1 of 11

Politics, Norms, and Corporate Compliance

Miriam Baer

April 2025

2 of 11

What is compliance?

  • System that ensures that the organization’s members understand and comply with their legal obligations.. Those who engage in compliance activity form an important network that improves behavior and facilitates the flow of information.
    • Education
    • Internal monitoring and sanctions
    • Systems analysis
    • Inculcation and reinforcement of prosocial norms

3 of 11

Behavior and Flow

  • - Behavior – ex ante
  • - Flow – ex ante and ex post

​

Norms impact both purposes!

4 of 11

How do norms support the compliance network?

Altruism

Self-restraint

Contrarianism

Gadflies

Whistleblowers

behavior

flow

5 of 11

How does our political atmosphere impact norms? And compliance?

  • Imagine three different political backdrops:
    • Nonpartisan backdrop
    • Polarized backdrop
    • Authoritarian backdrop

6 of 11

Nonpartisan backdrop: �Political leaders (including enforcement agencies) are more similar than different in their general orientations towards compliance as an activity.

Bipartisan support for corporate monitoring and self-reporting

Growth of compliance industry and supporting actors

Development of pro-compliance norms

7 of 11

Polarized backdrop

    • Greater distance
    • Partisan Sorting
    • Hostility/Warmth

Polarization

    • Greater turnover
    • Increased sorting of outside counsel
    • Reduced support for contrarians

Impact on the firm

    • Less altruism/self-restraint
    • Reduced reporting
    • Cognitive errors increase

Impact on norms

8 of 11

Polarization’s double whammy

Incidence of wrongdoing increases

Reporting of wrongdoing decreases

9 of 11

Authoritarian Backdrop

Erosion of expertise and “pricing out”

Law firms/consultants hired less for expertise and more for connections/signaling

Disfavored companies are eventually “priced out” of compliance services

Central authority dictates preferences

Laws remain on books - but may be enforced in an unpredictable manner

Benefits of early detection/self-reporting (Leniency Programs) less clear

10 of 11

A note on transnational businesses

  • Businesses that operate in more than one jurisdiction may encounter all three frameworks.

​

​

polarized

authoritarian

nonpartisan

Norms???

11 of 11

What does this mean for compliance?

Pivot away from early self-reporting

Declining emphasis on lawyers with certain gov expertise

Cultural changes in how we see whistleblowing

Other shifts – more technology/AI, less emphasis on relationships