Business Response to Regulation: An Economist's Perspective

This chapter presents an economist's perspective on the interrelationship of the compliance and enforcement decisions of business and regulators in the context of regulations governing occupational health. Assuming profit-maximizing firms and harm-minimizing enforcement agencies, it is argued that a degree of preventive activity would be undertaken by businesses even in the absence of regulation. However, if employees are not fully informed about the risks of the workplace, it is likely that the profit-maximizing level of prevention will be less than socially optimal, and consequently there will be a need for regulation. An enforcement agency which attempts to minimize harm through inducing compliance with regulatory standards will be faced with similar informational difficulties to individual employees, and this suggests some scope for cooperative gains with individual firms through negotiated compliance, rather than prosecution.     

涉案企业合规刑行衔接的初步研究

涉案企业合规改革的推行和深化,离不开行政监管部门的全面配合.检察机关在涉案企业合规改革探索过程中,也较为注重发挥行政监管部门的作用,并尝试利用现有的制度空间解决好与行政监管部门的衔接配合问题.但由于行政监管部门并没有配合刑事执法机关参与办理企业合规案件的法定义务,加上衔接配合的规则和程序粗陋缺失,刑行衔接程序出现不畅问...     

An Enforcement Taxonomy of Regulatory Agencies

A variety of multivariate techniques were used to develop a taxonomy of regulatory agencies from the first comprehensive study of the disparate enforcement strategies employed by business regulatory agencies in one country. Seven types of agencies were identified: Conciliators, Benign Big Guns, Diagnostic Inspectorates, Detached Token Enforcers, Detached Modest Enforcers, Token Enforcers and Modest Enforcers. Agencies were distinguished primarily according to their orientation to enforcement versus persuasion, according to their commitment to detached (or arms length) command and control regulation versus cooperative fostering of self-regulation, and according to their attachment to universalistic rulebook regulation versus particularistic regulation. Nevertheless, it is not unreasonable to view regulatory agencies as lying on a single continuum from particularistic non-enforcers who engage in cooperative fostering of self-regulation to rulebook enforcers whose policy is detached command and control. This approximates the suggestions of Hawkins and Reiss for distinguishing regulatory agencies according to a "sanctioning/deterrence" versus "compliance" dimension. The predominant regulatory style in Australia, however, is distant from both poles, being a perfunctory regulatory approach which is neither distinctively diagnostic and educative nor litigiously "going by the book"; rather it amounts to "going through the motions". The typology also partially conforms to Black's categorisation of social control as penal, therapeutic, conciliatory and compensatory.     

Mitigating the Harshness of FCPA Enforcement Through a Qualifying Good‐Faith Compliance Defense

In recent years, the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) have enforced the Foreign Corrupt Practices Act (FCPA) with increasing rigor. These zealous enforcement practices have been criticized for putting excessive pressure on companies to settle, often through nonprosecution or deferred prosecution agreements. The resulting proliferation of such settlements has created a dearth of case law interpreting the statute, resulting in legal ambiguity that reinforces pressures on companies to continue to settle rather than litigate, as uncertainty of the law adds to risk. This dynamic is exacerbated by the broad vicarious liability that firms face for the wrongdoing of individual actors. Given the need for government to enlist business as a partner in any effective battle against global corruption, the current highly adversarial relationship between enforcement agencies and firms is unreasonable and counterproductive. The law and its enforcement agencies should go further in providing incentives for businesses to develop and implement strong good‐faith FCPA compliance programs. They should establish standards for rigorous compliance programs that would provide qualifying companies with a defense against entity liability for the corrupt behavior of individuals. Creation of a qualifying good‐faith compliance program defense would help to prevent future FCPA violations, to recruit companies as partners in fighting corruption, to encourage ethics‐oriented corporate cultures, and to encourage upstanding firms to do business in regimes where rectitude is most needed.     

Editor's Introduction: Understanding Regulatory Enforcement

This issue of Law & Policy adds to the growing body of empirical case studies of decision-making and enforcement in regulatory agencies. Summarizing that research, regulatory enforcement styles can be described in terms of two dimensions, one concerning the ways in which regulatory violations are defined and punished, the other concerning outcomes, described in policy-evaluative terms. In explaining variation in enforcement style, existing studies point to three sets of factors: characteristics of the regulatory "legal design"; features of agencies' "task environment"; and the regulatory "political environment." Weighting the relative importance of these factors, however, is difficult because of the number and fluidity of variables and the adaptiveness of regulatory agencies.     

Multijurisdictional drug task forces: An analysis of impacts

In the past decade, municipal police organizations have devoted significant resources toward drug enforcement. One popular strategy in addressing the American drug problem is the formulation of multijurisdictional drug task forces. Despite their popularity, the impact of these cooperative ventures on law enforcement agencies has not been adequately evaluated. The research reported here examined the effect of membership in a drug enforcement task force on levels of drug enforcement outputs and perceptions of effectiveness by comparing law enforcement agencies participating in drug task forces to agencies which do not participate. Results suggest that task force membership impacts perceptions, but does not appear to influence objective measures of drug enforcement outputs.     

Theory and Practice of Regulatory Enforcement: Occupational Health and Safety Regulation in British Columbia*

Data about the activities of occupational health and safety officials in British Columbia is utilized to explore competing explanations for the overwhelming prevalence of persuasion over punishment in regulatory enforcement. By plotting the compliance histories of individual firms, this study demonstrates that many offenders repeatedly commit the same infraction. Few of these repeat offenders are punished. These findings suggest that the very limited use of penalties is not a result of the vast majority of firms being good apples induced to comply by mechanisms of social control other than punishment. Rather, there appears to be institutionalized tolerance of widespread violations. The enforcement deficit may be partly explained by such aspects of regulatory structure as the ongoing relationship between regulated firms and field officers who are the gatekeepers of the penalty process.     

To What Extent Do Third Parties Influence Business Compliance?

Regulatory scholars have increasingly observed that it is not only public regulatory agencies and official enforcement action that motivate and enforce businesses' compliance with the law; in many situations, certain third parties may have greater capacity and power to motivate and enforce compliance with the law than do official regulatory agencies. This paper examines the extent to which businesses' worries about, and perceptions of pressure from, various third parties influence their internal compliance management activities and moral commitment in relation to complying with the objectives of competition and consumer protection law. Using data from a survey of 999 large Australian businesses, we find that businesses worry a lot about the reactions of a range of third parties including customers, shareholders, employees, and business partners to non-compliance. We find little evidence that these worries have much impact on what businesses actually do. However, perceptions of risk of complaints do influence what they do.     

BARGAIN AND BLUFF: Compliance Strategy and Deterrence in the Enforcement of Regulation

A strategy of compliance in which enforcement agents rely on negotiation is identified as a characteristic feature of water pollution control work. The strategy arises from the nature of the conduct and activities subject to regulation and from the need to maintain a continuing relationship with the regulated. In securing compliance regulatory agents shape their enforcement tactics by reference to assumptions held as to why polluters fail to comply. Bargaining is central to compliance strategy, but if a conciliatory approach fails, a more threatening posture will be taken in which a variety of mores, including bluffs about legal sanctions, may be employed. Law enforcement is treated as a matter of compliance as well as compulsion.     

The "Compliance" Trap: The Moral Message in Responsive Regulatory Enforcement

Simple deterrence will often fail to produce compliance commitment because it does not directly address business perceptions of the morality of regulated behavior. Responsive regulation, by contrast, seeks to build moral commitment to compliance with the law. This article shows that a regulator can overcome the deterrence trap to improve compliance commitment with the skillful use of responsive regulatory techniques that "leverage" the deterrence impact of its enforcement strategies with moral judgments. But this leads it into the "compliance trap." The compliance trap occurs where there is a lack of political support for the moral seriousness of the law it must enforce, such as is the case with cartel enforcement in Australia. In these circumstances, business offenders are likely to interpret the moral leveraging of responsive regulation as unfair or stigmatizing, and business perceptions of regulator unfairness are likely to have a negative influence on long-term compliance with the law. Moreover, big businesses that perceive regulatory enforcement as illegitimate are also likely to actively lobby for the political emasculation of the regulator. In these circumstances, most regulators are likely to avoid conflict by taking the easy option of enforcing the law "softly," and therefore ineffectively.     

General Deterrence and Corporate Environmental Behavior*

This research addresses the assumption that “general deterrence” is an important key to enhanced compliance with regulatory laws. Through a survey of 233 firms in several industries in the United States, we sought to answer the following questions: (1) When severe legal penalties are imposed against a violator of environmental laws, do other companies in the same industry actually learn about such “signal cases”? (2) Does knowing about “signal cases” change firms’ compliance‐related behavior? It was found that only 42 percent of respondents could identify the “signal case,” but 89 percent could identify some enforcement actions against other firms, and 63 percent of firms reported having taken some compliance‐related actions in response to learning about such cases. Overall, it is concluded that because most firms are in compliance already (for a variety of other reasons), this form of “explicit general deterrence” knowledge usually serves not to enhance the perceived threat of legal punishment, but as reassurance that compliance is not foolish and as a reminder to check on the reliability of existing compliance routines.     

The use of warnings in the presence of errors

This article studies the effects of warnings, an enforcement instrument which is often used by environmental inspection agencies. Due to regulatory errors, measured emissions are uncertain and some firms are unjustly penalized. Warnings can then be used as a means to reduce the consequences of these errors. Even though the presence of warnings creates some underdeterrence of medium-cost firms, such a system reduces the overcompliance of low-cost firms caused by the uncertainty surrounding measured emissions. Further, warnings reduce the number of incorrect prosecutions in the case of measurement errors, which is also welfare enhancing, albeit at the cost of increasing the number of violators that go unpunished. For small error sizes, the use of warnings is shown to be welfare improving compared to only using fines.     

The Context of Minority Group Threat: Race, Institutions, and Complying with Hate Crime Law

A wealth of research suggests a direct association between minority group size and government social control, such as arrest or imprisonment rates. Prior work in this vein, however, gives scant attention to (1) types of law that explicitly address intergroup conflict and (2) regional variation in the salience of minority group threat. At the same time, research on organizational responses to law indicates that institutional linkages to legal environments dictate policy innovation and compliance, yet the relevance of such linkages for law enforcement agencies is less clear. The present research investigates these themes by focusing on law enforcement responses to hate crime in the United States. Data from a sample of large municipal and county policing agencies and their degree of compliance with the federal Hate Crimes Statistics Act are analyzed. Main effects models show that compliance with federal hate crime law is less likely in places with larger black populations, an intriguing finding in light of extant work suggesting that both formal social control and race-based hate crime offending are typically more prevalent where more blacks reside. This effect of black population size on compliance with hate crime law, however, is contingent on region. A positive correlation in the Northeast contrasts with an inverse association in the South. The findings also suggest that organizational facets of law enforcement agencies, notably their engagement in community policing, are associated with compliance. The results elaborate and qualify group threat explanations of government social control and contribute to a burgeoning literature on the utility of organizational theory in the realm of law enforcement.     

Assaults Against Inspectors: The Dangers in Enforcing Corporate Crime

This survey of regulatory inspectors reveals a surprising number of threats and assaults being made against inspectors in the course of enforcing regulatory provisions. Contrary to conventional images of regulatory enforcement, inspectors in some agencies face violent resistance from regulatory offenders that is similar to the violent resistance encountered by police officers. These findings provide support for the contention that regulatory enforcement and policing should be conceptualized as overlapping forms of law enforcement rather than as distinct governmental activities.     

Intellectual property and white-collar crime: report of issues,trends, and problems for future research

This research examines the association between intellectual property (IP) and whitecollar crime (WCC), and identifies future research that might benefit policymakers; federal, state, and local agencies; and the general public. Research methods include a review of literature, a review of information and data in IPR violations and WCC, and inquiry in areas that directly deal with IP laws and enforcement practices, such as law enforcement agencies, IP-based industries and private law firms.     

Regulatory Enforcement in Local Government in Japan

The Japanese inspectors usually adopt an "informal measure-oriented" style in enforcing violations of regulatory statutes. They prefer administrative guidance with no legally binding effect to compliance orders or criminal prosecution. These formal measures, they think, would erode the cooperative relationship with the regulatee, which is believed essential for cost-effective enforcement. In contrast to that in the United States, the Japanese enforcement process lacks citizen participation and information disclosure, this enabling the inspectors to deal with violations at their own pace.     

Applying game theory to the protection of public funds: Some introductory notes

Regulatory agencies responsible for preventing misuse of public funds do not all operate in the same fashion. Some carefully weigh the costs and benefits associated with various enforcement policies, but others do not. We use game theory to suggest that (1) regulatory agencies actually have a range of enforcement options at their disposal and (2) these enforcement options can have quite different cost-benefit ratios, depending on the resources of the enforcement agency, the nature of its connection to principals, and the strategies adopted by opportunistic actors. We conclude that enforcement organizations must be flexible in order to be effective.