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

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

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!)

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

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

Australian Compliance Research 2 Third party Influence Nielsen/Parker- To what extent do Third parties Influence Business Compliance? (2008) Law and Society 309 -340 3 rd 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. .

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

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

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. . ? ?