Business Responses to Regulation
Edited by Christine Parker and Vibeke Lehmann Nielsen
Chapter 15: Naming and Shaming in Regulatory Enforcement
Judith van Erp* INTRODUCTION Despite the increasing efforts of enforcement agencies to stimulate voluntary compliance, an important part of enforcement action still consists of imposing sanctions. One aim of sanctions is general deterrence: they should communicate a threat that will prevent other potential offenders from breaching the law. A now considerable body of empirical research has shown however that financial sanctions do not deter as strongly as regulators sometimes expect. Their impact is often better characterized as ‘weak signal, weak threat’ (Thornton et al., 2005). The effect of sanctions on compliance may be much stronger, when in addition to their financial impact, they can also be expected to cause damage to a company’s reputation. The additional threat of reputational damage becomes more realistic as enforcement agencies increasingly use publicity to communicate their activities, including their enforcement decisions, to the wider public. Publicity may be intended to contribute to the transparency, accountability and legitimacy of enforcement and ultimately, to maintaining trust in markets. This chapter, however, discusses a more instrumental reason for the use of publicity in enforcement: the publication of names of corporate offenders as an explicit part of a regulatory enforcement strategy that is intended to increase business compliance. Disclosure policies or ‘regulation by revelation’ is sometimes characterized as a third wave of regulatory strategies after command and control and market based regulation (Florini, 1998; Fung et al., 2007; Gupta, 2008). The publication of the names of corporate offenders is often referred to as ‘naming and shaming.’ This term...
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