Inside the velvet glove: Sustaining private regulatory institutions through hollowing and fortifying

Abstract

The forces that threaten to break apart private regulatory institutions are well known, but the forces that sustain them are not. Through a longitudinal inductive study of the Towards Sustainable Mining (TSM) program in the Canadian mining industry, we demonstrate how private regulatory institutions are sustained by strategically manipulating different aspects of an institution’s stringency. Our findings show how shifts in external conditions decreased benefits of participation for firms, triggering institutional destabilization. We demonstrate how the interdependent mechanisms of hollowing—actions that ratchet down aspects of stringency associated with high compliance costs—and fortifying—actions that ratchet up aspects of stringency associated with low compliance costs—worked together to stabilize the institution by rebalancing the competing pressures that underpin it. However, these same mechanisms can hinder the ability of these institutions to substantively address the targeted issues even as they become more stringent in some areas. Our study advances research on private regulation by showing how different aspects of stringency can be simultaneously ratcheted up and ratcheted down to sustain private regulatory institutions. Further, in positioning institutional stability as an ongoing negotiation, we elucidate the key custodial role of governing organizations like trade associations in institutional maintenance.

Keywords: private regulation, trade associations, institutional maintenance, social and environmental issues in management, mining

JEL Classification: M10, M48