Consequences of Tit‐for‐Tat Enforcement: Toward a Hippocratic Principle of Regulatory Implementation

The article discusses when tit‐for‐tat enforcement, an important strategy in responsive regulation theory, may generate intended reactions in communities of regulatees. Combining insights from compliance motivation theory, responsive regulation theory, and ethnographic studies of compliance, I hypothesize that tit‐for‐tat enforcement's probability of success depends on regulators’ institutionalized capacity to promote law–morality correspondence. Building such institutionalized capacity—so‐called “embeddedness”—simultaneously increases requirements for inspectorates’ competence. This article addresses three forms of law–morality correspondence: moral support for the law's content, the legislator's authority, and harmony between legal and moral guilt criteria.     

Fuzzy Legality in Regulation: The Legislative Mandate Revisited

How does law interact with regulatory reality, and why does legislative mandate, which presumably stands at the apex of a regulatory package, often deviate from its ideal‐type as exclusive organizer of action? These questions are treated in this article through the concept of “fuzzy legality,” which serves as a common title for six different legal arrangements that stray from the ideal‐type legislative mandate, while enabling “perfectly legal” industry behavior. Against the background of potential dangers involved in such practices, the article traces the politics of preference for fuzziness both by regulators and regulatees. It reassesses calls for responsive and reflexive law as a cure for the regulatory malaise: these may have been voiced due to existing overly rigid regulatory frameworks, rather than the intrinsic flaw of legal constructs.     

Managing Regulatory Risks and Defining the Parameters of Blame: A Focus on the Australian Prudential Regulation Authority

Risk-based regulation is a new arrival in the lexicon of risk and regulation. Regulators in Australia, Canada, and the UK have begun developing systems and processes to assess the probability and impact of compliance failures by regulated firms, and to adjust their relationship with firms accordingly. This article explores the motivations for, and key elements of, the risk-based frameworks of one of those regulators, the Australian Prudential Regulation Authority (APRA). It broadens out from this case study to argue first, that risk-based regulation goes hand in hand with the technique of "meta" regulation, the regulation of the firm's own internal self regulation, and will both fuel and be fueled by any trend towards the latter. Second, it argues that risk-based frameworks are not risk-free: whilst they seek to manage risks they inevitably introduce their own. Third, risk-based regulatory frameworks have the potential both to expose and obscure key sociopolitical and socioeconomic choices as to the amount or types of regulatory failures that an agency will tolerate, and which in effect it is requiring society to tolerate. "Risk based frameworks" are attempt to define what are acceptable "failures" and what are not, and thus to define the parameters of blame.     

Driving Priorities in Risk‐based Regulation: What's the Problem?

Both risk‐based and problem‐centred regulatory techniques emphasize giving priority to matters that are serious and important. In the case of both risks and problems, however, issues of identification, selection, and prioritization involve inescapably normative and political choices. It is important, therefore, to understand why regulators target the risks and problems that they do; which factors drive such choices; and how regulation is affected when these factors pull in similar or opposite directions. Such an understanding provides a fresh framework for thinking about the challenges of both risk‐based and problem‐centred regulation. The analysis presented here does not oppose either risk‐based or problem‐centred regulation, but it illustrates why neither is as straightforward as simple calls for ‘better regulation’ may suggest, and it proposes ways in which key aspects of those challenges may be addressed.     

REVIEW OF THE US FINANCIAL REGULATION BILL——A LARGE-SCALE RISK CONTROL UNDER MIXED REGULATORY FRAMEWORK

When President Obama signed "Dodd-Frank Wall Street Reform and Consumer Protection Act," the US financial regulatory reform was basically outlined.This paper focuses on the evaluation of this reform with regard to the "Eye of the Storm" of the subprime crisis and summarizes the main contents of the bill.Studies suggest that this is a successful financial regulatory reform and the widest range of financial regulatory reform since the last century's "Great Depression," in that the bill has established a new framework of risk management with the characteristic of mixed regulation.     

When Social Norms and Pressures Are Not Enough: Environmental Performance in the Trucking Industry

Why do some business firms and not others work hard to advance regulatory values such as environmental protection and comply with regulations? Previous research indicates that business firms are influenced in that regard by a number of variables—not merely the perceived likelihood of legal punishment but also the risk of negative reactions by societal actors (which we call “social license pressures”) and the intensity of managers' commitment to norms of law‐abidingness and environmentalism. This article reports on a study of control of diesel emissions in the trucking industry, a highly competitive market with many small firms, mobile pollution sources, expensive “best control technologies,” and weak regulatory demands. In contrast to findings in studies of large firms, we found that social license pressures on small trucking firms are minimal. Trucking companies' environmental performance—good and bad—flows from managers' economic choices, which are influenced by their particular market niche. In such highly competitive, small‐firm market contexts, these findings imply, significant improvement in environmental performance is not likely without strong direct regulatory pressures.     

Libertarian Paternalism,Externalities, and the “Spirit of Liberty”: How Thaler and Sunstein Are Nudging Us toward an “Overlapping Consensus”

In their 2008 book Nudge: Improving Decisions about Health, Wealth, and Happiness, Richard Thaler and Cass Sunstein use research from psychology and behavioral economics to argue that people suffer from systematic cognitive biases. They propose that policy makers mitigate these biases by framing people's choices in ways that help people act in their own self‐interest. Thaler and Sunstein call this approach “libertarian paternalism,” and they market it as “the Real Third Way.” In this essay, I argue that the book is a brilliant contribution to thinking about policy making but that “choice architecture” is not just a solution to the problem of cognitive biases. Rather, it is a means of approaching any kind of policy making. I further argue that policy makers must take externalities into account, even when using choice architecture. Finally, I argue that libertarian paternalism can best be seen as motivated by what Sunstein has celebrated in his work on constitutional theory: a humility about the possibility of policy‐maker error embodied in Learned Hand's famous aphorism about the “spirit of liberty” and an attempt to reduce social conflicts by searching for what John Rawls called an “overlapping consensus.”     

The Hand of the Ancestors: Time,Cultural Production,and Intellectual Property Law

In successfully lobbying for the expansion of the copyright protection term, culture industries in the United States have used one of the temporal dimensions of intellectual property law to strengthen their control over the circulation of cultural goods. There is another less obvious way that time factors into the regulation of cultural products, and this has to do with the modes of temporality within which those products are made and their circulation regulated. In Ghana, where certain cultural products are protected as “folklore” under copyright law, cultural goods from one kind of temporality enter a regulatory framework that belongs to another. In this article, I examine these two ways of organizing time and argue that differences in ways of conceptualizing time also factor into the exercise of power over cultural products. I further argue that the Ghanaian case provides resources for radically rethinking intellectual property law.     

Self‐Determination and Sovereignty over Natural Resources

This article makes the normative case for a differentiated approach to the sovereignty of states over natural resources. In the first half of the article, drawing on the example of the Yasuní‐ITT‐Initiative, I will argue that countries commit a moral wrong when they exploit natural resources for their own benefit (and to the detriment of the climate), but that they have the moral right to do so given the current structure of the international system. In the second half of the article, I address the question of whether states' rights over natural resources can be justified. Central to my argument will be the distinction between “control rights” and “income rights.” Only control rights, I will argue, can be justified as inherently tied to collective self‐determination.     

Accountability and the Regulation of the Large Law Firm Lawyer

The regulation of solicitors in England and Wales has undergone great change in the wake of the Legal Services Act 2007. This article considers these regulatory developments through the lens of accountability, focussing on the regulation of transactional lawyers and the large commercial firms. It examines to what extent the Solicitors Regulation Authority's regulatory framework promotes accountability, examining entity regulation, outcomes‐focussed and principles‐based regulation, reporting and disclosure obligations, the Compliance Officer for Legal Practice and the sanctions system. It argues that although transactional lawyers cannot claim the benefit of the ethical principle of non‐accountability, as far as they and their firms are concerned, the regulatory framework is both unnecessary and insufficient. It duplicates the function of accountability to the client and fails to hold transactional lawyers to account for significant regulatory risks that they present, such as the practice of creative compliance.     

Performing Regulation: Transcending Regulatory Ritualism in HIV Clinics

Sociolegal scholars suggest that regulatory encounters often are occasions for displaying a surface compliance decoupled from day‐to‐day practice. Yet ethnographic data from five highly regulated HIV clinics show that regulatory encounters open opportunities both for ritualism and—surprisingly—for transcending ritualism. Using a theatrical analogy, we argue that improv performance is the technology that enables regulatory inspectors and clinic staff to transcend ritualism. As regulatory encounters unfold, clinics' carefully prepared performances sometimes change into more cooperative interactions where inspectors and regulatees hash out details about how rules will be applied and even work together on reports for the regulators' supervisors. By “performing together,” regulatory inspectors gain access to the clinic's backstage where they can assess clinic workers' deeper conformity to ethical and scientific norms. But such joint performances are less likely where cultural divides and material scarcity make it difficult for clinic staff to gain inspectors' trust.     

Limits on Violence; Limits on Responsive Regulatory Theory

Responsive regulation is a general theory of how to steer the flow of events. This article seeks to understand when violence is and is not defensible as an enforcement escalation. It specifies limits on the claim of responsive regulatory theory that a tough enforcement peak to a regulatory pyramid helps drive regulation down to persuasion at the base of the pyramid. Those limits are about the counterproductive effects of violence at the peak of an enforcement pyramid. Erica Chenoweth and her colleagues show that nonviolent civilian resistance to regimes is twice as likely as armed struggle to succeed. Nonviolence complemented by a violent radical flank is less effective than disciplined nonviolence. This refutes the “benign big gun” aspect of responsive regulatory theory as a general theory of the regulation of social action. The theory implies that capacity to escalate to armed struggle at the peak of a regulatory pyramid should empower resistance. Can responsive theory be adapted to this empirical challenge? Can that adaptation show a productive path to an ethics of when to constrain escalation to violence as an option at the peak of all kinds of regulatory pyramids? Lessons are drawn from how Nelson Mandela's struggle against apartheid opened nonviolent paths to transformation without total renunciation of violence.     

New Governance,Chief Privacy Officers,and the Corporate Management of Information Privacy in the United States: An Initial Inquiry

While the turn from traditional regulation to more collaborative, experimentalist, and flexible forms of governance has garnered significant academic focus, far less attention has been paid to the effects of such “new governance” approaches on regulated firms' understanding of the laws' demands, and on the structures employed within business organizations to meet them. This article targets this analytic gap by examining internal corporate practices regarding consumer privacy, an arena in which the Federal Trade Commission and the states have adopted new governance models. Using data from qualitative interviews with leading corporate Chief Privacy Officers, as well as internal corporate documentation, it examines the way privacy practices have been catalyzed in the shadow of new privacy governance approaches and the combination of regulatory, market, and stakeholder forces they seek to harness. Specifically, it suggests the convergence of a set of practices adopted by privacy officers identified as “leaders,” regarding both high‐level corporate privacy management and the integration of privacy into entity‐wide risk management goals through technology, decision‐making processes, and the empowerment of distributed expertise networks throughout the firm.     

Beyond Endogeneity: How Firms and Regulators Co‐Construct the Meaning of Regulation

What role do regulators and firms play in the construction of open‐ended regulatory terms? The new institutional legal endogeneity model posits that organizations respond to legal uncertainty by adopting formal structures to symbolically signal their compliance. These structures, however, tend to embody businesses' managerial and commercial values, as opposed to regulatory goals. Law becomes endogenous insofar as legal actors then defer to businesses' institutionalized ideas about regulation and compliance. Professionals, such as lawyers and human‐resource managers, and their strategic deployment of framing, are portrayed as the engines of the above process of legal endogeneity. By comparison, administrative agencies' strategies in shaping the meaning that corporations attach to the law are practically ignored. Building on a detailed case study of British financial firms' responses to the Financial Services Authority's Treating Customers Fairly initiative, this article problematizes the supposition of regulatory deference to business constructions of law. Instead, it develops a more balanced model that recognizes business professionals' and regulators' co‐construction of regulation and compliance. The process of regulatory meaning co‐construction, as depicted by this model, involves alignment and disputes between regulators' and professionals' strategic framing of regulatory concerns with tangible consequences for the enactment of regulation.     

Interpreters of International Economic Law: Corporations and Bureaucrats in Contest over Chile's Nutrition Label

This article analyzes the everyday interpretive practices of corporations and bureaucrats that shape the meaning and force of international economic law. To understand how common practices such as public consultation submissions, corporate threat letters, and external legal assistance influence regulators' understanding of their “legally available” policy space, we study the contested introduction of a pioneering nutrition labeling regulation in Chile. The transnational food industry powerfully challenged the regulation's legality under World Trade Organization law. But Chilean health bureaucrats, in coordination with segments of the country's legally highly competent economic bureaucracy, effectively defended the legality of their proposed regulatory measure. Drawing on data from freedom-of-information requests and in-depth interviews, the article argues that the outcomes of such interpretive contests are substantially shaped by participants' knowledge of the entitlements created by international economic law and thus by the international legal expertise they have access to. This often but not always puts transnational corporations at an advantage over national regulators in the strategic interpretation of international economic law.     

How the Party Can Win in Personal Vote Systems: The “Selectoral Connection” and Legislative Voting in Lithuania

Electoral rules can motivate politicians to cultivate a “personal vote” through their legislative voting records. However, I argue that candidate‐selection procedures have the ability to overpower these electoral incentives. This study—the first systematic study of how candidate selection and electoral rules interact—takes advantage of Lithuania's unique mixed electoral rules and fortuitous candidate‐selection procedures. Regardless of electoral rules, MPs whose future careers depend on getting renominated by central party leaders vote against the party less than those whose careers do not. This evidence of a “selectoral connection” suggests candidate‐selection procedures must be studied much more seriously.     

Global Banks as Global Sustainability Regulators?: The Equator Principles

Banks might now seem odd candidates for the role of global sustainability regulator. Nonetheless, in limited areas of their operation, where global banks kept risk on their balance sheets and were financially exposed to many types of risk often otherwise treated as “externalities,” banks began to enact policies to encourage what they construe as “sustainable” banking. A small number of these banks have started to extend these principles of responsible action more broadly, across many of their business lines, as conditions of lending to their corporate clients. To this extent, it is possible to talk about (some) global banks as global sustainability regulators. The “law of unintended consequences” as used in the legal literature almost always refers to the unintended negative consequences of a regulation or policy. In this article, however, we discuss a potentially positive unintended consequence of the deregulatory and privatization trend of the 1980s and 1990s that was fueled by neoliberal political commitments: some private banks have taken a leadership role in regulating development. Specifically, these banks are enacting policies that attempt to mitigate the potentially negative social and environmental consequences of infrastructure development in politically unstable or environmentally fragile landscapes. The vehicle for doing this is a voluntary agreement called the Equator Principles (EPs). The article describes and analyzes the EPs and reports the initial results from an interview‐based study of the various EPs stakeholders, including bankers, government officials, lawyers, consultants, and critics from nongovernmental organizations. We address—from the perspective of these stakeholders—such questions as why the participating banks decided to join the EPs, what effects, if any, the EPs are having on development practice, and whether the EPs will ultimately prove to be more than a public relations exercise.     

The Transparency Trap: Non‐Financial Disclosure and the Responsibility of Business to Respect Human Rights

This article examines the potential for transparency programs to improve corporations’ human rights performance. The primary focus is on “general” transparency programs such as the inclusion of human rights issues in sustainability reports. Regulators increasingly rely on such programs, one of which is the EU Directive on the Disclosure of Non‐financial Information, which many commentators view as a model for legislation in other countries and for a business and human rights treaty. This article identifies several problems with this approach. The human rights metrics used in current sustainability reporting standards often lack validity or are based upon data that is most easily collected, rather than most important. Moreover, the empirical evidence on sustainability reporting shows continued problems of selective disclosure, impression management, incomparable disclosures, and the use of disclosure as an end in itself (as opposed to a process that leads to organizational change). To move forward, regulators should shift focus to a model grounded in regulatory pluralism. Under this approach, regulators would combine a selection of targeted transparency mechanisms to create a more complete regulatory system that corrects for one disclosure mechanism's weaknesses by including others that have complementary strengths.     

Is the medicine right?

Is asking the Better Regulation Agenda (BRA) to answer the same preconditions it requires for any regulatory action a proper treatment? Does any assessment of the agenda necessarily imply a thorough definition of the costs and the benefits deriving from its application or is it enough to provide a few key insights to perform it? Is the BRA really so ideological, deriving from “a liberal analytical framework that considers no regulation/state intervention” as the preferred option? Is regulatory quality an issue that “cannot realistically be solved”? Does the principle of subsidiarity as a policy objective need some revision? Several questions come to mind when reading a very thought‐provoking article that is very critical of the BRA but that in the end recognises some of its main qualities.