Institutional Theory and Evolution of ‘A Legitimate’ Compliance Culture: The Case of the UK Financial Service Sector

Abstract

Over the last decade, scandals within the UK Financial Service sector have impacted their legitimacy and raised questions whether a compliance culture exists or not. Several institutional changes at the regulatory and normative levels have targeted stakeholders' concerns regarding compliance culture and led to changes in the legitimation process. This paper attempts to address a gap in the literature by asking the following question: How is the UK financial institutions' compliance culture shaped by the institutional environment and changing legitimacy claims? Towards achieving this objective, the paper draws on the institutional theory and pays attention to the various configurations of the legitimacy notion (property vs process Suddaby et al. Acad Manag Ann 11(1):451-478; 2017). The paper utilises a longitudinal interpretive design and undertakes a qualitative content analysis of fines issued by the UK regulator and the communicated response of violating firms as well as non-sanctioned firms. Our findings indicate that there is a cyclical 'evolutionary compliance' rather than the more widely recognised state of 'compliance culture'. This culture is fuelled by interchangeable isomorphic forces where the majority of violating firms are seen to issue similar responses to the regulators sanction to maintain their reputation and legitimacy in the market. Notably, legitimacy is now defined within an interactive process between the regulator and firms rather than being static and achieved by ticking the box.

The impact of assurance on compliance management systems on bank directors' decisions

“…Accordingly, bank directors are chosen as participants. They are ultimately responsible for developing and administrating a CMS for their bank, not only according to international scholarly literature (Adams, 1994; Burdon & Sorour, 2018) but especially according to section 91 clause 1 AktG. In addition, banks are of high economic relevance and play a major role in the German corporate governance system, and bank directors simultaneously represent the views of creditors, investment consultants, and shareholders.…”

Stakeholder perception of the determinants of audit committee effectiveness in a developing economy: evidence from the Libyan banking sector

“…Thanks for this comment. We have integrated Burdon and Sorour (2020) into the debate about the impact of professional bodies and normative aspects on the ACE. See pages numbered 12 and 35.…”

“…These contextual factors shape the national business systems (Matten and Moon, 2008;Jackson and Apostolakou, 2010;Gerged et al, 2021b) and exert coercive, normative or mimetic pressure on organisations (in our case, banks) to adopt certain structures or practices [1]. Neglecting the mimetic (industry) pressure, we submit, as do La Porta et al (1998) and Burdon and Sorour (2020), that the strength of coercive pressure (legal and regulatory systems; government intervention) and normative pressure (professional bodies' guidelines) will determine the extent to which firm corporate governance mechanisms, including ACs, function effectively to protect stakeholder interests. In this context, we postulate that if stakeholders perceive these institutional pressures as strong (weak) and effective (ineffective), they are also likely (less likely) to perceive the ACs established as effective (ineffective).…”

Introducing the new culture section of BJPsych Bulletin

“…It has become an explicit part of financial regulation, and firms are reviewed to ensure that their management structures deliver it. 10 Within the National Health Service (NHS), regulatory culture is much more variably instituted 11 and an audit model may not capture many of its necessary components. 12 We therefore wish to publish articles relevant to improving the regulatory culture of psychiatric care, as the level of variation found suggests an ongoing and urgent need.…”