A trust approach to regulating responsible businesses?

An eternal debate in regulation research is whether regulators should adopt a repressive (distrusting) strategy towards the businesses that they regulate or a cooperative (trusting) strategy. Ayres and Braithwaite (1992)... [ view full abstract ]

An eternal debate in regulation research is whether regulators should adopt a repressive (distrusting) strategy towards the businesses that they regulate or a cooperative (trusting) strategy. Ayres and Braithwaite (1992) sought to overcome that dichotomy by proposing their Responsive Regulation Theory in which the regulator starts by cooperating and as long as the regulated business organization reciprocates with compliance, the regulator will continue to cooperate. It focuses on the attitude and actions of the inspector during the inspection. Extant literature suggests that trust in the relationship between regulatory agency and regulated business has a positive effect on compliance and the control of public risks.
Decisions about which regulated business to inspect with which frequency and with attention to which aspects were not addressed by Ayres and Braithwaite. Risk-based regulation started to address those issues more systematically. Traditionally most attention went to distinguishing the notoriously bad compliers and consistent violators from the rest, but during the early 21st century attention shifted to also distinguishing the structurally good compliers (trustworthy, responsible businesses) from the rest, usually in order to reduce the administrative burden for those businesses.
This study focusses on the latter distinction: how do you distinguish the structurally good compliers from the rest? What makes a business a structurally good complier and, therefore, trustworthy? And then what are the implications for the relationship between trustworthy responsible businesses and their regulators? How does their regulatory regime differ from “normal” and “bad” compliers? In other words, what might a trust approach to regulating responsible business look like?
Table 1 shows ten cases identified to date with descriptive characteristics and preliminary analytic characteristics. Descriptive characteristics show variations in country, sector, type of public risk covered. Preliminary analytic characteristics include use of private certificates, corporate compliance systems, special contracts or intermediaries. Preliminary assessments of relative success or failure are also shown.