Coming Clean and Cleaning Up: Does Voluntary Self-Reporting Indicate Effective Self-Policing?

Abstract

Administrative agencies are increasingly establishing voluntary self-reporting programs both as an investigative tool and to encourage regulated firms to commit to policing themselves. We investigate whether self-reporting can reliably indicate effective self-policing efforts that might provide opportunities for enforcement efficiencies. We find that regulators used self-reports of legal violations as a heuristic for identifying firms that are effectively policing their own operations, shifting enforcement resources away from voluntary disclosers. We also find that firms that voluntarily disclosed regulatory violations and committed to self-policing improved their regulatory compliance and environmental performance, suggesting that the enforcement relief they received was warranted. Collectively, our results suggest that self-reporting can be a useful tool for reliably identifying and leveraging the voluntary self-policing efforts of regulated companies. * The authors are grateful for insightful comments from

Reinforcing Regulatory Regimes: How States, Civil Society, and Codes of Conduct Promote Adherence to Global Labor Standards

“…Orts (1995), for instance, describes how environmental auditing systems construct internal decision-making structures and routines that embed environmental impacts into managers' considerations. Research suggests that Sarbanes-Oxley's financial auditing requirements have changed corporate practices dramatically (Wagner and Dittmar, 2006;Schmidt and Raman, 2012) and that formal commitments to conduct internal audits can lead to improved regulatory compliance (Toffel and Short, 2011). In these types of regulatory design, auditing is not merely a technical tool for verifying objective facts, but an attempt "to re-order the collective and individual selves that make up organizational life" (Power, 1997:42) in a way that will "connect the inner workings of companies to wider public demands for control" (Power, 1997:65).…”

Extent of Cooperative Enforcement: Effect of the Regulator-Regulated Facility Relationship on Audit Frequency

“…Rather than examining the mere presence of a broad set of management activities or analyzing a count of practices, this study focuses on the use of a particularly tangible management activity -environmental regulatory compliance auditing -that is strongly expected to improve performance. Previous empirical studies support this expectation (Khanna and Widyawati, 2011;Short and Toffel, 2010;Toffel and Short, 2011); in particular, (Earnhart, 2004a,b) reveal that more audits lead to better compliance with wastewater discharge limits. As important, beginning in the mid-1980s, the EPA has promoted self-audits as a tool for improving environmental performance, especially for increasing environmental compliance (Evans et al, 2011).…”

Don’t Say You’re Sorry Unless You Mean It: Pricing apologies to achieve credibility

“…In particular, the same will be true for reductions in the penalty for offenders who elect to apologize. However, as I demonstrated in previous sections, there is no good reason to achieve such savings by lowering the penalty for apolo- 30 See, section 5.F. infra, discussing how punishment for apologizing can take the form of additional imprisonment, civil service, monetary transfers, or a combination thereof.…”