Abstract: Compliance can and often does serve as a conduit through which regulators and enforcement authorities enlarge their authority beyond statutory bounds. The potential to do so is a function of the symbiotic relationship between compliance officers and regulatory authorities. Compliance officers owe their professional existence and their organizational authority to the interventions of regulators and enforcement agents. This creates a unique incentive structure and renders compliance officers especially receptive to regulators’ extralegal pronouncements. As a result, the separation of compliance from legal and the elevation of the compliance function as the coequal of the legal department, a structure often insisted upon by regulators and enforcement authorities, effectively enlarges the compliance conduit through which the government may abuse the rule of law. Rather than separating compliance from legal, compliance should be subordinated to legal so that an officer accountable exclusively to the best interests of the firm is charged with interpreting the law and advising the firm on what the law requires. Only after this determination has been made should compliance officers be charged with the task of executing these decisions. A necessary condition to realigning organizational responsibilities in this way, however, is for the government to stop insisting on the alternative. More broadly, the government should not involve itself in the organizational details of compliance but, rather, should limit itself to making and enforcing the law.

Abstract: In the last three decades, compliance has grown from an ad hoc job function into a sophisticated profession. In this chapter, I describe the development of the field and current challenges in the design of effective compliance programs. I discuss several opportunities, particularly around the use of data and analytics, that have the potential to enhance compliance efficiency and efficacy.

Abstract: Systematic methods for building and using intellectual property (IP) support companies in creative projects. These methods ensure compliance with IP laws to both establish IP interests and enforce those interests. More than just systematic means to advance legal interests, well-crafted and carefully operated IP compliance programs serve as reliable sources of new creative assets and IP-enhanced profits. At the same time, IP compliance programs are often preventative. IP owned by other parties can severely limit companies’ freedom of action and produce unexpected liabilities that can scuttle major business enterprises. IP compliance programs can prevent commitments to business actions that will conflict with other parties’ IP interests, allowing alternatives avoiding the conflicts to be considered or the requisite permissions obtained to allow use of the needed IP.

Abstract: As big corporate misconduct scandals continue to dominate newspaper headlines, it has never been more important to understand corporate deviance. The present chapter explains the reasons why organizations break rules and employees engage in deviant behavior. This chapter reviews existing literature on workplace deviance and examines the role of different organizational factors that stimulate and sustain it: abusive supervision, dysfunctional employees, and toxic work environments. It finds that the characteristics of leaders and how they treat employees, as well as the characteristics of employees and how they respond to the organization, are determinants of organizational deviancy. It also finds that there is more at play than individual leaders and employees or the interaction between them. The organizational culture or climate as a whole can become negative and come to sustain and stimulate deviancy. However, there is not yet a clear, validated understanding of what is a negative culture or climate and the individual elements that spur deviance. In all of this, the organizational psychology of deviant organizations does not yet clearly show exactly how deviance relates to legal compliance.

Abstract: This chapter discusses prospect theory as an alternative approach in explaining tax compliance behavior. (Non)Compliance is frequently modeled as the outcome of a decision under risk, that is, the choice between a safe option of being compliant and a risky option of not complying with the law. Noncompliance results in either a better or a worse outcome than compliance, depending on whether the behavior is audited and penalized. The most prominent descriptive model to explain risky decisions is prospect theory. Many of this theory’s core ideas have been applied in theoretical and empirical studies of compliance. After a brief overview of prospect theory, this chapter summarizes empirical studies as examples for prospect theory inspired compliance research. It closes with a summary and critique of this approach.

Abstract: The widespread use of business codes raises the questions of what we know about codes and what they do. This chapter presents an overview of what we currently know about the definitions, functions, and effectiveness of business codes. The chapter shows that business codes are an important method of self-regulation, that the many studies into the effectiveness of codes present a mixed picture, and that there are promising directions for future research on business codes. The chapter also provides suggestions for the development, implementation, and assessment of business codes in practice.

Abstract: It is natural to think of compliance in terms of liability risk management. In the face of potentially massive liability exposure, it behooves boards of directors and senior executives to take costly steps to reduce these risks for the sake of the firm and its shareholders, akin to other serious enterprise risks. The liability risk management perspective treats compliance as a matter of business judgment rather than a moral or cultural imperative, which has important consequences. The prevailing idea is that firms are expected to invest in precaution (i.e., compliance investments) up to a level where the marginal benefits in terms of diminished liability risk to the firm equal the marginal costs associated with such efforts. This chapter explores from a multidisciplinary perspective the consequences of adopting a liability risk management perspective along three dimensions: the agency cost problem (i.e., whose risk is being managed); the social construct invoked as a result (the problem of cultural legitimacy); and the clash between a company’s own assessment of liability risk and sound public policy.

Abstract: This chapter reviews the evidence on whether procedurally just treatment of citizens by agents of the criminal justice system (CJS), usually the police, has the effect of increasing the citizen’s compliance with the law. There are many operational definitions of procedurally just treatment, but all share the common characteristics of CJS agents treating citizens with respect and affording them the opportunity to explain themselves. In brief, we find that perceptions-based studies consistently show that citizen perceptions of procedurally just treatment are closely tied to perceptions of legitimacy of the police, and that, with only a few exceptions, perceptions of legitimacy are strongly associated with legal compliance. Perceptions, however, cannot be directly manipulated. What can be manipulated are policies designed to improve procedurally just treatment of citizens. What has not yet been established is the necessary requirement for such policies to be effective in improving compliance, namely that policy changes are effective in changing procedurally just treatment of citizens by police and other CJS agents and that such changes are effective in triggering the causal chain underlying the theory of procedural justice: improvements in actual treatment lead to improved perceptions of procedurally just treatment, which in turn leads to improved perceptions of legitimacy, which in turn increases legal compliance. In light of this conclusion, policy implications and suggestions for future research are discussed.

Abstract: Crime control policies of the latter half of the twentieth century were largely grounded in the notion that punishment effectively deters crime and increases compliance. The inherent assumption is that offenders rationally weigh the costs and benefits of their actions before acting, and then act if and only if the benefits outweigh the costs. In retrospect, the policies informed by this “deterrence” perspective have done little to answer the age-old question of what deters crime and increases compliance, and instead have left us in an era of mass incarceration in which the US prison population has inflated by over 500 percent since the 1970s. However, rather than halt deterrence research wholesale, researchers have shifted to identifying for whom deterrence threats actually work. While the literature is in its nascent stages, studies indicate that individual differences may underlie who may be more or less susceptible to deterrence threats, and support a number of different mechanisms. For instance, emerging research suggests that individuals high in the obligation to obey the law and low in moral disengagement may be more responsive to deterrence threats. This chapter reports the findings of a developing body of research that focuses on identifying key individual differences that may underlie susceptibility to deterrence threats.

Abstract: Quite apart from government regulations and enforcement, employers usually have many incentives to keep workers safe and these have led to major reductions in deaths and injuries. But safety can be costly and disagreements about the worth of some safety measures are inevitable. Leaders of small firms will often have limited information about the risks they face and survey data show that they are less likely to recognize the benefits of safety investments. Preventing long-term exposures that can cause chronic diseases is especially costly and less likely to offer benefits to employers. Governments differ in their approaches to workplace safety. Some, like the United States, essentially train inspectors to identify, cite and punish failures to comply with a detailed list of requirements. Others rely less on punishment and more on training inspectors to offer advice to firms about how to improve. The latter focus less on compliance with detailed standards and more on systematic procedures to give more weight to safety. Evidence from manufacturing that inspections with penalties are followed by reductions in injuries indicates that inspections can affect outcomes beyond compliance. These studies rarely find that the size of the penalty has an effect, although it seems likely that unusually large penalties would draw management’s attention. Important reasons to comply with standards also include beliefs about the legitimacy of regulatory authorities and the fairness of the enforcement process as well as professional norms and empathy.

Abstract: A key objective of policy evaluation is assessing the efficacy of public policies. When evaluating public policy, compliance is treated both as an indicator of policy effectiveness and as a necessary intermediary outcome for achieving policy goals. Given the importance of compliance within broader assessments of policy efficacy, scholars have dedicated substantial attention to identifying policy, individual, and organizational factors linked to policy compliance. This chapter discusses what is meant by compliance in the context of policy evaluation and ways that it can be measured therein. It also provides an overview of recent scholarship that addresses determinants of compliance as relevant for policy evaluation.

Abstract: This chapter reviews the history of doping regulations, contemporary anti-doping policies and the effectiveness thereof, as well as the public’s perception of the current state of doping in sports. We discuss how detection, testing and punishment influence compliance and, ultimately, the prevalence of doping. We offer a general framework to understand why anti-doping objectives are difficult to achieve. Finally, we assess some of the proposed solutions to improve current anti-doping policies.

Abstract: Laws, policies, and incentives provide people with extrinsic reasons to engage in desired behaviours. But by doing so, they may attenuate or displace people’s intrinsic reasons for complying. In this chapter, I review theorising and empirical evidence on such crowding-out effects. I outline perspectives from psychology and economics on how laws, policies, and incentives may undermine people’s intrinsic motivation. Moreover, I describe how such insights have been applied to explain why laws, policies, and incentives may fail to increase compliance – or may even undermine it. The chapter then reviews the empirical evidence on these processes in environmental, organisational, and other legal settings. Although it is plausible that laws, policies, and incentives affect intrinsic motivation to comply, I conclude that empirical evidence of these processes is still modest. I end the chapter by outlining some important directions for future research and some (tentative) recommendations for policy.

Abstract: This chapter explores the importance of verifiability to contractual provision of incentives for contract performance or compliance. The crucial role of evidence and evidence-disclosure decisions is highlighted. Parties to a contract dispute convey information to the court by disclosing evidence. Actions taken by the parties in the productive phase (or primary activity) of their relationship influence the evidence that is available should a dispute arise. These considerations are important for practitioners in that 1) the lack of evidence to prove one’s claim may lead to some productive relationships being avoided or undertaken at a less than optimal level, and 2) the primary activity of the parties may involve steps to ensure relevant evidence should a breach occur. Many practical examples are discussed.

Abstract: Antitrust compliance scholarship, particularly with a focus on collusion, has been an area of study for some time (; ; ; ). Changes in technology and the rise of artificial intelligence (AI) and machine-learning have created new possibilities both for anticompetitive behavior and for detection of algorithmic collusion. To some extent, AI collusion takes traditional ideas of collusion and simply provides a technological overlay to them. However, in some instances, the mechanisms of both collusion and detection can be transformed using AI. This chapter discusses existing theoretical and empirical work, and identifies research gaps as well as avenues for new scholarship on how firms or competition authorities might invest in AI compliance to improve detection of wrongdoing. We suggest where AI collusion is possible and offer new twists to where prior work has not identified possible collusion. Specifically, we identify the importance of AI in addressing the “trust” issue in collusion. We also identify that AI collusion is possible across nonprice dimensions, such as manipulated product reviews and ratings, and discuss potential screens involving co-movements of prices and ratings. We further emphasize that AI may encourage entry, which may limit collusive prospects. Finally, we discuss how AI can be used to help with compliance both at the firm level and by competition authorities.

Abstract: Rule compliance (in organizations or society at large) may be strengthened or weakened by social contagion processes. Observing others’ (non-)compliance with rules influences one’s own likelihood of compliance. Extant literature shows two social contagion theories that can explain this phenomenon. First, the theory of normative conduct (TNC) (Cialdini et al. 1990) suggests that people interpret the observed behaviour of others (i.e. the descriptive norm) as adaptive for that context, resulting in rational imitation. Second, Goal Framing Theory (GFT) (Lindenberg and Steg 2007) suggests that we should look not just at the contagion of concrete behaviour but at the process that governs the contagion of the very goal to comply with norms and legitimate rules. This is particularly important because it predicts that observed (non-)compliance regarding one rule also affects (non-)compliance with other rules (‘cross-norm effects’). Because the goal to comply tends to decay, it needs continuous support from the observation of other people’s respect for norms and legitimate rules. Compliance and non-compliance are thus both self-reinforcing mechanisms. This has clear implications for policy which are discussed in this chapter, most notably the importance of a focus on legitimizing rules, so that they are interpreted as norms by the general public.