How does the content of public allegations impact regulatory communication strategies? Employing a multinomial logistic regression analysis and an original data set, this article analyzes the Israeli banking regulator's nuanced responses to public expressions of opinion between 1996 and 2012. We demonstrate this agency's greater propensity to acknowledge problems, yet mostly shift blame to others when faced with claims that regulation is overly lenient, and to deny allegations that regulation is excessive. These findings, although based on one institution, are important because they demonstrate an agency's differential response to external allegations, given their content and its assessment of the relative threat to its reputation. They also suggest that external audiences may be able to shape agency attention and response by carefully framing their claims in light of their understandings of agencies' distinct reputational vulnerabilities. InTROduCTIOnRecent accounts have looked at regulatory agencies' strategic crafting and management of their organizational reputations. That is, external perceptions of their roles, capabilities, and performance (Carpenter 2010). The scholarship focuses on the way regulators' concerns over reputation shape their decision-making processes and outputs. Our article contributes to this growing body of scholarship by focusing on regulatory communication, a terrain that has been neglected by previous studies of bureaucratic reputation. This neglect is substantial, given the growing role of communication in response to declining public trust in government (Im et al. forthcoming; Liu, Horsley, and Yang 2012) and the pressures towards and transition into transparent and accountable regulatory governance (cf. Coen and Thatcher 2005; Grimmelikhuijsen and Meijer, forthcoming; Lodge 2004).
Regulators in different countries and domains experiment with regulatory tools that allow organizations to adapt regulation to their individual circumstances, while holding them accountable for their self-regulation systems. Several labels have been coined for this type of regulation, including systems-based regulation, enforced self-regulation, management-based regulation, principles-based regulation, and meta-regulation. In this article, these forms of regulatory governance are classified as belonging to one family of "process-oriented regulation." Based on a review of diverse empirical and theoretical research, it is suggested that the family of process-oriented regulation tends to have a positive, albeit varied, impact on organizations' performance, and the factors that shape this inconsistent effect are analyzed. Building on aspects of Parker's normative construct of "metaregulation," the article explores the extent to which her innovative notion of a learning-oriented approach to regulation might overcome some of the weaknesses of prevalent process-oriented approaches. It is proposed that under conditions of regulatory uncertainty or entrenched and prevalent non-compliance or both, meta-regulation is likely to have many advantages over other forms of process-oriented regulation. Yet realizing these advantages requires a rare combination of high regulatory capacity, a stable regulatory agenda, and a supportive political environment.
What role do regulators and firms play in the construction of open-ended regulatory terms?The new institutional legal endogeneity model posits that organizations respond to legal uncertainty by adopting formal structures to symbolically signal their compliance. These structures, however, tend to embody businesses' managerial and commercial values, as opposed to regulatory goals. Law becomes endogenous insofar as legal actors then defer to businesses' institutionalized ideas about regulation and compliance. Professionals, such as lawyers and humanresource managers, and their strategic deployment of framing, are portrayed as the engines of the above process of legal endogeneity. By comparison, administrative agencies' strategies in shaping the meaning that corporations attach to the law are practically ignored. Building on a detailed case study of British financial firms' responses to the Financial Services Authority's Treating Customers Fairly initiative, this article problematizes the supposition of regulatory deference to business constructions of law. Instead, it develops a more balanced model that recognizes business professionals' and regulators' co-construction of regulation and compliance. The process of regulatory meaning co-construction, as depicted by this model, involves alignment and disputes between regulators' and professionals' strategic framing of regulatory concerns with tangible consequences for the enactment of regulation. I thank Micki Eisenman, Michal Frenkel, Ronen Mandelkern, Varda Wasserman, and three anonymous reviewers for their helpful comments. I also thank the London School of Economics Centre for the Analysis of Risk and Regulation for funding the data-collection stage of this project.
Regulatory agencies, like most public organizations, typically operate with multiple tasks and goals, which requires them to prioritize some tasks over others. Such prioritization, while essential, engenders a risk of bureaucratic oversight of significant material problems. Despite the ubiquity and importance of these concerns, our understanding of agencies' allocation of attention across tasks is limited. This article develops a model of agencies' allocation of attention across tasks, which involves an interaction between external public and political pressures and agencies' distinct organizational identities. A brief comparison between two cases of pre‐crisis financial regulation illustrates the proposed model. The two cases suggest that the British Financial Services Authority's and the Israeli Supervisor of Banks' distinct identities conditioned their responses to similarly vigorous pressures to devote more attention to firms' alleged mistreatment of their customers, with important implications for these regulators' attention to firms' capitalization and liquidity.
This article analyzes the institutionalization of process-oriented regulation, namely: regulatory institutions that allow firms to adapt regulation to their individual circumstances, while holding them to account for the adequacy and efficacy of their internal compliance systems. The article's main focus is on the strategies sought by compliance professionals to attain managers' receptiveness to regulatory expectations. It analyzes British financial firms' responses to a process-oriented regulatory initiative, which sought to transform the widespread culture of product "mis-selling" in this industry. Three key arguments and hypotheses are put forward: first, it is suggested that the existing theoretical literature on process-oriented regulation overly stresses managers' rational, profit-maximizing motivations for (non-)compliance, whilst overlooking their emotive motivations. Second, it is proposed that managers' emotive resistance is expected when regulatory expectations challenge firms' "organizational identities" and thereby their individual identities. Third, it is hypothesized that when process-oriented regulation poses a threat to organizations' identities, its institutionalization will entail delegation of the design and subsequent implementation of compliance systems to managers outside compliance, and reframing of regulatory expectations into existing businesses discourses and methodologies.
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