General Deterrence and Corporate Environmental Behavior*

Abstract

This research addresses the assumption that “general deterrence” is an important key to enhanced compliance with regulatory laws. Through a survey of 233 firms in several industries in the United States, we sought to answer the following questions: (1) When severe legal penalties are imposed against a violator of environmental laws, do other companies in the same industry actually learn about such “signal cases”? (2) Does knowing about “signal cases” change firms’ compliance‐related behavior? It was found that only 42 percent of respondents could identify the “signal case,” but 89 percent could identify some enforcement actions against other firms, and 63 percent of firms reported having taken some compliance‐related actions in response to learning about such cases. Overall, it is concluded that because most firms are in compliance already (for a variety of other reasons), this form of “explicit general deterrence” knowledge usually serves not to enhance the perceived threat of legal punishment, but as reassurance that compliance is not foolish and as a reminder to check on the reliability of existing compliance routines.

Making Self-Regulation More Than Merely Symbolic: The Critical Role of the Legal Environment

“…Numerous studies have demonstrated the importance of external motivators like regulatory enforcement and punitive sanctions in prompting regulated organizations not only to comply with law but to regulate themselves. Regulatory penalties can promote formal compliance with legal requirements (Gunningham, Thornton, and Kagan, 2005;Mendelhoff and Gray, 2005;Shimshack and Ward, 2005). Punitive enforcement can also motivate organizations to adopt self-regulatory structures and policies, at least symbolically (Edelman, 1992;Sutton et al, 1994;Short and Toffel, 2008).…”

Regulatory Theory

“…However, social oversight and acceptance may have different implications for particular actuarial risks depending on political context and the levels and contours of political risk. So, social oversight has, alternately, been argued to raise industry standards in some cases (for example, reducing pollution levels) (Gunningham et al 2005), while other studies point to a social licence being somewhat independent of actuarial concerns (Haines 2009) or even that social acceptance or a social licence (that is, successful sociocultural risk management) can be accompanied by ongoing and serious actuarial concerns (Bachrach and Baratz 1970;Culley and Hughey 2008).…”

“…There is also evidence of prosecuted enterprises implementing additional actions to manage risks (specific deterrence), but less evidence that prosecution of others prompts nonprosecuted enterprises to take appropriate preventive action (general deterrence), as communication of information about cases may be unreliable or differences in business operations may make comparisons difficult ( Jamieson et al 2010;Schofield et al 2009;Bluff 2015a;Thornton et al 2005). …”

The Weak Probability of Punishment for Environmental Offenses and Deterrence of Environmental Offenders: A Discussion Based on USEPA Criminal Cases, 1983–2013

“…That issue was specifically examined by Thornton, Gunningham, and Kagan (2005). In their study, Thornton and colleagues asked corporate decision makers about their knowledge and responses to environmental penalties levied against other facilities.…”