‘Law Needs a Behavioral Revolution’

Reading Behavioral Jurisprudence: Law Needs a Behavioral Revolution – the authors, Benjamin van Rooij and Adam Fine, make a very important point here.

We need fewer and better laws and regulations, based on evidence.

Christopher Hodges and I based Ethical Business Practice and Regulation on his previous work showing that punishment and deterrence are ineffective to change behaviour. Time to get the message across.

We achieve more when we cooperate. So how do we do that?

A useful excerpt from a recent SUMMARY OF OUTCOME-BASED COOPERATIVE REGULATION from my colleague Professor Christoper Hodges OBEdownload the full 2 page summary from the International Network for Delivery of Regulation.

This approach is firmly based on the evidence (scientific and empirical studies) of how humans behave and what works in maximising achievement of collective goals and outputs.

It re-invents traditional regulation (rules-inspect-breaches-sanctions-assume deterrence) by focusing on behaviour and outcomes, supporting those who are well-intentioned (enlisting society’s ethical values and principles with the state’s common goals of prosperity, growth and protection) and differentiating those who are not.

Key elements are:

  • to support people to behave well and constantly improve performance.
  • reliance on intrinsic motivation with supportive interventions rather than externally imposed authoritarian control (which is reserved for those from whom society needs to be protected).
  • building trust – through producing a convincing and adequate body of evidence that people have good intentions, competences, understanding, resources, and will do the right thing (based on ethical values), such as asking for help, reporting problems, cooperating to implement fixes.
  • involving everyone (all stakeholders) in a collaborative co-creative exercise.

Download the full summary from International Network for Delivery of Regulation

Why everyone fighting corruption should worry about sprawling rules & regulations

In ‘Corruption from a Regulatory Perspective’ (Hart 2021) Professor Maria de Benedetto makes the case for a less-is-more approach.

What sets this book apart from the previous literature is how it brings together numerous related disciplines into a systematic whole – looking at rules and regulations during their “whole life-cycle”. It helps you consider how rules, corruption and controls are linked to regulatory effectiveness and why regulatory effectiveness is an important part of combatting corruption. And counterintuitive as it might seem, every rule that is created and every control that is devised to monitor compliance with the rule – also creates opportunities for corruption. So what to do?

I have been involved in anti-corruption efforts in various ways for over four decades. So, I was pleasantly surprised to discover an approach I had not heard advocated before. It had occurred to me that administrative corruption exists specifically in relation to laws, rules and/or regulation. It has also been part of my own values-based approach to advocate drafting rules and regulations carefully and keeping them to a minimum. Intrinsic motivation is more effective than extrinsic, rules derived motivation. Professor de Benedetto however covers new ground with her analysis and her recommendations. And, she is suggesting a better and more cost-effective way to “fight” corruption, without – basically – fighting.

You may be wondering, what is regulatory anticorruption and how might it help? Professor de Benedetto states that it “is intended to develop a diagnostic intelligence by limiting the use of troops in the war against corruption, in a certain sense by winning without fighting* (François Jullien, Traité de l’efficacité) to the greatest extent possible.” What is meant by this is that it looks at rules, rather than at administrative activities, and therefore considers how they can be drafted and adopted effectively long before any corruption is even contemplated. Another way of understanding this is that regulatory anticorruption carries out its anti-corruption assessment “much earlier and works upstream” in order to prevent countless potential acts of corruption from ever occurring. (p.77) Regulatory anticorruption can be applied when the rules are first made or reformed, i.e. in law making and in the regulatory delivery process when guidelines and other documents meant to ensure regulatory effectiveness are created. Managing rules allows the detection of opportunities for corruption rather than incidents of corruption (p94) and so occurs at a very early stage. Prevention, rather than cure.

Professor de Benedetto’s comprehensive and inclusive analysis of the regulatory anticorruption approach and all it implies is both readable and comprehensible. That’s a feat in itself. I would recommend it to anyone involved in anti-corruption, especially those working in policy and advocacy roles.

The exploration of the ways in which regulation itself increases corruption and provides practical and feasible ways of combatting this – without fighting- but rather by improving the regulatory stock (rules, controls, sanctions) and their flow (delivery). And, although addressed to the macro environment of lawmakers and regulators, I found much to consider for internal “compliance” systems that are often characterised by unnecessarily complicated policies and procedures, onerous controls and unevenly applied and often counterproductive sanctions, all of which crowd out the more powerful intrinsic motivation provided by values and ethical principles.

Corruption from a Regulatory Perspective

I have only begun to scratch the surface of the ideas and analysis presented in Corruption From a Regulatory Perspective, but I hope I have succeeded in convincing some of you to read it and consider its implications for your own work. We can continue to create quantities of ineffective rules and kid ourselves that we are fighting corruption or we can take a step back and consider the issue from a regulatory perspective and understand that ‘less is more’ if that ‘less’ is effective.

The ideas laid out in the book, when combined, suggest that we have been wasting much of our time in the past creating ever more complicated anti-corruption laws, regulations, controls and sanctions, while in fact our energies would have been better spent in other ways.

Find Corruption from a Regulatory Perspective on Amazon or directly from Bloomsbury, the publisher.

Share your insights with other ethics professionals

A call to action from the Society of Corporate Compliance and Ethics (SCCE):

Compliance & Ethics Professional (CEP) Magazine® is SCCE’s award-winning peer-to-peer monthly publication with a circulation of 6,500+ compliance and ethics professionals worldwide. CEP Magazine is here to be your voice—a place to share and connect with other practitioners navigating the complexities of compliance and ethics work. Compliance and Ethics professionals, both experienced and those new to the profession, greatly value your experienced-based guidance and we want you to share your knowledge

Submissions are welcome from both SCCE members and non-members.

corporatecompliance.org/publications/write-scce/write-cep-magazine

Help spread the word

Honest discussions about whistleblowing and corporate scandals at the annual Nordic Business Ethics Day

Lots of reasons to tune in when the good people at Nordic Business Ethics put on their 4th annual conference:

“Is your organisation next out? Whistleblowers and investigative journalists ensure that we keep reading about companies and their short comings. Sometimes the conduct is outright illegal, other times it is perceived as unethical and often times only lawyers and the involved persons care about the difference.”

nordicbusinessethics.com/event/nordic-business-ethics-day-2022/

Some of the speakers I am looking forward to hearing on the day:

  • Tom Meiers – Chief Governance and Legal Officer at SEAT and CUPRA
  • Per Arne Lund – Chief Compliance Officer/Head of GRC på VOLKSWAGEN GROUP Sverige
  • Mary Inman – Partner at Constantine Cannon LLP | Head of International Whistleblower Practice
  • Guido Palazzo – Professor of Business Ethics at the University of Lausanne
  • Johannes Stefanson – Fishrot Whistleblower

And of course the organisers and moderators for the day: Anna Romberg and Niina Ratsula.

Sign up here: nordicbusinessethics.com/event/nordic-business-ethics-day-2022/

An Introduction to Outcome Based Cooperative Regulation (OBCR)

You can now download the new 9 page Introduction to Outcome Based Cooperative Regulation (OBCR) on SSIR and on INDR – from Christopher Hodges OBE at University of Oxford – Centre for Socio-Legal Studies; Faculty of Law.

Abstract

OBCR is a model for achievement of common purposes and outcomes in a cooperative mode based on engaged relationships built on evidence produced by parties that they can be trusted. The OBC approach can be applied in diverse situations, such as communities and organisations; this model applies to regulation.

Keywords: cooperation, regulation, trust, evidence, outcomes

JEL Classification: K

Suggested Citation:

Hodges OBE, Christopher, An Introduction to Outcome Based Cooperative Regulation (OBCR) (February 1, 2022). Available at SSRN: https://ssrn.com/abstract=4031491 or http://dx.doi.org/10.2139/ssrn.4031491

Purpose, Values, Wates…

The Financial Reporting Council has issued the first in-depth assessment of the quality of reporting from private companies who have chosen to follow the Wates Principles.

The report, which was conducted with the Universities of Essex, Bristol and East Anglia – shows that the Wates Principles are the most widely adopted corporate governance code used by large private companies. And whilst there is lots to celebrate it is also sobering that the research team (Gaia, Baboukardos, Cuomo, Michelon and Soobaroyen) found that Principle One had the lowest disclosure score among the six Principles.

The good news is that we now have this data – so we can do something about it. Clarity on purpose is crucial to internal cohesion in any organisation. Learn more about how purpose plays a role across the 7 levels of Ethical Business Practice.

And help spread the word about the new Wates – so more boards both can and will take action.

100 for the Ethics Academy

The good people at The Ethics and Compliance Initiative (ECI) has announced their 2022 call for applications for the Ethics Academy Scholarship program.

In celebration of ECI’s Centennial Anniversary, the Northrop Grumman Foundation and KPMG have generously partnered to expand access to ECI’s Ethics Academy. Over the next three years ECI will select 100 qualified applicants to participate in the Ethics Academy.

The Ethics Academy was created to support a sustainable and vibrant profession by investing in the education of students interested in the ethics and compliance field and supporting the faculty members, researchers and other academics who foster the next generation of E&C practitioners.

In 2022, up to thirty-four recipients will be selected for the ECI Ethics Academy. Recipients will receive a suite of benefits and opportunities to strengthen their knowledge of the E&C industry, and network with thought leaders and experts around the globe.

APPLY HERE: ethics.org/academy/


The most cost effective way to ensure that ethics permeates the organisation…

I was excited to read a blog by Linn Byberg at the Institute of Business Ethics titled Ethics ambassadors: helping hands across the organisation. A worthwhile read.

Drawing on experiences of UK and international companies, this Guide:

helps organisations understand what ethics ambassadors are and how they can be used effectively in promoting an ethical culture
provides guidance on creating and motivating a network of ethics ambassadors
includes a set of practical tools for training and evaluating the efficacy of ethics ambassadors.

It is a topic close to my heart as you might know – having pioneered the concept – and authored the Institute’s Good Practice Guide on the topic. (That said, it could maybe do with a design refresh).

The content inside is 100% timeless advice though, and it is a snip at £15 via the IBE web shop.

An Ethics Ambassador programme is by far the most cost effective way to ensure that ethics permeates the organisation. Get in touch if you’d like to discuss.

18th Annual Anti-Money Laundering & Financial Crime Seminar

One for the calendar – organised by the good people at AMLP:

New Topics 2022

  • New UK Economic Crime Plan – national priorities including private sector information sharing, fraud action plan & stepping up oversight of payments and virtual currencies
  • The FCA’s supervisory priorities 2022 – commitment to a more proactive approach
  • Post-brexit economic sanctions strategies update & proliferation financing focus 
  • Companies House on the Public Register – improving the integrity and accuracy
  • Addressing the greatest challenges in 2022 – taking forward an effective compliance programme with a holistic approach to financial crime 
  • Emerging CDD/KYC & client lifecycle management strategies – driving effective processes and operational efficiency through a targeted risk-based approach, big data, digitalisation and automation
  • Building up an effective 1st and 2nd line of defence in effective risk management
  • Environmental & wildlife crime – latest highlights & expectations of the industry
  • Law enforcement on filing meaningful SARs, PPP & information sharing – combatting the new ML, fraud & financial crime threats and greater use of confiscation and asset recovery tools

View the full list of topics here.

Stellar government, regulatory & law enforcement speakers line-up

  • Carol Smit, Executive Secretary, JMLSG
  • Clive GordonHead of Financial Crime Specialist Supervision Department, FCA
  • Debbie Price, Deputy Head of Division, Proceeds of Crime, CPS & until recently Head of UKFIU, NCA
  • John Roch, Detective Superintendent, Central Specialist Crime Head of Economic Crime, Metropolitan Police 
  • Martin Swain, Director of Policy, Strategy and Planning, Companies House
  • Owen RowlandHead of the Economic Crime Unit, Home Office

View the full government and industry speakers line-up here.