of Feminist Initiative (Fi) – a comparatively small and new Swedish feminist party – to map voters’ own motivations for split‐ticket voting in the 2014 elections. Contrary to expectations based on second‐order election theory, it is found that voters ticket‐split in both directions: there are those voting for Fi in the EP election but not in the national election, and those voting for Fi in the national election but not in the EP election. These voters take the same types of considerations into account but nevertheless end up making opposite voting decisions. Voters clearly distinguish between the two levels – for example, by prioritizing different issues.     

Nurturing regulatory compliance: Is procedural justice effective when people question the legitimacy of the law?

Procedural justice generally enhances an authority's legitimacy and encourages people to comply with an authority's decisions and rules. We argue, however, that previous research on procedural justice and legitimacy has examined legitimacy in a limited way by focusing solely on the perceived legitimacy of authorities and ignoring how people may perceive the legitimacy of the laws and rules they enforce. In addition, no research to date has examined how such perceptions of legitimacy may moderate the effect of procedural justice on compliance behavior. Using survey data collected across three different regulatory contexts – taxation (Study 1), social security (Study 2), and law enforcement (Study 3) – the findings suggest that one's perceptions of the legitimacy of the law moderates the effect of procedural justice on compliance behaviors; procedural justice is more important for shaping compliance behaviors when people question the legitimacy of the laws than when they accept them as legitimate. An explanation of these findings using a social distancing framework is offered, along with a discussion of the implications the findings have on enforcement.     

Workplace and Non‐workplace Pro‐environmental Behaviors: Empirical Evidence from Florida City Governments

Public employees are expected to be good stewards of public resources and engage in pro‐environmental behaviors (PEBs). Using different categorizations of PEBs, this article examines whether public employees perform these PEBs in workplace and non‐workplace settings. The article further investigates how PEBs are influenced by salient characteristics of public organizations—that is, public service motivation (PSM) and civic participation categorized as civic engagement and cognitive engagement. Data were collected through a survey of public employees in two city governments in Florida. A structural equation model was employed to test the proposed model. Findings indicate that PSM has a positive influence on workplace PEBs and similar PEBs in the non‐workplace settings. Civic engagement has a positive influence on both workplace and non‐workplace PEBs. Barriers significantly moderate the effects of PSM and cognitive engagement on workplace and non‐workplace PEBs.     

Taking Others into Account: Self‐Interest and Fairness in Majority Decision Making

Research on the formal properties of democratic aggregation mechanisms has a long tradition in political science. Recent theoretical developments, however, show that in the discussion of normative contents of democratic decisions, the actual shape of preferences deserves just as much attention. However, our knowledge about the concrete motivations of individual behavior in democratic decisions is incomplete. Using laboratory experiments, this article examines the existence of social preferences in majority decisions. Contrary to earlier experiments of committee decision making, we develop a design that controls for the conditions of communication and the level of information between subjects. This allows us to comparatively test the predictive power of several theories. We find strong evidence that self‐interest and fairness motivate human behavior in majority decisions.     

The container security initiative costs,implications and relevance to developing countries

Following 9/11, the Department of Homeland Security established the Container Security Initiative (CSI) programme in 2002 in response to the threat from terrorist attacks involving weapons of mass destruction transported by cargo containers. This project establishes the tracking and targeting of ‘high risk’ containers and their subsequent scanning with X‐ray machines before loading onto the U.S. bound ships. To date, 44 of the world's largest ports have agreed to become CSI‐compliant, the majority of which are located in industrialised countries, while developing and least developed countries are under‐represented. CSI‐eligibility requires that ports represent a considerable volume of U.S. bound container traffic and invest in container scanning devices. Every non‐intrusive inspecting device (NII) costs several million dollars while investments in IT and existing infrastructure often triple the compliance costs. Containers originating in a CSI port are expedited through U.S. customs, representing a comparative trade barrier for exporters from non‐CSI ports. Thus, CSI acts as a tool for the U.S. to improve security, while representing a challenge to exporting countries' market access. This article provides an evaluation of the impacts this plan will have on the export competitiveness of developing countries. It reviews the potential benefits this programme offers in terms of improved trade facilitation, as well as proposing recommendations for its expansion to include developing countries. Copyright © 2006 John Wiley & Sons, Ltd.     

Fair treatment,fair play? The relationship between fair treatment perceptions,political trust and compliant and cooperative attitudes cross-nationally

Obtaining citizens’ voluntary compliance with political decisions is a fundamental democratic challenge. Fair treatment by public officials plays a key role in theoretical and empirical studies on citizens’ compliance and cooperation. Yet it is unclear whether citizens within different societies react to (un)fair treatment in the same way. Using multilevel structural equation modelling and multilevel regression analysis on the European Social Survey 2010–2 (N = 52,458), this article shows that perceptions of fair treatment by police officers are associated with higher levels of trust in political institutions and in turn stronger compliant and cooperative attitudes of citizens in 27 countries. Yet the link between perceptions of unfair treatment and institutional trust is stronger in countries in which fair behaviour is more prevalent. While fair treatment is often considered to be a universal norm affecting citizens in a uniform way, this article sheds light on important cross-national variations.     

Structure and Process: Examining the Interaction between Bureaucratic Organization and Analytical Requirements

Attempts by politicians to control bureaucratic decisions include both structural (how is the agency making the decision organized?) and procedural (what rules must they follow when making the decision?). But how do these two modes of influence interact? This article examines the interaction between bureaucratic structure and one procedural control, the requirement that agencies conduct an analysis of their decisions prior to their issuance. I look at this interaction in the context of two types of analysis, cost‐benefit analysis and environmental impact assessment. I interview 16 individuals in each field and draw from their experiences of conducting and reviewing more than a thousand analyses. The conduct of analysis is affected by where analysts are placed in agencies. In particular, independence of analysts has a trade‐off. The more independent analysts are, the more likely they can challenge preferred decisions in their agency. But independent analysts are brought into decisions later and their independence may limit their long‐term impacts on agency culture. Despite this trade‐off, analysts expressed a clear preference for independence. The interaction between different controls of bureaucratic behavior is a potentially fruitful line for further research.     

Local government reform in South Africa: An analysis of financial management legislative compliance by municipalities

South African local government has undergone radical transformation. The reform process included a local government financial management best‐practice technical assistance programme (MFMTAP) targeting financial management and especially budget quality reform. Dollery and Graves (2009) earlier examined the efficacy of the South African National Treasury (NT's) municipal budget funding compliance technique for measuring adherence to the Municipal Finance Management Act's (MFMA) budget funding requirements using a single metropolitan municipality case study. This article further evaluates the robustness and validity of the funding compliance instrument as a reform performance measurement tool by comparing the results of four geographically and demographically different municipalities. Also introduced is a performance ‘trend’ instrument similar to a ‘Likert scale’ for comparing municipal performance. Optimal tax revenue theory is invoked to examine this key revenue variable for producing a compliant budget. The article finds the ‘budget funding’ reform component of the Best‐Practice Technical Assistance (BPTA) programme presently ineffective and unsustainable. Copyright © 2009 John Wiley & Sons, Ltd.     

Representation and Collaboration: Exploring the Role of Shared Identity in the Collaborative Process

Public managers must regularly engage and interact with stakeholders in the external environment to deliver meaningful policy outcomes. Examining the motivations behind such behavior is a critical component of understanding management in the modern era. Some studies suggest that actors with similar interests are more likely to form collaborative partnerships. Using an original mail survey of 150 American Indian education directors in public school districts, this article examines how shared identity and individual attitudes affect levels of interaction with Native American communities. Findings suggest that public school officials who share both a racial and a tribal/co‐ethnic identity with Native American nations in their service area have higher levels of interaction with these groups than public school officials who are either members of Native American nations outside their service area or non‐Indian. This research has broad implications for incorporating theories of representation and social construction into our understanding of collaboration.     

Signaling and Counter‐Signaling in the Judicial Hierarchy: An Empirical Analysis of En Banc Review

We leverage the institutional features of American courts to evaluate the importance of whistleblowers in hierarchical oversight. Drawing on a formal theory of signaling in the judicial hierarchy, we examine the role of whistleblowing dissents in triggering en banc review of three‐judge panels by full circuits of the Courts of Appeals. The theory generates predictions about how dissent interacts with judicial preferences to influence circuits' review and reversal decisions, which we test using original and existing data. First, we show that judges who dissent counter to their preferences are more likely to see their dissents lead to review and reversal. Second, we show that dissents are most influential when the likelihood of non‐compliance by a three‐judge panel is highest. Our results underscore the importance of dissent in the judicial hierarchy and illustrate how judicial whistleblowers can help appellate courts target the most important cases for review.     

Participation rationales,regulatory enforcement,and compliance motivations in a voluntary program context

This article extends the study of regulatory compliance motivations from “traditional” regulatory settings to a government-sponsored voluntary one. We argue that the rationale(s) which motivate participants to engage a voluntary program likely shape which motivations drive them toward (or away from) program compliance. Our study examines the possible influence of program participation rationales alongside that of regulatory agents' enforcement styles and strategies. Leveraging a national survey of certified United States Department of Agriculture organic producers, we find that the more a producer pursues organic certification to increase profits, the more likely they are to report deterrent fears as an important compliance motivation. In contrast, the more a producer becomes certified to support the organic movement, the more heavily they weigh a personal sense of duty to comply. We discuss the implications of these, and other, study findings for compliance motivations theory and voluntary program integrity.     

Conflict and Compliance in Swedish Health Care Governance: Soft Law in the ‘Shadow of Hierarchy’

Soft law, or non‐legislative modes of policy making, is becoming increasingly common today. The Nordic countries have a long tradition soft law, not least in central–local relations, where non‐binding agreements are frequently used to coordinate policies. A key question springing from soft law theory is that of compliance. Why do independent actors comply if they are not formally obliged to do so, and what happens if they do not comply? This article addresses the question of how compliance can be achieved during policy conflict between actors at different governing levels by investigating a case of health care reform in Sweden. An important finding in the study is that compliance was reached ‘in the shadow of hierarchy’. The central government resorted to the threat of regular legislation to force the county councils to comply. This finding points to the fact that sanctions and the presence of a hierarchical order may play an important role even in soft law governance. The study also shows that an additional important reason that the voluntary agreement between the county councils and central government was honoured in the end by both parties can be attributed to the efforts of a mediating actor: the organization representing the county councils in their negotiations with the government. Finally, the study also illustrates how various forms of informal social pressures such as shaming, peer pressure and moral responsibility can help enforce local compliance in a case of open policy conflict. Arguably, all these compliance mechanisms also have relevance outside the Nordic setting.     

Motivation for Compliance with Environmental Regulations

A combination of calculated, normative, and social motivations as well as awareness of rules and capacity to comply are thought to foster compliance with regulations. Hypotheses about these factors were tested with data concerning Danish farmers' compliance with agro‐environmental regulations. Three key findings emerge: that farmers' awareness of rules plays a critical role; that normative and social motivations are as influential as calculated motivations in enhancing compliance; and that inspectors' enforcement style affects compliance differently from that posited in much of the literature. It was also found that formalism in inspection can be helpful to a point, while coercion by inspectors can backfire. Taken together, these findings counter arguments concerning the harm of legalism and the benefits of flexible enforcement. This study contributes to the understanding of factors that shape compliance with social and environmental regulations. © 2001 by the Association for Public Policy Analysis and Management.     

Globalization and the Retreat of Citizen Participation in Collective Action: A Challenge for Public Administration

Globalization challenges the ability of contemporary public administration to encourage citizen participation in collective action through behaviors such as tax compliance and contributions to public goods. The authors introduce a new individual‐level approach to globalization, arguing that people vary in the extent to which they are globalized and that an individual's level of globalism (ILG) reflects attitudes and dispositions that influence the way he or she resolves the social dilemma of participation in collective action (i.e., the decision to contribute versus follow a “free‐ride” strategy). Using a four‐country sample, the article examines the relationship between ILG and collective action participation decisions in three behavioral experiments. Findings support the hypothesis that regardless of country‐level globalization, a more globalized individual complies less willingly with tax codes, donates less to local nongovernmental organizations, and prefers to adopt a free‐ride strategy in a public goods game. The consequences for public administration are discussed.     

Judicial enforcement deputies: Causes and effects of Chinese judges enforcing environmental administrative decisions

This paper explores how and why Chinese courts became involved in regulating pollution by aiding administrative agencies in executing sanction decisions and collecting pollution levies. It also studies the effects of their regulatory involvement, both in terms of deterrence inferred from available information, as well as the compliance behavior of regulated actors defined as payment of regulatory penalties. It finds that judicial involvement in regulatory enforcement proved to be short‐lived and depended on a particular context at a particular period of time when a regulatory need coincided with administrative and financial judicial needs and particular judges. The paper also finds that court involvement enhanced deterrence in terms of certainty of punishment and to some extent the severity of punishment; however that deterrent effect was undermined by the close relationship between the courts and the regulated entities as fines and levies were almost always negotiated. In effect, deterrence increased the number of compliers paying levies without increasing the depth of compliance in terms of their full payment.     

The regulatory state in developing countries: Redistribution and regulatory failure in Brazil

Following the traditional doctrine of the “regulatory state”, regulatory agencies should be given very focused mandates and stay away from the politicized realm of distributive policies and decisions. An opposing perspective would state that if regulatory agencies can contribute to economic redistribution, positive results such as network expansion, economies of scale, and fiscal efficiency will ultimately lead to lower levels of regulatory failure. This article tests whether, in countries of high socio-economic inequality, such as Brazil, the active incorporation of distributive considerations by regulatory agencies leads to lower levels of failure. Through the analysis of the activities of seven Brazilian network regulatory agencies, the article develops theory-driven expectations and tests these expectations using crisp set Qualitative Comparative Analysis (csQCA). It concludes that not prioritizing redistribution is a necessary but not a sufficient condition for regulatory agencies' failure. In most types of failure, a lack of priority to redistribution leads to failure when combined with low regulatory capacity and low levels of competence.     

Failure of auditors: The lack of compliance for business combinations in China

This empirical study investigates the compliance of 344 Chinese listed companies with the Accounting Standard for Enterprises No. 20‐Business Combination, a mandatory reporting standard applicable to companies involved in business combinations. China has recently reformed its auditing sector, enabling private firms to provide auditing services. The results of the study show a low level of compliance by Chinese listed companies. While companies audited by Chinese domestic auditors have significantly lower compliance than companies audited by Big Four auditors on supplementary disclosure that is mandatory under the Chinese accounting standards, compliance remains low even after companies receive unqualified reports from these international auditors. There appears to be a lack of commitment, and possibly expertise, among Big Four auditors, in fully applying the reporting requirements of the business combination standard in a Chinese setting. This raises concerns about the independence of Chinese auditing in disclosing reliable information about business combinations. Broader theoretical contributions of the paper go beyond the Chinese context by problematizing whether well‐resourced international auditors uphold internationally expected standards or succumb to local non‐compliant practices.     

Empathy in a Citizen Deliberation Experiment

Despite increased scholarly attention, there is still limited knowledge on how empathy works in democratic deliberation. This article examines the role of empathy in citizen deliberation with the help of a deliberative experiment on immigration. First, a random sample of citizens was surveyed regarding their opinions on immigration. Based on their opinions, they were then divided into a permissive or a non‐permissive enclave, and randomly assigned into like‐minded or mixed‐opinion groups for deliberation. After deliberation, they were surveyed anew. The study analyzes: (a) empathy differences between permissive and non‐permissive participants; (b) changes in outgroup empathy toward immigrants as a result of deliberation; and (c) differences in prosocial behavior (i.e., donating to charity). The results show that the permissive respondents had more empathy, especially toward immigrants, than the non‐permissive respondents. Among participants, outgroup empathy increased during deliberation. Regarding prosocial behavior, the permissive participants donated more often to charity at the end of the experiment.     

When top‐down meets bottom‐up: Local adoption of social policy reform in China

Authoritarian local leaders face two driving forces in social policymaking: top‐down pressure from the regime and bottom‐up motivations derived from local conditions. Existing studies recognize the importance of both forces, but remain unclear as to how they interact and which of them is more influential in driving local policy adoption. Focusing on two health insurance integration policies in China, we find that when the policy entails substantial class or distributive conflicts and bureaucratic friction, top‐down pressure for compliance is a dominant driver for local policy adoption; when the policy does not entail such conflicts or bureaucratic infighting, bottom‐up motivations based on local economic geography together with top‐down pressure drive local adoption. We find support for this argument from an analysis of an original city‐level data set in China from 2004 to 2016. This study has implications for social policy reform, decentralization, and government responsiveness in authoritarian countries with multilevel governance.