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Crime Narratives in Context Network
Seminar Papers 2007/8
<‘Chancer’, ‘Failure’ or ‘Trier’?
Regulatory Conversations and the
Construction of Identities
>
Julia Black
Law Department
London School of Economics and Political Science
Email [email protected]
< July 2008>
About this paper and the author
This paper is derived from two streams of research: that relating to discourse theories and that
relating to the dynamics of regulatory regimes. The paper focuses in particular on the dynamics
of compliance and the construction of identities by regulator and regulate in the course of their
relationship. My research interests focus more broadly on the structures and dynamics of state
and non-state regulatory regimes, using principally discourse and institutionalist perspectives.
For further details please see http://www.lse.ac.uk/collections/law/staff/julia-black.htm.
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‘Chancer’, ‘Failure’ or ‘Trier’? Regulatory Conversations and the
Construction of Identities
Julia Black1
Introduction
When they are not losing the critical personal data of 25 million people, officials
at Her Majesty’s Revenue and Customs department (HMRC) are cracking down
on tax fraud. A central plank of their new ‘VAT Compliance Strategy’ is a
targetted, risk-based approach to investigation and enforcement. HMRC have
analysed all those who pay VAT, and characterized them on the basis of their
predicted response to tax laws. It has come up with seven categories, including
‘evaders’, ‘chancers’, ‘failures’ and ‘triers’. Each firm is assigned a category, and
that categorization in turn is used to order the HMRC’s inspection and
enforcement policy.
The Australian Tax Office has also been revising its interactions with tax payers,
but it has approached its regulatory task in a slightly different way. Although not
using this terminology, it has explored why people are ‘chanchers’ or ‘triers’ in the
first place: what, in other words, affects how people respond to the law. Why do
some pay tax, and yet others do not? Based on this research, it has then tried to
manage people’s responses by changing the way that it interacts with them.
Letters have been re-drafted, tax demands are no longer sent out on Christmas
Eve, and other attempts have been made to present a more ‘friendly face’ in an
effort to enhance the propensity to pay tax.
1
Law Department, London School of Economics and Political Science; Research Associate, Centre
for the Analysis of Risk and Regulation, LSE. This paper is a revised version of the paper given at
the CNIC seminar in November 2007. I am grateful to the participants at that seminar and to Rob
Baldwin for comments. More broadly the framework of analysis used in the paper draws on that
developed in an earlier article, ‘Regulatory Conversations’ (2002) 29(1) Jnl of Law and Society 263.
Why have the tax offices been engaging in these strategies? Why not simply
raise the fines, increase the number of inspectors? According to economic
analyses, those two measures should be sufficient to ensure that people comply.
But a generation of research in to the motivations of compliance has shown that
people comply with the law not, or at least not just, as a result of a calculation of
relative costs and benefits of compliance or non-compliance, but because of a far
more complex set of motivations. Moreover, more recent work has emphasized
the role of personal interactions between those responsible for enforcing the law
and those who are subject to it in the shaping of those motivations.
Those inter-personal communications about the regulatory regime, or as I term
them, ‘regulatory conversations’, are critical for its functioning in a number of
ways. They are a way of overcoming the limits of rules, of dealing with the
inherent indeterminacy of language, and of forging common understandings as to
the meaning and application of rules. More relevant for this discussion, they are
also the sites in which identities are constructed and attitudes shaped (albeit not
necessarily forged) by regulator and regulatee towards one another and in the
latter’s case, towards the regulatory regime as a whole.
This paper explores this process of construction of identity, and indeed
legitimacy, through regulatory conversations. After explaining what is meant by
‘regulatory conversations’, the paper will look in turn at the how regulators’
construct the identities of regulatees; how regulatees characterize regulators;
and how each attempts to construct their own identity vis a vis the other, arguing
that in each case participants are trying to affect how the other responds to them.
For the regulator, the response that is sought from the regulatee is enhanced
compliance; for the regulatee, the response sought is a minimization of negative
interactions with the regulator. Drawing on insights of discourse theory, I will
argue that these identities matter as they form the basis of how both regulator
and regulatee behave. Regulatory conversations are not the only element
determining this behaviour, but they are significant for understanding the
dynamics of the relationship between regulator and regulatee in the regulatory
regime.
Regulatory conversations
The conception of regulation adopted here is that of a process involving the
sustained and focused attempt to alter the behaviour of others according to
identified purposes with the intention of producing a broadly identified outcome or
outcomes which may involve mechanisms of standard-setting, informationgathering and behaviour-modification. Regulation is thus not seen as an activity
performed only by state actors, or as necessarily involving legal mechanisms, but
the definition is not as wide as some sociologists might adopt. In this view,
‘culture’ or the ‘market’ do not regulate, though their influence may be significant
in affecting the regulatory process.2 Regulation is thus understood here to be the
intentional, goal-directed, problem-solving attempts at ordering undertaken by
both state and non-state actors.
No particular institutional or organisational
arrangement is assumed in the definition, neither are particular techniques, nor is
success;there may also be unintended and unforeseen consequences.
Regulators may operate at a transnational, supranational, national or subnational level, and be governments, associations, or firms. The regulated may
include governments, associations, firms, and / or individuals.
The others
involved may include professional associations, professional advisors, both legal
and non-legal, accreditors, auditors, non-governmental organisations, consumer
and other special issue groups. Boundaries between regulator and regulated
might shift, certainly in a transnational context, and they might be one and the
same organisations.
By regulatory conversations I mean the communications that occur between
regulators, regulated and others involved in the regulatory process concerning
the operation of that regulatory system.3
The term includes all forms of
interpersonal communications, extending beyond standards, policy documents
and guidance notes, to include all micro-level conversations that may occur in
See further J. Black, ‘Decentring Regulation: The Role of Regulation and Self Regulation in a
“Post-Regulatory” World’ (2001) 54 Current Legal Problems 103; ‘Critical Reflections on Regulation’
(2002) Australian Journal of Legal Philosophy 1.
3: J. Black, Rules and Regulators (1997), and J. Black, ‘Talking about Regulation’ (1998) Public Law
77. Note that the term ‘conversations’ is used to denote a broader field of study than the naturally
occurring conversations focused on by conversational analysis.
2
formal or informal settings, including policy briefings, seminars and conferences,
in the course of the regulatory process between individuals both within and
across organisations or particular cohesive communities. In understanding the
role played by regulatory conversations it is important to disaggregate the
regulatory process and to identify at which points regulatory conversations occur,
between whom, and about what.
It may be that little role is played by
conversations at certain stages: speed cameras which gather information about
behaviour, for example, are not discursive in their operation.
Indeed some
techniques of control based in cybernetics, for example collibration, are
described by their authors as being ‘discourse-less’,4 a claim which in itself
presumes a particular definition of discourse.5
However, studies which have
been done of the day to day development and operation of regulatory systems
suggest that in practice regulation is far from discourse-less, in the sense of
lacking in communicative interaction. As Braithwaite and Drahos discovered of
global business regulation, regulation is ‘surprisingly deliberative’. 6
Even
Bentham’s panopticon would have involved conversations in its design, adoption
and construction, and more particularly in fashioning the rationality that made
such a design seem appropriate and acceptable. So whilst certain aspects of the
regulatory process may not be marked by communicative interactions, others will
be.
That said, regulatory conversations are likely to be a particularly significant
feature of regulation in a number of situations, including the following. First,
where the regulatory process is characterised both by a reliance on written
norms, and where discretion pervades (and it is difficult to think of a regulatory
system that is not so characterised). Written norms include rules, standards and
principles, and no clear distinction between rules and discretion can be assumed;
rather discretion is seen as the space both within and between rules in which
decision makers exercise choice.7 Written norms are central to a wide range of
A. Dunsire, ‘Tipping the Balance: Autopoiesis and Governance’ (1996) Administration and Society
299, 322.
5 Foucauldian analysis would see cybernetics and collibration itself as a discourse: knowledge
systems that inform social and governmental ‘technologies’ which constitute power in modern
society: M. Foucault, Discipline and Punish (1977).
6 J. Braithwaite and P. Drahos, Global Business Regulation (2000), 32, also 552, 553.
7 For discussion see Black, op. cit., n. 3 (1997), 216.
4
regulatory techniques and they have two central features which make them
particularly problematic regulatory instruments: their temporal aspect, they speak
from the past or present but purport to govern the future, and their linguistic
aspect: they are linguistic structures which require interpretation. How they will
‘work’ depends on the interpretation they receive. 8 Regulatory conversations
about the prescriptions for the conduct necessary to resolve particular problems
and the meaning and application of those prescriptions in particular
circumstances are likely to be a central feature of those regulatory systems that
employ them.
Secondly, regulatory conversations are likely to be a central characteristic of the
regulatory process in situations of uncertainty: where the task of regulation is
uncertain and ambiguous, and where agreement on the definitions of problems
and solutions presupposes an extensive intersubjective sharing of ideas and
negotiations of meaning. Regulation of risk provides an obvious example; but
conversations will also be important in the more general situation in which
regulators are given broadly defined and conflicting objectives to fulfil or principles
to follow, where they operate in a dynamic context in which problem definitions are
complex and shifting, and the consequences of regulatory action uncertain.
Regulatory conversations and discourse analysis
The existence and dynamics of regulation has been examined through a
kaleidoscope
of
lenses:
economic,9
cultural
/
anthropological
theory,10
institutionalism,11 organisational theory, and systems theory.12 There does not
8
For discussion see F. Schauer, Playing by the Rules (OUP, 1991).
G. Stigler, ‘The Economic Theory of Regulation’ 2 Bell J of Economics 1; R. Posner, ‘Theories of
Economic Regulation’ (1974) Bell J of Economics and Management Science 335; S. Peltzman,
‘Towards a More General Theory of Regulation’ (1976) 19 J Law and Economics 211.
10 Particularly Hood, who has used the hierarchy / community / competition / fate matrix of world
views developed in anthropological cultural theory as the base for describing types of techniques of
governmental control: C. Hood, Art of the State (1998), adopted in C. Hood, C. Scott, O. James, G.
Jones and T. Travers, Regulation Inside Government (1999) and C. Hood, H. Rothstein and R.
Baldwin, The Government of Risk (2001); C. Hall, C. Scott and C. Hood, Telecommunications
Regulation: Culture, Chaos and Interdependence Inside the Regulatory Process (2000).
11 See for example M. Thatcher, The Politics of Telecommunications: National Institutions,
Convergence and Change in Britain and France (1999).
9
seem room for another. But regulation is in large part a communicative process.
Communications between all those involved in the regulatory process concerning
that regulatory system are an important part of their operation. Understanding
such regulatory conversations is thus central to understanding the ‘inner life’ of
that process.13 Why then not look to discourse analysis, that loosely defined
body of theory that ranges across the social sciences and humanities which is
concerned with the analysis of language and communication?
The conception of regulation used and the notion of regulatory conversations
deployed suggest that certain aspects of discourse analysis might have more
immediate relevance than others in helping us to understand a regulatory
process. Thus merely to adopt the techniques of conversational analysis, for
example, will not tell us much about the operation of the regulatory process as a
whole, given the very narrow definition of context that is used in that approach. It
would have to be combined with an approach which pays close attention to
language use in a broader social context, for example socio-linguistics and
ethnography. Further, because of the nature of regulation as an instrument of
governmentality (whether or not exercised by governments), attention is also
drawn to Foucauldian perspectives and to critical discourse analysis. Because it
is contended that linguistic practices in themselves are an important aspect of
regulatory processes, evident for example in the strategic use of rule design, 14
the definition of discourse adopted will be that discourse consists of ‘text and
talk’, and is separate from other social practices. Despite the tensions between
these different strands, such a combination of micro and macro, of linguistic base
and social science concerns has precedence in discourse analysis: Mehan, for
example, combines ethnomethodological and conversational analysis of microG. Teubner, ‘Substantive and Reflexive Elements in Modern Law’ (1983) 17 Law & Soc Rev 239;
id., ‘Juridification - Concepts, Aspects, Limits, Solutions’ in G. Teubner (ed), Juridification of the
Social Spheres (1987); id., ‘After Legal Instrumentalism? Strategic Models of Post-Regulatory Law’
in G. Teubner (ed), Dilemmas of Law in the Welfare State (1986); R. Veld et al, Autopoiesis and
Configuration Theory: New Approaches to Societal Steering (1991).
13 E. Meidinger, ‘Regulatory Culture: A Theoretical Outline’ (1987) 9 Law and Policy 355, J. March
and J. Olsen, Rediscovering Institutions (1989); P. DiMaggio and W. Powell ‘Introduction’ in W.
Powell and P. DiMaggio, The New Institutionalism in Organisational Analysis (1991); ‘inner life’ is
used here to refer to the interactions of all engaged in the process, not just bureaucrats engaged in
its administration; contrast C. Hood, H. Rothstein and R. Baldwin, The Government of Risk (2001),
141.
14 J. Black, ‘”Which Arrow?”: Rule Type and Regulatory Policy’ [1995] Public Law 94.
12
level interactions with Foucauldian concerns to develop a discursive history
about the emergence of concepts or objects, the forms of expertise that manage
them, and the power relations afforded by them.15 It is such a combination of
micro-level analysis with macro-level concerns that may fruitfully be adopted and
developed by regulatory theory. But that is to jump an important stage in the
analysis - we turn therefore to consider five central contentions in discourse
theory as to the role of language and linguistic interaction to suggest what
implications they may have for regulatory theory and practice.
Discourse analysis, as will be well known to those here, contends that social
action can be comprehended only by comprehending discourse, that discourse is
the basis of social action in that it is constitutive, functional and co-ordinative.16 It
is constitutive in that it builds objects, worlds, minds, identities and social
relations, it does not just reflect them. It is functional in that it is designed to
achieve certain ends, for example to persuade (its rhetorical and argumentative
aspect). It is co-ordinating in that in the activity of producing meaning and shared
senses it requires and produces co-ordination, and the possibility of co-ordination
is at the basis of social life.
If we were to transpose those claims to the context of regulation, the contention
would be that discourse forms the basis of regulation. It constitutes regulation in
that it builds understandings and definitions of problems (eg ‘market failure’,
‘risk’) and acceptable and appropriate solutions (criminalisation, ‘metaregulation’, ‘precautionary principle’), it builds operational categories (eg
‘compliance’), and produces the identities of and relations between those
involved in the process. It is functional in that it is designed to achieve certain
ends (eg the strategic use of rule design; the deployment of skills of
argumentation and rhetoric by all involved at every stage). It is co-ordinating in
that it produces shared meanings as to regulatory norms and social practices
which then form the basis for action (eg the formation of regulatory interpretive
communities).
H. Mehan, ‘The Construction of an LD Student: A Case Study in the Politics of Representation’ in
M. Wetherell, S. Taylor, S. Yates, Discourse Theory and Practice: A Reader (2001).
16 M. Wetherell, ‘Themes in Discourse Research: The Case of Diana’ in M. Wetherell, S. Taylor, S.
Yates, Discourse Theory and Practice: A Reader (2001), 16.
15
These are very broad claims, and discourse analysis is a very broad church.
How could we take the analysis further both theoretically and empirically? At the
theoretical level, there are five principal contentions as to the relationship of
discourse and social practices which stem from the above-mentioned
constitutive, functional and co-ordinative claims which are of potential relevance
in understanding regulation. These are first, meaning and co-ordination: that the
meaning of language is in its use, that use and therefore meaning will vary with
context and with genre, and that the development of shared linguistic practices
entails co-ordination and forms the basis of social action.
Secondly, the
construction of identities: that communicative interaction is representative and in
particular produces identities, which in turn affect social action.
Thirdly, the
relationship of language, thought and knowledge: that language frames thought,
and produces and reproduces knowledge. The fourth, closely related, contention
is that language is intimately related to power: that it is marked by the values of
social groups, that it encodes perspectives and judgements, and can instantiate
certain perspectives or orthodoxies.
The final contention considered is that
meaning, thought, knowledge and power are contestable and contested;
meaning, and thus thought, knowledge and power, is never fixed and so is open
to contestation and change.
I have explored each of these five briefly elsewhere. 17 What this paper focuses
on is the second contention: the role of regulatory conversations in constructing
identities.
Communicative interactions create identities
A key contention of discourse analysis to explore is that social communicative
interactions position actors and constitute their identities. Individual identities are
acquired interactively as people talk about a particular individual, creating his or
her reputation.18
17
18
Positions and identities may also be reflexive, in that one
Black, ‘Regulatory Conversations’.
See eg B. Davies and R. Harre, ‘Positioning: The Discursive Production of Selves’ (1990) 20 J of
positions oneself, constructs one’s own identity as a result of how one is
positioned and addressed by others.19 The identity constituted, however, is not a
relatively fixed end product, but is always open and shifting depending upon the
positions made available in one’s own and others’ different discursive practices,
and within those practices the stories through which sense is made of one’s own
and each other’s lives.20
That said, labels, once assigned, may not be as fluid
and shifting as this line of theory suggests, and as will be discussed, misapplied
labels which are not revised can prove disastrous in the regulatory context, at
least from a functional and political perspective.
Regulators constructing identities of regulatees
The site in which this paper explores the creation of identities is that of
compliance and enforcement. There has been a significant body of empirical
work on how regulators and regulatees negotiate compliance on the ground in
their day to day interactions.
Those studies demonstrate how enforcement
officials construct identities of regulatees based on their willingness and ability to
comply with the regulation.
It suggests that those identities are discursively
produced and communicated throughout the regulatory organisation.
Those
identities then affect how the enforcement official interprets the actions of
individual
firms,
and
thus
what
enforcement
response
is
considered
appropriate.21
Academics have come up with their own categorisations of firms, based on two
dimensions: a firms’ motivations to comply and their ability to do so. Kagan and
Scholz, for example, identify three categories of regulatee: political citizens,
amoral calculators, and the organizationally incompetent. Political citizens have
the capacity to comply and are generally well disposed to do so, so long as they
agree with the regulatory regime. Amoral calculators decide whether or not to
comply based on cost-benefit calculations: where the cost of the sanction as a
the Theory of Social Behaviour 43.
19 Davies and Harre, ibid; see also S. Hall, ‘The Work of Representation’ in S. Hall (ed),
Representation: Cultural Representations and Signifying Practices (1997).
20Davies and Harre, above .n. 18.
21 K. Hawkins, Environment and Enforcement (1984); Hutter, Compliance, Regulation and
Enforcement (1997).
function of the probability of detection is greater than the gain from noncompliance, they will comply; where it is lower than the gain, they will not comply.
Baldwin’s categorisation attempts to make more of a distinction between
motivation and capacity (though a narrower definition of capacity: capacity is
defined in terms of knowledge of the rules). He distinguishes between those who
are well intentioned and well informed; well intentioned and ill informed, and ill
intentioned and ill informed. A fourth category needs to be added: those who are
ill intentioned and well informed, those who ‘game’ the rules to their own
advantage.
Baldwin does not explore the ways in which firms are ‘well intentioned’ or ‘ill
intentioned’. In contrast work by psychologists and sociologists has adopted a
more granular analysis of regulatees’ responses.
Drawing on studies of the
compliance of nursing homes with regulatory requirements, and later developed
in the context of tax law, Braithwaite argues that there are five main motivational
postures, or responses to regulation, based on the nature of the social
relationship between regulators and regulatees. Motivational postures are ‘the
social signals that individuals send to authority, to others and to themselves to
communicate preferred social distance from that authority’. 22 This relationship
could be based either on interpersonal qualities such as trustworthiness or
instrumental concerns such as shared goals, but usually was both.23 The five
basic motivational postures identified are: commitment or accommodation to the
agenda of the regulatory authority; capitulation or capture to the authority;
resistance or fighting against the authority, and disengagement or detachment
from the regulatory efforts of the authority; and game playing. 24
Attitudes of
commitment or accommodation are evidenced by comments such as ‘paying tax
is the right thing to do’, or ‘I feel a moral obligation to pay my tax’. Capitulation to
the tax authorities is evidenced by comments such as ‘the best policy is always
to co-operate’ or ‘the tax system is not perfect but works well enough’.
V. Braithwaite, K. Murphy and M. Reinhart, ‘Taxation Threat, Motivational Postures and
Responsive Regulation’ (2007) 29(1) Law and Policy 137 at 138; V. Braithwaite, ‘Games and
Engagement: Postures within the Regulatory Community’ (1995) 17 Law and Policy 225.
23 V. Braithwaite, K. Murphy and M. Reinhart, ‘Taxation Threat, Motivational Postures and
Responsive Regulation’ (2007) 29(1) Law and Policy 137 at 138; V. Braithwaite, ‘Games and
Engagement: Postures within the Regulatory Community’ (1995) 17 Law and Policy 225.
24 Braithwaite above n. 22 (1995); V. Braithwaite, ‘Tensions between the Citizen Taxpaying Role
and Compliance Practices , Centre for Tax System Integrity Working Paper 12, Canberra, 2001.
22
Resistance is evidenced by comments such as ‘we need more people to take a
stand against the Tax Office’ or ‘the Tax Office is more interested in catching you
doing the wrong thing than helping you to do the right thing’. Disengagement is
evidenced by agreement with such comments as ‘I don’t care if I’m not doing the
right thing by the Tax Office’. Finally, gaming is evidenced by such comments as
‘I like the game of finding the grey area in the tax law’. 25
These are examples of academic observers categorising firm’s responses. They
draw on empirical observations of inspectors’ own, often more tacit,
categorisations, but they are not those which are necessarily in use by regulatory
officials. The HMRC example, in contrast, is significant because it takes the
issue of identity formation to a different, more formalised level, and because it
explicitly uses this to formulate its own actions: for organising the deployment of
their inspection resources and their enforcement approach.
The HMRC’s Compliance Continuum seeks to capture the behavioural
characteristics of all traders, from the compliant to the fraudulent, and to
categorise each trader into one of seven categories: deliberate evader, avoider,
chancer, failure, new business, trier and compliant. With respect to evaders and
avoiders, it will take formal enforcement action and seek to disrupt their business.
Chancers and failures will be prioritised in inspections and
enforcement action if necessary.
threatened with
New businesses will receive advice from
inspectors in how to comply; and triers and those who are compliant will receive
education and generic marketing informing them of how to comply.
The HMRC’s approach is an example of the new ‘risk based’ approach to
compliance which is being adopted by many UK regulatory bodies. It involves an
attempt to systematically categorise firms drawing on an explicit set of
characteristics which the regulator uses to assess a firm’s ability and propensity
to comply.
Risk based approaches raise a number of issues, but what is
relevant for this discussion is the role of labelling, of identity construction, in
constituting action. Which identity the HMRC constructs for the firm governs its
25
Braithwaite et al n. 22 above (2007) p.155-6.
actions. The response that the firm or individual receives from the regulator,
here HMRC, is dependent on the category into which they have been placed.
Identity really does matter.
Whether the identities constructed are in fact accurate reflections of the firm’s
propensity to comply is another question. There is little scope within the model
itself for ways to verify the categorisation once imposed, and it is unclear what
would act as a trigger to change it. There is a danger that once imposed, an
identity is hard to change, almost no matter what the firm does. Moreover, even
if there is a change in identities, that change may be induced not by any changes
in the firm’s behaviour but because the regulator (tax authority) comes under
political or institutional pressures to either ‘crack down’ or ‘back off’.26
So
identities are constructed, but it remains an open question as to how reliable
those constructions are.
Regulatees constructing identities of regulators: identity, legitimacy and
compliance
The discussion so far has focussed on how regulators construct the identity of
regulatees. But how do regulatees construct or characterise regulators, and
more broadly the regulatory regime, and what the implications does this have in
turn for their response to the regulatory requirements? Here, research into the
reasons why people comply with the law is significant. There is a body of work
by psychologists and sociologists which suggests that people comply with laws
which they think are legitimate. Significantly for lawyers, legitimacy is not
confined to, or even dependent upon, legal validity in a formal, positivist sense.
Rather legitimacy means social credibility and acceptability: ‘a generalized
perception or assumption that the actions of an entity are desirable, proper, or
appropriate within some socially constructed system of norms, values, beliefs,
and definitions.’27 In a governance or regulatory context, a statement that a
regulator is ‘legitimate’ means that it is perceived as having a right to govern both
See R. Baldwin and J. Black, ‘Really Responsive Regulation’ (2008) 71(1) Modern Law Review
59.
27 Ibid.
26
by those it seeks to govern and those on behalf it purports to govern.28 Drawing
on institutional theory, there are three sets of reasons for social acceptance.
Legitimacy may be pragmatically based: the person or social group perceives
that the organisation will pursue their interests directly or indirectly. It can be
morally based: the person or social group perceives the goals and / or
procedures of the organisation to be morally appropriate). Finally, legitimacy can
be cognitively based: the organisation is accepted as necessary or inevitable.
29
Research into the motivations for compliance highlights the significance of each
of these bases of legitimacy for shaping a person’s response to regulatory
requirements. People comply because they see it in their interests to do so,
either in monetary terms or in terms of their social acceptability amongst their
peers. Research into the role of ‘shaming’ in prompting compliance, together
with work on the significance of social acceptability in prompting firms to ‘go
beyond’ compliance with their legal obligations emphasises the significance of
social judgements in motivations to comply.30
People also comply because they agree with the purpose of the regime, or
because they see it as procedurally fair.
Tyler’s work on obedience to the law
emphasises the importance of procedural legitimacy in determining people’s
response to the law. Where law is perceived as procedurally legitimate, either in
its initial formation and / or in its implementation, compliance is more likely.
Empirical work on tax evasion in Swiss cantons provides additional support for
this argument. Successive studies have shown that the more directly democratic
the political decision making procedures of a canton are, the lower the rate of tax
evasion.31
28
Referenda on tax has been found to have the highest positive
See discussions in R. Barker, Political Legitimacy and the State (Oxford: OUP, 1990) and D.
Beetham, The Legitimation of Power (London: Macmillan, 1991).
29 M. Suchman, ‘Managing Legitimacy: Strategic and Institutional Approaches’ (1995) 20(3)
Academy of Management Review 571; L.G. Zucker, ‘Institutional Theory of Organizations’ (1987)
13 Annual Review of Sociology 443. A fourth form of legitimacy, charismatic legitimacy, is also
noted by these writers.
30 S. Winter and P. May, ‘Motivation for Compliance with Environmental Regulations’’ (2001)
20(4) Jnl of Policy and Management 675; Braithwaite and Fisse; R. Kagan, N. Gunningham and D.
Thornton, ‘Explaining Corporate Environmental Performance: How Does Regulation Matter?’ (2003)
37 Law and Society Review 51.
31 L. Feld and B. Frey, ‘Tax Compliance as the Result of a Psychological Tax Contract: The Role of
Incentives and Responsive Regulation’ (2007) 29 (1) Law and Policy 102 and references cited
influence on tax morale (or support for the tax regime and levels of compliance),
although more generally tax morale is higher if people have a higher trust in
government, the courts and the legal system.
Empirical work into the
relationships between people’s experiences of regulation and their compliance
supports these findings. Tyler’s research, for example, found that judgements
about the fairness of procedures used during people’s personal interactions with
the police influenced their views about the legitimacy of legal authorities, views
which in turn influenced compliance.32
An important element in assessing
procedural fairness was the nature of the inter-personal interactions with the
authorities, independently of
whether the outcome
was favourable or
unfavourable to the person. Most significantly, inferences as to the motivations,
honesty and bias of the decision maker, and assessments of the ‘ethicality’ of the
process (being treated politely and having respect shown both for their rights and
for themselves as people) were more important than the favourability (as
opposed to perceived fairness) of the outcome. People assessed procedures to
be fair where they felt that the authorities were trying to be fair, and where they
felt that they were treated with respect.33
Tyler’s findings are significant for regulators as they illustrate that social
acceptance can be gained by the way in which regulators interact with
regulatees, irrespective of whether the person gains or loses under the regulatory
regime. How regulatees’ characterise regulators, based on their inter-personal
interactions with them, is thus critical for how they respond to regulatory
requirements. Regulatees are less likely to contest regulatory practices if the
regulator is generally respected as being knowledgeable, fair and reasonable
than if the regulator is characterised as ignorant, out of touch, a ‘pen-pusher’,
‘box-ticker’, petty or inconsistent.
Again, however, the identities, once
constructed, may be hard to change, almost irrespective of what the regulator
does. This can work in the regulator’s favour, but only as long as the identity
constructed is positive. Legitimacy, once conferred, can be hard to lose. But if
the characterisation is negative, then trying to change the identity attributed to it,
therein at 113.
32 T. Tyler, Why People Obey the Law (Princeton, 2006), p.102.
33 Ibid, pp.133-154.
and indeed build its legitimacy with respect to particular legitimacy communities,
can be a hard task.
Constructing and manipulating perceptions of identity
This leads us to the next point, which is that people are not necessarily passive
recipients of the identities imposed upon them by others. They can attempt to
build their own identities and to manipulate others’ perceptions of themselves.
The discursively produced identity of the regulator affects the de facto authority
and legitimacy that is conferred on them by others in the regulatory process. 34
Regulators can, and in some cases do, attempt to manipulate their identity in the
eyes of others, just as they can, and do, attempt to manipulate their legitimacy
more generally.35 Work by Fisse and Braithwaite, for example, suggests that the
effectiveness of a regulator depends on its ability to portray the impression to the
regulated that they are a ‘benign big gun’.36 Hawkins’ work emphasises the role
of bluff in the interaction between inspector and regulatee in getting certain types
of firm to comply (those who are ill informed as to the regulatory requirements of
powers of the regulator).
Tyler’s work also suggests how regulators may
enhance compliance by changing the nature of their interpersonal interactions
with regulatees.
As Tyler argues, regulators ‘who recognise and respond to
people’s normative concerns can exercise their authority more effectively; their
rules and decisions will be obeyed voluntarily’.37
Hence the Australian Tax
Offices’ re-drafting of letters, and changing the timing of when tax reminders are
sent out, referred to at the outset.
34
Collins, for example, argues that conversations both enacted and circulated secondarily as
reputations of other people, is what principally constitutes the social structure of authority: R.
Collins, ‘On the Microfoundations of Macrosociology’ (1981) 86 American Journal of Sociology 984
at 1004.
35 See Scott and Meyer, above; Suchman, above; Powell and DiMaggio (eds), The New
Institutionalism in Organisational Analysis (1991); S. Bernstein and B. Cashore, ‘Can Non State
Global Governance be Legitimate? An Analytical Framework’ (2007) 1 Regulation and Governance
347; B. Cashore, ‘Legitimacy and the Privatization of Environmental Governance: How Non-State
Market Driven (NSDM) Governance Systems Gain Rule Making Authority (2002) 15(4) Governance
503; J. Black, ‘‘Constructing and Contesting Legitimacy and Accountability in Polycentric Regulatory
Regimes’ (2008) 2 Regulation and Governance 1.
36 I. Ayres and J. Braithwaite, Responsive Regulation (1992).
37 Tyler, p.178,
By paying attention to the way in which regulatory conversations are conducted,
regulators can lead regulatees to develop perceptions that the regulatory regime
is procedurally fair, and thus legitimate. This in turn can prompt the regulatees
to comply. At a more systemic level, the rhetoric being deployed in the debate
on ‘principles based regulation’ is serving a similar function of constructing
identities, and in turn legitimacy, in what is in many respects a battle for business
in which the character of the regulatory regime is seen as a key weapon. The
UK financial and accounting regulators are using the rhetoric of ‘principles based
regulation’ to portray an image of a regulatory regime which is focused, flexible,
reasonable and stable, and thus attractive to firms.38 This identity has been
picked up and reinforced by influential US policymakers, who contrast it with the
identity they have constructed for their own regulators as box-ticking and
aggressive regulators who rely on detailed rules, who are discouraging firms from
doing business in the US and yet whose regulatory regimes allow significant
gaming and non-compliance, leading to failures such as Enron or the credit
crisis.39 Whilst the political wind blows in favour of principles based regulation,
those who are portrayed as (and who portray themselves as) practising it remain
relatively immune from reform.40
Rhetoric and identity can be powerful political
weapons, shielding regulators from political flak.
Regulators can not only attempt to manipulate their own identity, they can
attempt to manipulate the identities of those they are regulating. Foucauldian
analysis suggests that discourses can construct identities for individuals that then
affect their actions and thus provide a fertile site for their governance. 41 Again,
work in enforcement suggests that regulators engage in such attempts to
strategically manipulate the identities of regulatees in order to promote
compliance. John Braithwaite talks of the ‘self’ that regulators and firms choose
to put forward in encounters, and argues that sophisticated regulators achieve
38
See for example FSA, Principles Based Regulation: Focusing on the Outcomes that Matter (FSA,
April 2007).
39 See eg US Treasury’s Blueprint for a Modernized Financial Regulatory Structure (2008) available
at http://www.treas.gov/press/releases/reports/Blueprint.pdf.
40 See eg R.D. Kershaw, ‘Evading Enron: Taking Principles Too Seriously in Accounting Regulation’
(2005) 68 Modern Law Review 594.
41 See eg N. Rose, ‘Identity, Genealogy, History’ in S. Hall and P. Du Gay (eds), Questions of
Cultural Identity (1996).
their goals by manipulating ‘vocabularies of motive’.42 He draws on the work of
psychologists to suggest that the way that the regulatee is treated by the
regulator can affect how the regulatee sees themselves and their relationship to
the regulation, and can in turn affect their attitude towards that regulation and
ultimately their compliance (assuming they have the organisational capacity to
back up the will to comply). For example, if a firm is treated as being responsible
and law abiding, they are more likely to demonstrate that ‘self’ than if they are
treated as amoral calculators.
Bardach and Kagan’s work shows a similar
phenomenon.43 Parker also argues that the conscious strategy of identifying
certain firms as ‘leaders’, ‘champions’ or ‘beacons’ whose practices others might
emulate has also been shown (when supported by other regulatory strategies) to
be effective in improving internal compliance systems within firms.44
However,
the reverse may also be true. Wrongly dharacterising a firm as deviant, or as an
amoral calculator, can backfire causing the regulator to lose any goodwill that
there may have been in the firm for the regulatory regime, and prompting
behaviour which accords with the negative identity which has been bestowed on
it. This indeed is Braithwaite’s argument for an approach to enforcement which
always starts with negotiation, for one which always uses a punitive approach, he
argues, can turn a generally compliant firm into a deviant simply because it is
treated as such.45
Finally, regulatees can also attempt to construct identities for themselves vis a
vis regulators. Here work on organisational deviance is suggestive.46 Some of
that work suggests strategies of avoidance that involve portraying images of
compliance to the regulator whilst in practice engaging in avoidance. For
example, the creation of ‘buffer zones’ within an organisation which handle the
face to face interactions with regulators, portraying images of compliance whilst
the rest of the organisation continues unaffected by the regulatory regime; or the
Ayres and Braithwaite, op. cit. n. 111 at 32, citing C. Wright Mills, ‘Situated Actions and
Vocabularies of Motive’ (1940) 5 American Sociological Review 904 at 908, 913.
43 E. Bardach and R. Kagan, Going by the Book: The Problem of Regulatory Unreasonableness
(1977).
44 C. Parker, The Open Corporation: Self-Regulation and Corporate Citizenship (2002) at 327.
45
I. Ayres and J. Braithwaite, Responsive Regulation (1994); J. Braithwaite Restorative Justice and
Responsive Regulation (2002).
46 See eg C. Oliver, ‘Strategic Responses to Institutional Processes’ (1991) 16(1) Academy of
Management Review 145; P. Rock (ed) Organisational Deviance (2005).
42
strategy of creating scapegoats at either a junior or senior level: the role of ‘vice
president for going to jail’. However, despite the extensive research that has
been done on how regulators engage with regulated firms and seek to negotiate
compliance with them, and indeed on why regulated firms themselves comply,
there has been little or no research on how regulated firms try to portray
themselves to the regulator; how they construct a particular identity of
themselves in an attempt to induce the regulator to adopt a particular approach
towards them; a gap in our understandings of micro-level regulatory dynamics
that needs to be filled.
Conclusions - Constructing and being constructed: the role of regulatory
conversations
Analysing regulatory conversations of itself does not tell us why people say what
they do, but it can help to both draw attention to and explain the effects of what it
is they do say. Regulatory conversations play a role in constructing a
characterisation of the regulatory process as a whole and enabling those
involved to make sense of that process.47 Regulators construct
characterisations of regulatees on which they in turn base decisions on when to
inspect, and how to respond to non-compliance. Regulatees construct
characterisations of regulators which in turn affect their perceptions of the
legitimacy of the regulatory regime and whether or not they comply. Regulators
attempt to manipulate the perceptions regulatees have of the regulators and of
themselves in attempts to enhance compliance; and regulatees attempt to
manipulate the perceptions regulators have of the regulate in order to improve
their ‘standing’ in the regulators’ eyes, a manipulation which may itself be part of
a strategy of organisational deviance. Analytically it is possible that the regulatee
also tries to manipulate the perception the regulator has of itself for similar
Eg K.E. Weick, Sensemaking in Organizations (1995); M. Alvesson, ‘Talking in Organizations:
Managing Identity and Impressions in an Advertising Agency’ (1994) 15 Organization Studies 535;
B.Czarniawska-Joerges, ‘Autobiographical Acts and Organizational Identities’ in S. Linstead et al,
Understanding Management (1996); Y. Gabriel, ‘Same Old Story or Changing Stories’ and A.
Wallemacq and D. Sims, ‘The Struggle with Sense’ in D. Grant, T. Keenoy and C. Oswick,
Discourse and Organization (1998).
47
reasons, though there is little or no empirical work on whether or how that is
done.
However, although discourse theories emphasise fluidity and change in identity
construction, in practice the identities constructed may be determinative and
‘sticky’ – hard to change. Once labelled, always labelled. There is an obvious
down side. If the regulator erroneously characterises the regulatee as ‘generally
willing and compliant’ then this does affect their attitude and response to its
behaviour. The Australian insurance firm, HIH, had been regarded by its
regulator as generally compliant and a firm which, like other large firms, could be
trusted to comply. As a result, the regulator adopted an approach to HIH
characterised by accommodation and non-aggression. HIH collapsed leaving
millions of dollars of liabilities; causing a complete recasting of the regulators’
approach.48 Mischaracterisation led to significant regulatory failure. Northern
Rock provides a similar example.49 Moreover, it is unclear how the identities
constructed should play into the enforcement approach. In the HMRC’s risk
based approach, should it focus on the ‘trier’ who has a high risk profile (high
impact even if low probability) or the ‘chancer’ who has a low risk profile (low
impact even though high probability)?
Regulatory conversations are not the only element involved in constructing
identities, and the identities that participants build of themselves and others in the
regulatory process are not the only reasons that they behave in the way that they
do. But understanding the dynamics of regulatory conversations is necessary
even if not sufficient for understanding the dynamics of the regulatory regime as
a whole. The process of identity construction may have positive effects, in purely
functional terms; but identities are contestable, and for the regulator, failure to get
it right is likely to come at a high political cost.
See J. Black, ‘Managing Regulatory Risks and Defining the Parameters of Blame: the Case of
the Australian Prudential Regulation Authority’ (2006) Law and Policy 1-27.
49 See the Treasury Select Committee’s report, Run on the Rock (Fifth Report 2007-8).
48