Development of Norms Through Compliance Disclosure

Abstract

This article introduces compliance disclosure regimes to business ethics research. Compliance disclosure is a relatively recent regulatory technique whereby companies are obliged to disclose the extent to which they comply with codes, 'best practice standards' or other extralegal texts containing norms or prospective norms. Such 'compliance disclosure' obligations are often presented as flexible regulatory alternatives to substantive, commandand-control regulation. However, based on a report on experiences of existing compliance disclosure obligations, this article will identify major weaknesses that prevent them from becoming effective mechanisms to discipline a certain type of behaviour. It will be argued that regulatory recourse to compliance disclosure obligations is nonetheless worthwhile if we view them as mechanisms that can initiate a dialogue about norm interpretation, application and norm desirability. From this perspective, compliance disclosure obligations serve less to discipline companies by making corporate practices transparent, and more to trigger a process of norm development, in which the law, companies and their stakeholders interact. This article provides an illustration of how mandatory disclosure, if it is restricted to a unilateral communication process, may produce no effective results (or even prove counterproductive), whilst highlighting the alternative potential of disclosure as an initiator of dialogue, supported by laws, geared towards the development and refinement of norms applicable to business in a global context and the values they promote.

The remuneration of independent directors in the UK and Italy: An empirical analysis based on agency theory

“…It also contributes to the existing regulatory debate about the choice of either a statutory regime or a flexible system on some governance issues (McNeil & Li, 2006;Arcot, Bruno & Faure-Grimaud, 2010;Fasterling, 2012), by providing new insights on the risks associated with a flexible system on the key corporate governance issue of INEDs. Moreover, by highlighting the potential implications of assessing directors' independence as compliance with rules, our study has attempted to answer the call of Aguilera and Cuervo-Cazurra (2009) for more careful examination of the content of the codes of corporate governance to help understand the soundness, or otherwise, of their recommendations.…”

A Swiss‐Army Knife? A Critical Assessment of the Extractive Industries Transparency Initiative (EITI) in Ghana

“…Compliance disclosure regimes as an alternative to substantive “command‐and‐control” regulation has proven to bear major weaknesses that prevent it from really disciplining a certain type of corporate behavior, for instance, making corporations more transparent (Fasterling ). It was expected that this initiative would do better but since it relies on what companies themselves provide, it tends to exhibit the characteristics of other nonlegal CSR measures such as the UN Global Compact, the Global Reporting Initiative, and the UN Guiding Principles on Business and Human Rights, among others.…”

“…Even when we want to assume that companies are operating in good faith and providing all the data needed for them to be considered complaint, the greater problem is that “compliance with a norm cannot always be assessed by mere observation of the facts. Applying norms often requires an interpretation of the norm and an evaluation of the company's practices and the circumstances of the individual case in light of this interpretation” (Fasterling , p. 77). This approach implies that reported facts do not always speak for themselves, and there is the need to verify them.…”

“…The EITI, by its nature, forms part of global regimes that are controlled by compliance disclosure measures. According to Fasterling (), “regulation through compliance disclosure is an approach that presents a midway solution between substantive and informational, non‐state and state regulation, and in a very broad sense could be categorized as ‘soft law’” (p. 74). The “soft” nature of this disclosure mechanism implies there is no guarantee that actors will take it seriously, even when powerful advocates have embraced the language around it.…”

Increasing Environmental Performance in a Context of Low Governmental Enforcement: Evidence From China

“…Because “naming and shaming” alone is not sufficient to induce many polluters to become environmentally responsible, the challenge for environmental stakeholders is to find ways to provide companies both positive incentives for improvement and negative consequences for laggards (Agrawal & Lemos, 2007; Eisner, 2006; Fasterling, 2012; Gunningham et al., 2003; Pawson, 2002; Vurro, Russo, & Perrini, 2009). I argue here that a transparency-based platform, like the one built by IPE in China, can create a mechanism that channels market forces in environmentally positive ways by integrating environmental performance into global supply chain systems.…”