The Framing Effects of Professionalism: Is There a Lawyer Cast of Mind? Lessons from Compliance Programs
Rosen, Robert Eli, Parker, Christine E., Nielsen, Vibeke Lehmann, Fordham Urban Law Journal
4. Testing Hypothesis 1: Compliance Behavior of Respondent's Company
In order to test Hypothesis 1, we evaluate the extent of influence of the type of professional in charge of compliance on two measures of compliance management behaviors of the businesses--implementation of (formal) compliance management systems and the (substantive) way compliance is managed in practice. (114)
(a) Implementation of formal compliance system elements (Table 2): The questionnaire asked respondents to provide yes or no answers to a series of twenty-one very specific questions about whether their organization had implemented various procedures and actions expected to be part of a good (formal) compliance system. (115) The questions were later grouped into four different indices measuring the implementation of system elements concerning a) complaints handling, b) communication and training from the top of the organization to employees, c) management accountability and whistle-blowing, and d) compliance performance measurement and discipline. We use these four measures to look at four different dimensions of compliance system implementation (rather than one index of all the items) because businesses will not necessarily implement all potential aspects of compliance systems equally. (116) On the other hand, using these four indices rather than looking at variation in each of the twenty-one elements individually gives a clearer picture that takes into account the fact that there are different ways of performing the different functions of a compliance system. (117)
(b) Compliance management in practice (Table 3): Implementation of a compliance system is aimed at putting formal structures in place that managers and employees can use to identify, prevent and correct compliance. (118) This should be helpful in influencing the way activities are managed in practice to improve actual compliance. But it is not enough on its own. (119) It is possible for an organization to implement the various elements of compliance management programs in a formulaic, formalistic, or purely symbolic way. (120) But the key to a compliance management program's impact on compliance will be the impact it has on everyday routines and practices. (121) Effective compliance management in practice means that management and employees identify compliance problems, communicate them to those who can fix them, and rectify them as a part of their everyday routines and practices. (122) The aim of compliance management programs is to ensure compliance by improving compliance management in practice. Again we constructed a single measure by adding together fourteen questions containing specific statements about what business management actually does in order to make sure they comply with the TPA (shown in Table 3).
5. Testing Hypothesis 2: Respondent Company's Risk Analyses
Risk analysis requires determining both the magnitude of the loss and the probability that the loss will occur. (123) As there are multiple stakeholders who can sanction non-compliance, the salience of a stakeholder sanction must be determined in addition to the weight it is accorded. (124) As the regulator is reactive, (125) we add to the measure of legal detection of non-compliance, detection by stakeholders.
(a) Respondents' Weighting of Losses from Different Stakeholders (Table 4): We measure the way the firm weighs the magnitude of loss for non-compliance resulting from sanctions from different stakeholders by a series of questions asking about how much they would worry about (i) economic losses in relation to various different stakeholders if their firm was accused of breaches of the TPA; and (ii) losses of respect and esteem in relation to various different stakeholders if their firm was accused of breaches of the TPA. These questions are all predicated on the hypothetical that the firm is "accused of breaches of the TPA one day in the future." In so doing, we attempt to segregate out the seriousness of the norm violation from the probability of it being detected. …