Big audit firms as regulatory intermediaries in transnational labor governance

Studies using the Regulatory–Intermediary–Target (RIT) framework have examined a variety of forms of regulatory capture, including how targets capture intermediaries (T➔I) and how intermediaries capture regulators (I➔R). Little attention has been paid to why and how regulators themselves might engage in capture. Yet such a scenario is likely in transnational governance settings characterized by regulatory competition and conflict, as well as power differentials between different types of private regulators (non‐governmental organizations, multinational corporations, and business associations). This paper elucidates why and how a private regulator might capture another private regulator via a regulatory intermediary: R1➔I➔R2. Drawing on interview and archival data, I examine three industry‐driven regulatory intermediaries created to harmonize private labor codes of conduct and ethical audit processes. These are founded and governed by a small group of retail trade associations and global retailers who also fulfill the role of private regulators (R1). My analysis reveals that the creation of these intermediaries is driven by global retailers’ reliance on standardization, low transaction costs, and regulatory harmonization across all aspects of their operations. It further reveals how the harmonization platforms are designed to leverage global retailers’ market power and evolve from regulatory intermediaries into de facto regulators that supplant existing private regulators (R2), and thereby capture transnational governance of consumer product supply chains. The article concludes by discussing contributions, implications, and avenues for future research.

Section: Discussionmentioning

confidence: 99%

Private regulatory capture via harmonization: An analysis of global retailer regulatory intermediaries

Marques

2019

“…2). In this special issue, Fransen and LeBaron (2019) provide a telling example of how target-related intermediaries, such as big audit firms, can influence CSR rules related to forced labor and modern slavery. This argument also has implications for Koenig-Archibugi and Macdonald's (2017) taxonomy of the possible relationships between beneficiaries and the other groups of regulatory actors.…”

Section: Combining the Rit Model And Critical Political Csrmentioning

confidence: 99%

“…Actually, and rather paradoxically, indirect regulatory strategies can be of more benefit to regulatory targets than intended beneficiaries. As also illustrated by Fransen and LeBaron (2019) in this special issue, there is evidence that supposedly "independent" intermediaries (e.g. professional accountants and auditors) construct voluntary social auditing standards and reporting frameworks that are used by companies as a self-referential and legitimizing tool (see also Bebbington et al 2014;LeBaron et al 2017).…”

Section: Introductionmentioning

confidence: 95%

The European regulation of corporate social responsibility: The role of beneficiaries' intermediaries

Monciardini

Conaldi

2019

Intended beneficiaries have an undeniable relevance to regulation. However, current research has focused mainly on the two‐party relationship between rulemaking and rule‐taking. We attempt to fill this gap by exploring the formal and informal roles that beneficiaries’ intermediaries played in co‐creating European Corporate Social Responsibility (CSR) rules and associated practices between 2000 and 2017. By linking recent conceptualizations of regulatory intermediaries with the literature on critical political CSR, we offer a more dynamic and contextualized understanding of the roles of beneficiaries’ intermediaries. Specifically, we identify six micro‐dynamics through which they influenced the regulatory process. Notably, our findings highlight how the convergence of interests between three groups of beneficiaries’ intermediaries – the Non‐governmental organization–Investor–Union nexus – had a key role in reshaping CSR rules. We conclude that, in the European context, stronger and better‐coordinated beneficiaries’ intermediaries are crucial in order to achieve more effective corporate conduct regulation.

“…Intermediaries themselves may expand their role by appropriation and advancement of their own agenda. For example, the Big Four audit firms arrive at their own interpretation of social and financial outcomes and, in doing so wield influence over public and private regulators and other stakeholder groups (Fransen & LeBaron , p. 4). In cases of wide but inconsistent regulatory adoption, the targeted actors may even become fatigued by the implementation of different audits and standards (Locke ).…”

Section: Intermediary Roles In Regulatory Programsmentioning

confidence: 99%

Intermediary roles in regulatory programs: Toward a role‐based framework

Kourula

Paukku

Peterman

et al. 2018

This paper develops a role‐based framework of intermediaries in regulatory programs. In examining the types of roles that organizations adopt in regulation and governance, we argue that roles have important implications for understanding organizational and program level dynamism and outcomes. We use the Regulator–Intermediary–rule‐Taker framework to describe how organizational roles can be adopted through assignment, appropriation, or promotion. We then go deeper into how intermediaries adopt a variety of different roles in key regulatory programs. We examine generic intermediary roles across programs that involve four main groups of activities: creating and/or organizing, coordinating between programs, supporting implementation, and voicing an opinion. All in all, our role‐based framework allows for a novel relational way to understand interorganizational and institutional dynamism in complex, interactive, and ever‐changing regulatory regimes.