This programme researches why people obey rules, or break rules, and hence best practice in ensuring compliance and maximising performance and innovation, both internally within companies and externally in public regulatory and enforcement systems. As a result of extensive research into theory and practice, Professor Christopher Hodges has proposed a model of Ethical Business Regulation, which is built on the following principles:
- A policy of supporting ethical behaviour. The regulatory system will be most effective in affecting the behaviour of individuals where it supports ethical and fair behaviour.
- Ethical regulators. Regulators should (as the central part of this report advocates) adopt unimpeachable, consistent and transparent ethical practice.
- Ethical businesses. Businesses should be capable of demonstrating constant and satisfactory evidence of their commitment to fair and ethical behaviour that will support the trust of regulators and enforcers, as well as of employees, customers, suppliers and other stakeholders.
- A learning culture. A “Blame” culture will inhibit learning and an ethical culture, so businesses and regulators should encourage and support an essentially open collaborative ‘no blame’ culture, save where wrongdoing is intentionally or clearly unethical.
- A collaborative culture. Regulatory systems need to be based on collaboration if they are to support an ethical regime, and to maximise performance, compliance, and innovation.
- Proportionate responses. Where people break rules or behave immorally, people expect to see a proportionate response.
The core substantiation for this model is set out in C Hodges, Law and Corporate Behaviour: Integrating Theories of Regulation and Enforcement (Hart Publishing, 2015).
The idea of EBR has influenced UK Government in adopting its major January 2017 policy on Future Regulation, involving ‘regulated self-assurance’ and ‘assured advice’: see https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/582283/Regulatory_Futures_Review.pdf (especially pages 22-23).
A paper summarising the evidence was published by the UK Department for Business Innovation & Skills in 2016: C Hodges, Ethical Business Regulation: Understanding the Evidence (Department for Business Innovation & Skills, Better Regulation Delivery Office, 2016). Copies of that paper in German, Italian and Spanish, are available.
The Scottish Government has approved of the approach in its 2016 competition and consumer protection policy.
The Committee on Standards in Public Life strongly supported the EBR policy in its 2016 report on ethics in regulators Striking the Balance. Upholding the Seven Principles of Public Life in Regulation; see especially pages 62, 69-70, and Prof Hodges' paper commissioned by the Committee.
A Foundation for Law Society and Justice Policy Brief is available: Ethical Business Regulation: Growing Empirical Evidence
The work has been cited in the European Commission’s July 2016 report on innovation, Opportunity now: Europe’s mission to innovate.
The Ethical Business Regulation approach has been described with approval in chapter 6 of the 2016 draft UNCTAD Manual on Consumer Protection . Chapter 11 on consumer redress, which was largely written by Prof Hodges, supports regulatory redress and ombudsmen.
Extensive discussions with governments, regulators and business are taking place in this topic. Outside UK, presentations in 2016 included with officials in Ireland, Singapore and the European Commission.
Professor Hodges spoke on EBR at the European Commission’s conference in Brussels on 'Single Market for Products: Fresh ideas to unleash the full potential' on 17 June 2016. A video recording of the conference is available.
The concept of 'Ethical Business Regulation' (EBR) identified by Professor Chris Hodges has been used as the basis for the Government's Regulatory Futures Review published in January 2017. The Review recommends that all UK regulators should move towards models of 'regulatory self-assurance' and 'earned recognition', which would permit savings of perhaps £600 million in the government's funding of regulators. Businesses should be invited to produce evidence of compliance and systems from a wide range of stakeholders, including not only regulators but also , trade bodies, businesses networks, assurance bodies, with the ‘influence of users and consumers, of buyers and commissioners, and other professionals involved in the sector’. The Review notes that such a system has to be based on evidence of trust, that people will all 'do the right thing', based on ethical business practices, in return for which they would be regulated with a 'very light touch' in a no blame relationship. That is the EBR model proposed by Hodges. It was adopted by the Scottish Government as part of their 'fair Scotland' policy in the December 2016 competition and consumer policy . Hodges spoke on Ethical Business Regulation at the invitation of the Scottish Government in meetings with various sectoral regulators and the Nuisance Calls Commission in January 2017. He is speaking on EBR in February 2017 in Toronto at the invitation of an Ontario Minister, and with the Singapore Civil Service College.