Presentation by Ruth Steinholtz at the OECD Global Conference on Governance Innovation which took place in Paris on 13-14 January 2020. Further information is available at http://www.oecd.org/gov/regulatory-policy/oecd-global-conference-on-governance-innovation.htm.

1. Ethical Business
Practice and
Regulation:
A Behavioural and Values-
Based Approach to
Compliance and Enforcement
Ruth Steinholtz
ruth@aretework.com
Professor Christopher Hodges

2. The Questions we set out to answer
• Why do people conform to or break rules?
• How do we get people to conform to rules?
• How can regulators/enforcers/compliance support ethical behaviour,
compliance, performance improvement, growth, innovation?
• How should we design “enforcement” policies and regulatory systems?

3. Our quest took us in various directions
• Behavioural psychology research- we are predictably irrational, not the
rational actors of classic economic theory
• Genetic biology and its evolution that enabled our species to collaborate
• Developments in regulatory practice from confrontation and punishment
to advice and support (i.e. UK policy of ‘Regulated self-assurance’ and ‘earned recognition’: Regulatory Futures Review (Cabinet Office, 2017)
• Move away from shareholder primacy to maximising stakeholder value

4. Co-regulation: the ”adult” solution?
• Middle ground between traditional regulation and no regulation
• Different sectors with different degrees from self to formal, wouldn’t
most benefit from the option of a more collaborative approach, based
on the evidence of what is effective?
• Convergence of interest: companies realising their place in society –
ESG, ethics, sustainability, purpose, and regulators role in supporting
economic growth and prosperity
• Risk and evidence based
• Principles vs rule based

5. Sanctions Proportionate to the Attitude:
Scottish Environmental Protection Agency
Criminale, Spericolato, Negligente, Confuso, Conforme, Campione
Incoraggiare il miglioramento
Sanzionare, Educare, Abilitare, Ingaggiare
Wide range of tools to use:

6. The Essence of Ethical Business…
Regulation (EBR)
A relationship between a business and a regulator, in which the business
produces evidence of its on-going commitment to EBP and the regulator
recognises and encourages that commitment.
Practice (EBP)
Creating and being able to provide evidence of an effective ethical culture
where employees can do the right thing, based on ethical values.

8. Organisation A Organisation B
Value
client satisfaction
making a difference
integrity
teamwork
humor/fun
quality
ethics
financial stability
Level
2
6
5
4
5
3
7
1
Value
blame
short term focus
internal competition
buck passing
risk averse
customer satisfaction
information hoarding
profit
Level
2
1
2
3
1
2
2
1
A Tale of Two Companies
Service
Making a Difference
Internal Cohesion
Transformation
Self-Esteem
Relationship
Survival

9. Implementing EBP + EBR
Approaches or pilot studies
Customised evidence of trust
How can the OECD Help?
Civil aviation Medical devices Workplace
Health & Safety
Environment Trading Standards:
Primary Authority
Equality & Human
Rights
Gambling Water pricing Food standards Genetic materials
Data protection &
privacy
Energy Water quality Lawyers Timber
County Councils International money
laundering
Care Homes Sport Medicines

11. “Regulation is fundamentally
about how people in organisations
actually behave. This book pulls
together the evidence on “what
works” in getting the right results.
There is a wealth of material here
for smart regulators who are
pursuing effectiveness through
actual outcomes, not compliance
with rules for its own sake.”
Richard Thomas CBE, Information
Commissioner (2002-9), Committee on
Standards in Public Life (2012-17)