The Dialectics of Corporate Deterrence

Abstract

Panel data fail to support a subjective expected utility model of corporate deterrence. There is partial confirmation, however, that chief executives of small organizations who perceive the certainty of detection as high have better regulatory compliance in their organizations. Perceived sanction threats do not work significantly more effectively for chief executives (a) of for-profit versus nonprofit organizations; (b) who are owners as well as managers; (c) who say they think about sanctions more (sanction salience); and (d) who have a weaker belief in the law. Nor does the effectiveness of corporate deterrents depend on compliance costs. There is, however, a significant deterrent effect for managers who are low on emotionality, but an opposite counter-deterrent effect for actors high on emotionality. This supports the critique of those who condemn rational actor models from a sociology of the emotions perspective. Emotions of guilt among managers predict the subsequent compliance of their organizations. The results are consistent with perceptual deterrent studies of individuals that find little effect of formal sanctions and social disapproval as deterrents, but stronger support for an effect of self-disapproval (guilt or shame) on law observance. Qualitative data are used to show why it would be folly to interpret these results as showing that business regulation can work without sanction threats and social disapproval. Rather, the data evince the need for a complete reconceptionalization of the way policy analysts think about the deterrence of law breaking.