An empirical assessment of corporate environmental crime-control strategies.

• Author: Simpson, Sally S.

1. INTRODUCTION

   As a subtype of white-collar crime, corporate crime is typically understood to involve illegal behavior by firms and their agents (executives and managers) in the pursuit of corporate benefit. (1) Criminologists recognize that even though corporations as juridical persons can be charged with illegal activity, corporations per se do not "act." Rather, managers make decisions and act on behalf of the company. As corporate "actors," managers also are potentially subject to sanctions for their participation in or knowledge of corporate illegality. (2) Enforcement provisions for environmental crime allow criminal prosecution, in addition to administrative and civil sanctions, against both corporations and responsible corporate officers. (3)

   Most corporate crime research focuses on firm, industry, and manager attributes to differentiate offenders from nonoffenders. (4) While this approach is a reasonable one, it often leaves out an important characteristic associated with company (and employee) compliance: the regulatory environment. Specifically, the regulatory environment influences and shapes criminal opportunities through punishment (or the threat of it) and socialization, (5)

   Putatively, command-and-control policies--compliance rules imposed and "policed" by the government with an emphasis on punitive sanctions for violators--influence corporate crime because corporate managers are instrumental actors. (6) Decisions and actions flow from a cost-benefit assessment of both the pecuniary and nonpecuniary pros and cons associated with illegal activity. If the benefits of crime are high and the risk of discovery and punishment is low, then criminal opportunities increase as actors perceive less risk associated with illegal activities. (7)

   Another regulatory strategy shifts the primary mechanism of compliance away from the government to the organization itself and to individual actors within it. This approach is less reliant on formal regulation (although the government often plays a secondary role through "enforced" self-regulation) and builds on what Braithwaite has called a "family model" of crime control. (8)

   Good corporate citizens are firms whose managers, when confronted with corporate criminal opportunities, will be guided by a sense of right and wrong, by their understanding of how others are likely to view their behavior, and by the extent to which they think the discovery of these acts would bring shame on their companies. (9) Effective self-regulation by firms (ethics programs, internal compliance mechanisms, and sensitivity to informal sanctions) should narrow criminal opportunities.

   In the corporate crime literature, there has been extensive discussion and debate about different regulatory strategies but far too little systematic investigation of the relative merits of each, and few have taken into account the range of solutions that can be included in regulatory policy, (10) Consequently, scholars and policymakers know very little about "what works, what doesn't, and what's promising" regarding corporate crime-control strategies. (11) In the current study, we offer some empirical insight into this question.

   In this Article, we examine the prevention and control of corporate environmental crime in the context of individual and firm-level characteristics that have been linked conceptually and empirically to corporate crime. Specifically, we focus on the extent to which decisions by managers to violate environmental laws are affected by command-and-control or self-regulation prevention-and-control strategies, controlling for known risk factors for crime. This research improves on the prior literature in several ways. Much of the corporate crime literature relies heavily on official data sources. As criminologists are well aware, official observations are limited to illegal acts recorded by enforcement agents and neglect those acts that do not come to the attention of authorities. Of equal importance, these data sources do not allow researchers to learn what managers are actually thinking, leaving the intra-organizational decisionmaking process virtually uninvestigated. The current study addresses both of these issues by using data from a factorial survey to examine managerial decisionmaking within a corporate context. Our goal is to determine the extent to which regulatory strategies are effective in the context of situational and individual pushes/pulls toward illegal behavior.

   In Part II of this Article, we describe the regulatory context and review previous research on environmental noncompliance. We focus particularly on organizational and individual factors that increase the risk of crime. In Part III, we describe the current research design and research participants. Part IV contains our analysis and results. We conclude, in Part V, with a discussion of the findings, particularly their implications for successful regulatory regimes.

2. PRIOR LITERATURE

   A. REGULATORY STRATEGIES AND CORPORATE OFFENDING

   Regulatory strategies often overlap. Regulatory instruments and institutions are interconnected, (12) and some strategies, such as responsive regulation, are built around the argument that "regulatory policy should take neither a solely deterrent nor a solely cooperative approach." (13) Although it is somewhat simplistic to classify regulation into distinct types, (14) Gunningham, Grabosky, and Sinclair argue that it is useful to examine both the prevention and control capacities of different regulatory strategies given that "a particular instrument which may appear attractive, when looked at on its own, may work quite differently when introduced alongside others." (15) Below, we identify the key components of two regulatory strategies (command-and-control and self-regulation) and highlight how each is expected to or has been shown to affect corporate crime prevention and control. (16) In addition, we discuss the important role of informal sanctions either as a control mechanism that can be triggered by command-and-control interventions or as complementary with self-regulatory strategies.

   1. Command and Control

      In command-and-control strategies, legal authorities dictate the terms of compliance, relying on the threat of formal legal sanctions to achieve compliance with those terms. (17) High detection risk coupled with certain and severe punishments should deter most offenders. Empirically, however, the story is more complicated than this. Some research supports the contention that punitive sanctions affect firm and plant behavior, but findings overall are mixed. Cohen, for instance, finds that Coast Guard inspections and monitoring reduce spills at the firm level (a general deterrence effect) and that the frequency of inspection is more important than sanction severity. (18) Simpson, Garner, and Gibbs find little evidence that sanctions of any type (e.g., inspections, informal or formal interventions) associated with Clean Water Act enforcement inhibit reoffending (i.e., specific deterrence). (19) Plant-level studies more consistently show a specific deterrence effect associated with Environmental Protection Agency (EPA) monitoring and enforcement, and a recent review of the empirical literature on enforcement, conducted by Gray and Shimshack, finds both specific and general deterrence associated with environmental monitoring and enforcement. (20)

      Scenario-based survey research, which largely focuses on environmental and other forms of corporate offending (e.g., bribery, sales fraud, price-fixing), shows that current and prospective managers report reasonably high expectations that corporate crimes will be discovered by legal authorities and that ensuing sanctions will be costly, particularly when individuals (as opposed to the company) are targeted. (21) Thus, command-and-control strategies based on discovery and punishment should lower corporate offending. But once again, the relationship is far from straightforward. In one study, threats of formal sanctions are mediated through individual characteristics such as morality (22) and outcome expectations. (23) Formal punishments are less relevant once informal consequences are included in the analysis. (24)

   2. Self-Regulation

      Self-regulatory approaches (typically offered as a complementary strategy in conjunction with government-enforced regulation) presume that prosocial norms and values coupled with effective internal compliance systems (e.g., clear accountability, communication of expectations, effective monitoring, and appropriate reprimands when violations occur) will secure compliance. (25) Braithwaite's "family model" of self-regulation rejects the economically rational conception of the firm and its managers found in command-and-control approaches to crime control. (26) Instead, company self-regulation also accounts for the notion of organizational social responsibility and the prosocial norms and ethical values of company managers. Thus, managers' perceptions of the ethical climate of a firm should affect their own offending intentions.

      Evidence suggests that managers who believe that the corporate culture is tolerant of illegality are more likely to violate regulations. (27) Similarly, a recent meta-analysis found that ethics codes supported and enforced by top management have a positive, significant effect on ethical decisionmaking and conduct within companies. (28) Research also indicates that a positive compliance culture at the firm level may be transmitted from a parent company to the plant level. (29)

   3. Informal Sanctions

      Informal sanctions (e.g., extralegal costs) are regulatory levers associated with both firm self-regulation and command-and-control strategies, depending on the mechanism that inhibits crime. Negative publicity is a case in point. Multiple sources of negative publicity can affect corporate (and manager) actions or outcomes, including: environmental activism, (30) mandatory firm disclosure...