Corporate Behaviour: Enforcement, Support or Ethical Culture?
28 Pages Posted: 28 Apr 2015 Last revised: 29 Apr 2015
Date Written: April 28, 2015
Abstract
How does law affect corporate behaviour? This article first examines the empirical evidence supporting theories of deterrence and economic rational acting, and finds little support for their effectiveness in affecting behaviour in private enforcement in USA and public enforcement of competition law by the European Commission. It then summarises findings of behavioural psychology and empirical socio-legal research supporting responsive regulation theory, and notes widespread adoption of those approaches in the enforcement policies of many British public regulators. A shift is noted in much regulatory 'enforcement' towards provision of advice and support, including through co-regulatory architectures. It is also noted that systems for delivering redress are shifting from tort liability in courts to regulatory oversight mechanisms, ombudsmen or other alternative dispute resolution systems, and compensation schemes. Further, it is noted that many regulatory systems can only function effectively if they can be integrated with in-firm compliance systems, rather than operating adversarially; that the financial crisis has highlighted the need for internal culture and ethics in traders, rather than regulation alone; that civil aviation only delivers safety if reporters are assured of a no blame culture?
Does the Emperor of legal theory have any clothes? Is it time to jettison deterrence and economic rational calculation theories in relation to tort law and public enforcement? The article proposes a new policy for public enforcement: ethical regulation.
Keywords: regulation, enforcement, ethics, deterrence, economics
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