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Professor Barry J Rodger, University of Strathclyde Glasgow

Professor Barry J Rodger, University of Strathclyde Glasgow ACLE- To Enforce and Comply: Incentives Inside Corporations and Agencies, March 5-6, 2009 barry.j.rodger@strath.ac.uk. Reflections on: Reflections on Corporate Governance, managerial incentives and Regulatory/Antitrust Compliance.

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Professor Barry J Rodger, University of Strathclyde Glasgow

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  1. Professor Barry J Rodger, University of Strathclyde Glasgow ACLE- To Enforce and Comply: Incentives Inside Corporations and Agencies, March 5-6, 2009 barry.j.rodger@strath.ac.uk Reflections on: Reflections on Corporate Governance, managerial incentives and Regulatory/Antitrust Compliance

  2. Background: Paper • Tackles a range of key issues in the debate on compliance and incentives • Corporate Governance • Internal Managerial incentives • Corporate and individual Crime • Whistleblowing, compliance and Law Enforcement • 3 issues- Leslie and ‘faithless agents’; the Australian compliance study and my UK follow-up study

  3. Leslie and Faithless Agents I • ‘Cartels, Agency Costs and Finding Virtue in Faithless Agents’ C R Leslie [2008] William and Mary Law Review Vol. 49 1621 • Fascinating- Christie’s and Sotheby’s- Christopher Davidge, CEO of former- (see the Art of the Steal) • Lysine- Mark Whitacre, division manager of ADM (see the Informant, and forthcoming film- Matt Damon!)

  4. Leslie and Faithless Agents II • Leslie- destabilise cartels from within… • Encourage faithless agents, by decoupling the interests of principal and agent by:- • Increasing severity of individual punishment for price-fixing; • Reward individuals for exposing cartel activity- immunity and bounties; and • Structure law so employees will not trust employers to protect them should the cartel be exposed

  5. Australian Compliance Research 1 • The Australian compliance study- work of Parker and Nielsen • “Do Businesses Take Compliance Systems Seriously?: An Empirical Study of the Implementation of Trade Practices Compliance Systems in Australia”, Melbourne University Law Review, Volume 30, 2006 p 441; • ‘How Much Does it Hurt? How Australian Businesses Think about the Costs and Gains of Compliance with the Trade Practices Act’ (2008) Melbourne Uni Law Review 554-608- perceptual deterrence

  6. Australian Compliance Research 2-Third party Influence • Nielsen/Parker- To what extent do Third parties Influence Business Compliance? (2008) Law and Society 309-340 • 3rd party pressure/influence on compliance management- plural compliance motivations? • Considerable worry but little evidence of impact in driving business compliance behaviour, except for risks of complaints • But suggests enforcement agencies can facilitate role of third parties..

  7. UK study- Compliance Post-OFT Infringement Action Earlier empirical work re compliance (2000 CLLR, 2005 World Competition) (forthcoming European Competition Journal) Study following Australian study-Database of all OFT infringement decisions from March 1 2000 to end 2005 • Questionnaires to all organisations which infringed either Competition Act prohibition • Your organisation, the Competition Act 1998 and the OFT; Your knowledge of the 1998 Act; The impact of the Act on your Organisation; Costs and Benefits of Complying with the Act • 20 questionnaires returned (33%)- all Chap 1 prohibitions

  8. Compliance Post-Infringement Study- Conclusions 1 • 33% response rate satisfactory, but limited number- 20 in total • Disappointing levels of compliance implementation- note focus of study • Communication and training weak • OFT education strategy post 1998- enhanced carrot and stick approach • Further resources dedicated to information and education re compliance

  9. Compliance Post-Infringement Study- Conclusions 2 • Business perceptions re compliance important- pluralistic motivations • Support for three key theories- deterrence, moral citizenship, managerial (in)competence • Increase sanctions> greater concern but clearly insufficient • Greater task for OFT including promotion of compliance professionalism • Future research re top 100 UK companies ..??

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