Building Better Compliance

Abstract

Corporate compliance with the law matters not merely for its own sake but for the sake of all members of society. It operates as a behavioral bridge between the rules on the books and improved outcomes in the world. Yet in too many regulatory agencies, the strategic management of enforcement and other compliance-oriented activities remains mainly based on unverified hunches and intuition. Overall, regulatory officials and scholars still know remarkably little about why businesses comply with regulations, why they fail to comply, and what can be done to improve compliance. That is why a recent article by Dorothy Lund and Natasha Sarin makes such an important contribution: it brings rigorous analysis and new data to bear on questions for which regulators desperately need answers. In this essay commenting on Lund and Sarin’s article, I explicate a three-step model of regulation that situates compliance at the center of regulatory performance. I show why better empirical analysis of each step in the model is needed to be able to combat persistent levels of corporate noncompliance and ultimately to improve regulatory outcomes. Advances in digital technology can help by facilitating data collection, improving monitoring, and providing feedback to regulators. In the end, responsible efforts to incorporate better analysis into decision-making—and to retreat from continued reliance on untested aphorisms and hunches—can help regulators build better compliance and a better future.

Keywords: Administrative law, government regulation, regulatory compliance, rulemaking, enforcement, public administration, policy design, evidence-based decision making, data analysis, empirical studies, behavioral analysis