Business Responses to Regulation
Edited by Christine Parker and Vibeke Lehmann Nielsen
Chapter 11: Voluntary Programs, Regulatory Compliance and the Regulation Dilemma
Matthew Potoski and Aseem Prakash INTRODUCTION Voluntary programs are an important policy tool across sectors and countries (Potoski and Prakash, 2009). Indeed, in addition to their popularity in the governance of the for-profit sector, they are being increasingly employed in the governance of the nonprofit sector (Gugerty and Prakash, 2010). Our chapter examines how voluntary programs can help government regulators and regulated firms to develop a cooperative relationship in the context of enforcement and compliance with public law. A voluntary program can be viewed as a codified standard or set of policies that firms pledge to follow. We place enforcement interactions between firms and government regulators in the context of the regulation dilemma, a version of the familiar ‘prisoners’ dilemma,’ in which individual, self-interested action produces collectively inferior outcomes. Voluntary regulations have the potential to mitigate the regulation dilemma by offering firms a mechanism for signaling to government regulators their cooperative intentions. But in order for voluntary programs to work in this capacity, they must provide credible signals about firms’ behavior of complying with program obligations. Since not all voluntary programs function as desired, it is important to recognize that voluntary programs are amenable to failure. While they have potential to mitigate the conflictual relationship between the regulators and the regulated, voluntary programs should not be viewed as the panacea for the ever increasing compliance challenges facing modern societies. They function in the shadow of public law, and ultimately their contribution needs to be judged with public law as...
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