Compliance in the absence of Sanctions: Insights from the Netherlands

• In Event: White Collar Crime at 75: Corporate Compliance in Declining and Emerging Economies

Abstract

Although many authors have studied corporate deterrence and business reactions to sanctions, one question that has received little attention is how companies respond to the absence of sanctions; or in other words a perceived lack of enforcement towards offending competitors. In analogy with broken windows theory, we ask whether observed offenses undermines other businesses willingness to comply. This question is particularly relevant in the context of self-regulatory arrangements: companies may be reluctant to invest in voluntary compliance when they know that offending competitors are not punished. But this reaction may differ according to the regulatory regime; the degree of transparancy within a business sector, and the extent to which businesses identify themselves as member of a group.
Based on interview and survey data collected from representatives of Dutch companies active in sectors partaking in voluntary tax self-regulation, we address the following questions: 1 ) How do companies that do or do not participate in voluntary self-regulation react to their perceived lack of punishment for rule violations which they attribute to competitors? 2) does the participation of the offender in a self-regulation arrangement make a difference for other self-regulating companies? 3) To what extent and in what way does their response depend on the nature of their perceptions and on the information on which their perceptions are based as well as on the transparency and homogeneity of the business sector in which these companies are active? Our research aims to integrate criminological theories on sanction effects with sociolegal research on compliance motivations and regulatory legitimacy.

Authors

• Judith van Erp, Erasmus University Rotterdam

• Peter Mascini, Erasmus University Rotterdam