Using Public Law to Shape Private Organizations

• Author: Cary Coglianese and Jennifer Nash
• Pages: 168-182

The Handbook of Law and Society, First Edition. Edited by Austin Sarat and Patricia Ewick.

© 2015 John Wiley & Sons, Inc. Published 2015 by John Wiley & Sons, Inc.

Introduction

For the last century, government officials have sought to use law to shape the

behavior of organizations, including businesses, non‐profit institutions, and even

governmental entities. They have used law – that is, regulation – as an ostensible

means to improve social and economic outcomes by treating business firms and

other organizations as rational actors, raising the expected costs of undesirable

behavior through the imposition of rules backed up by threatened penalties.

Although widely accepted, the rational actor model of regulation actually faces

considerable conceptual and empirical challenges when applied to organizations,

which are by no means unitary actors, let alone necessarily “rational” in the sense

contemplated by conventional theory. Perhaps this partly explains the checkered, or

at least contested, history of government regulation, which in most developed econ-

omies has yielded substantial net benefits in some instances while also failing in

other cases to achieve even the most basic policy objectives (Coglianese 2012).

A relatively new approach to regulation seeks to overcome the limitations of

traditional forms of regulation by seeking to affect directly the way that organiza-

tions manage their operations. Rather than assuming that business firms and other

organizations are rational “black boxes” that respond in a calculated fashion to the

risk of ex post penalties, a managerial approach to regulation treats organizations’

internal management processes as the vital ingredient in combating regulatory

problems, explicitly targeting these processes for control. Management‐based regu-

lation places government in the role of a meta‐regulator, directing organizations to

regulate themselves from the inside while reserving governmental power to oversee

the adequacy of this internal management.

Using Public Law to Shape Private

Organizations

Cary Coglianese and Jennifer Nash

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