20161005 publicly induced self regulation presentation martin de bree

Publicly induced

self-regulation

Next Generation Compliance and Enforcement

Tools, Theory, and Practice

Beijing, October 20 &21, 2016

Martin de Bree

Institute of Business-Regulation Management

Rotterdam School of Management

Erasmus University

CONTENT

Publicly induced self-regulation

• Why?

• How?

• Problems & solutions

• Conclusions

WHY?

• Public regulation has not enough resources

& knowledge to keep up,

• companies need public scrutiny and

• public regulation shifts from a technical to a

social challenge, so …

Regulator should understand, influence

and use potential for self-regulation

Source: Downer 2010

HOW?

Compliance

Conformity with legal requirements

Compliance management system

Internal management system designed and used

by a regulated company to assure compliance*

Compliance = compliance assurance

Compliance = the goal of compliance

assurance

* Preferably the spirit of the law, not the letter of the law

Compliance

Company

checks own

compliance

Company

corrects non-

compliances and

takes action to

prevent in the

future

HOW?

Public regulator Regulated company

Compliance

assurance

Risk identification

Risk analysis

Risk control

HOW?

Source: Sparrow 2012

Public regulator Regulated company

Compliance

assurance

Risk identification

Risk analysis

Risk control

HOW?

Public regulator Regulated company

Compliance

assurance

Risk identification

Risk analysis

Risk control

Compliance

management

system

HOW?

?

? =

1. Holding companies

responsible for compliance

assurance

2. Assessing compliance

assurance

3. Stimulating compliance

assurance

Compliance

assurance

Risk identification

Risk analysis

Risk control

Compliance

management

system

Public regulator Regulated company

HOW?

Source: Van Dorp 2016

Assessing compliance assurance

HOW?

Stimulating compliance assurance

HOW?

Stimulating compliance assurance

Compliance

management

system

(Non)

Compliance Actions

Traditional inspections

(= single loop learning)

System based supervision

(= double loop learning)

Source: Argyris 1974, Meerman 2014

HOW?

PROBLEM #1

Decoupled compliance management systems:

work as imagined (on paper) is not implemented (work as done)

Sources: Meyer 1977, Bromley 2012, De Bree 2016, Sandholtz 2012

SOLUTIONS #1

• Check feasibility regarding target industry*

• Adequate tools to assess compliance management* and ***

• Giving feedback to company/industry about gaps between goals, management system, practice & result**

• Making arrangements with company/industry to recouple layers and close plan-do-check-act cycle***

• Adequate policy to support this*:

– Assessment and stimulation of compliance assurance

– Reluctant with penalties for violations by those who are willing and acting

– Strict penalties for violations by those who do not demonstrate preparedness to assure compliance

Sources: * IMPEL Guidance for Compliance Management Supervision 2014

** Perezts 2014, Tilcsik 2010, Stoopendaal 2016

*** De Bree 2016

Procedures,

instructions,

measures

Governance

codes, Codes of

conduct Work as

imagined

Goals, mission?

Processes &

procedures suitable

and documented?

Implemented &

effective? Work as

done

SOLUTIONS #1

Source: De Bree 2016

Co

mp

an

y c

ultu

re

PROBLEM #2

Black & white thinking:

A single non-compliance does not mean that compliance management system is not effective

AND vice versa:

Absence of non-compliances does not mean that the compliance management system is

effective

SOLUTIONS #2

• Check feasibility regarding own inspectorate*

• Commitment from top management inspectorate and

political leaders that prevention is better than fire fighting*

• Adequate intervention strategy*

• Training and coaching of inspectors*:

auditing,

system thinking and

communication

• Learning by doing, interacting with company**

Sources: * IMPEL 2014

** Perezts 2014, Tilcsik 2010, Stoopendaal 2016

CONCLUSIONS

1. Modern public regulation cannot do without smart use of self-regulation potential

2. Publicly induced self-regulation does not mean that public regulator is passive; it

requires a different role: hold companies responsible for assuring compliance and

actively assess and stimulate self-regulation

3. Publicly induced self-regulation requires customized regulation approach

penalties may be counter productive. “one size fits no one”

4. Tools and policies are available, tested and effective

5. Main pitfalls are

• decoupled companies (what-you-see-is-not-what-you-get)

• black-and-white thinking of regulators

FURTHER READING Argyris, C Schon, Donald A. 1974. Theory in practice: Increasing professional effectiveness. Oxford, England: Jossey-Bass

Bromley, P., Powell, W.W. 2012. From Smoke and Mirrors to Walking the Talk: Decoupling in the Contemporary World, The Academy of Management Annals, 6:1

Bree, M.A. de, Stoopendaal A. 2016. Recoupling through System Based Regulation, forthcoming

Dorp, R. van, Bree, M.A. de, 2016, Safety lessons from aviation for regulation of road transport, forthcoming

Meerman, P., Bree de, M.A. 2014. Compliance Assurance through Company Compliance Management Systems, in Paddock, L., Wentz, J. (Eds.), Next Generation

Compliance and Enforcement: 301-312, Washington DC: Environmental Law Institute Washington

Downer, J. 2010. Trust and technology: the social foundations of aviation regulation, The British Journal of Sociology, Vol. 61 Issue 1.

Meyer, J.W., Rowan, B. 1977. Institutional Organizations: Formal structure as a myth and ceremony, American Journal of Sociology, 83, Issue 2

IMPEL, 2014. Guidance CMS Supervision (Available here) & Compliance Assurance through Company Compliance and Environmental Management Systems

2013/15 – 2014/1; (Available here)

Perezts, M., Picard, S. 2014. Compliance or Comfort Zone? The Work of Embedded Ethics in Performing Regulation, Journal of Business Ethics, Vol. 131, Issue 4:

Sandholtz K.W. 2012. Making Standards Stick: A Theory of Coupled vs. Decoupled Compliance, Organization Studies, 33(5-6)

Sparrow. M.W. 2012. Crime reduction through a regulatory approach; Joining the Regulatory Fold. Criminology & Public Policy. American Society of Criminology.

Volume 11, Issue 2

Stoopendaal, A., Bree, M.A. de, Robben, P. 2016. Reconceptualizing regulation: a formative evaluation of the experimental project of

System Based Regulation in Dutch healthcare, Evaluation, forthcoming October 22(4)

Tilcsik, A. 2010. From ritual to reality: Demography, ideology and decoupling in a post-communist government agency, Academy of Management Journal, Vol. 53,

No. 6

Thank you for your attention

Martin de Bree

mbree@rsm.nl

www.rsm.nl/brm