Building on the trust of management: overcoming the paradoxes of principles based regulation

Ojo, Marianne (2010): Building on the trust of management: overcoming the paradoxes of principles based regulation.

Abstract

This paper illustrates how trust in management can be consolidated through the order and mode of application of enforcement measures (negotiating and punitive enforcement measures) which are employed in facilitating and maximising compliance with rules. “Whilst negotiating strategies are introduced initially to develop trust between the regulator and the regulated, resort is made to more punitive strategies where an absence of trust in the compliance activity has been confirmed.”

In considering techniques which could be introduced to maximise compliance with rules, standards and principles, this paper not only highlights why responsive and negotiating strategies are more effective than deterrence based strategies in facilitating compliance with rules and principles, but also the importance of introducing some element of fairness and high degree of accountability into the decision making process. Whilst fairness is considered to be of greater significance to decisions founded on principles and discretion, accountability is a benefit and feature which is usually attributed to “bright lines rules”. Even though it is contended that issues related to legitimacy and accountability could still arise with group decisions, this paper seeks to demonstrate that some degree of accountability (along with the fairness attributed to group decisions) could be fostered through corporate and group decision making. Furthermore, the paper highlights how effective communication can be achieved, how such communication – as well as an effective system of communication, is vital to determining the point at which there should be a departure from the systematic application of rules.

• Item Type: MPRA Paper
• Language: English
• Keywords: communication; compliance; principles; enforcement; regulation; trust
• Subjects: K - Law and Economics > K2 - Regulation and Business Law; D - Microeconomics > D7 - Analysis of Collective Decision-Making; G - Financial Economics > G3 - Corporate Finance and Governance

References

Ayres I and Braithwaite J, Responsive Regulation: Transcending the Deregulation Debate (1992) Oxford University Press

Baldwin R, „The New Punitive Regulation“ May 2004 Volume 67 No 3 Modern Law Review

Baldwin R, Rules and Government (1995) Oxford: Clarendon Press

Black J, “Forms and Paradoxes of Principles based Regulation” LSE Working paper, LSE Law, Society and Economy Working Papers 13/2008

Gray J and Hamilton J, Implementing Financial Regulation (2006) John Wiley

Gunningham N and Grabosky P Smart Regulation: Designing Environmental Policy (1998) Oxford: Clarendon Press.

Haines F and Gurney D, “ The Shadows of the Law: Contemporary Approaches to Regulation and the Problem of Regulatory Conflict” Paper presented at the Current Issues In Regulation: Enforcement and Compliance Conference 2002

Hawkins K „The Use of Legal Discretion: Perspectives from Law and Social Science“ in K Hawkins The Uses of Discretion (eds) 1995 Oxford University Press

Hopkins A, Making Safety Work: Getting Management Commitment to Occupational Health and Safety. (1995) Sydney: Allen & Unwin.

Luhmann N, „The Self-Reproduction of Law and its Limits“ in G Teubner (ed) Dilemmas of Law in the Welfare State(1985) Berlin: Walter de Gruyter

Makkai T and Braithwaite J, „Procedural Justice and Regulatory Compliance” Law and Human Behaviour, Volume 20 No 1 1996

Parker C, “The Compliance Trap: The Moral Message in Regulatory Enforcement” (2006) 40 (3) Law and Society Review at 591

Parker C, “The Open Corporation: Effective Self – Regulation and Democracy” 2002 Cambridge University Press

Schneider CE , „Discretion and Rules: A Lawyer’s View“ in K Hawkins The Uses of Discretion (eds) 1995 Oxford University Press

Schwarcz SL, “The Principles Paradox” (2009) European Business Organisation Law Review (10) at pages 175-184 and also R Baldwin, Rules and Government (1995) Oxford: Clarendon Press