The Causes and Consequences of Industry Self-Policing
Jodi L. Short
University of California Hastings College of the Law
Michael W. Toffel
Harvard Business School (HBS) - Technology & Operations Management Unit
September 25, 2007
HBS Technology & Operations Mgt. Unit Research Paper No. 08-021
Innovative regulatory programs are encouraging firms to police their own regulatory compliance and voluntarily disclose, or confess, the violations they find. Despite the win-win rhetoric surrounding these government voluntary programs, it is not clear why companies would participate and whether the programs themselves do anything to enhance regulatory effectiveness. Tasked with monitoring the legality of its own operations, why would a firm that identifies violations turn itself in to regulators rather than quietly fix the problem? And why would regulators entrust regulated entities to monitor their own compliance and enforce the law against themselves? This paper addresses these questions by investigating the factors that lead organizations to self-disclose violations, the effects of self-policing on regulatory compliance, and the effects of self-disclosing on the relationship between regulators and regulated firms. We investigate these research questions in the context of the US Environmental Protection Agency's Audit Policy.
Number of Pages in PDF File: 16
Date posted: September 24, 2007 ; Last revised: January 11, 2011
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