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Why Do Corporations Obey Environmental Law? Assessing Punitive and Cooperative Strategies of Corporate Crime Control Author(S): Sally S

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Why Do Corporations Obey Environmental Law? Assessing Punitive and Cooperative Strategies of Corporate Crime Control Author(S): Sally S The author(s) shown below used Federal funds provided by the U.S. Department of Justice and prepared the following final report: Document Title: Why Do Corporations Obey Environmental Law? Assessing Punitive and Cooperative Strategies of Corporate Crime Control Author(s): Sally S. Simpson ; Joel Garner ; Carole Gibbs Document No.: 220693 Date Received: November 2007 Award Number: 2001-IJ-CX-0020 This report has not been published by the U.S. Department of Justice. To provide better customer service, NCJRS has made this Federally- funded grant final report available electronically in addition to traditional paper copies. Opinions or points of view expressed are those of the author(s) and do not necessarily reflect the official position or policies of the U.S. Department of Justice. This document is a research report submitted to the U.S. Department of Justice. This report has not been published by the Department. Opinions or points of view expressed are those of the author(s) and do not necessarily reflect the official position or policies of the U.S. Department of Justice. FINAL TECHNICAL REPORT WHY DO CORPORATIONS OBEY ENVIRONMENTAL LAW? ASSESSING PUNITIVE AND COOPERATIVE STRATEGIES OF CORPORATE CRIME CONTROL Sally S. Simpson Department of Criminology and Criminal Justice University of Maryland Joel Garner Joint Centers for Justice Studies Carole Gibbs Michigan State University This report was prepared with support from award # 2001-LJ-CX-0020 from the National Institute of Justice. Points of view are those of the authors and do not necessarily reflect the official position of the U.S. Department of Justice, the University of Maryland or the Joint Centers for Justice Studies. This document is a research report submitted to the U.S. Department of Justice. This report has not been published by the Department. Opinions or points of view expressed are those of the author(s) and do not necessarily reflect the official position or policies of the U.S. Department of Justice. ABSTRACT Punitive strategies for corporate crime control emphasize the use of formal legal sanctions, especially but not exclusively those found in criminal law, to deter current and future offenders from similar acts of misconduct. Cooperative crime control strategies emphasize the use of regulatory persuasion to facilitate and enhance legal compliance. These strategies emphasize pro-social norms, informal sanction threats, and intra-organizational controls to motivate firm compliance. In this study, we use a triangulated research strategy that incorporates interviews with environmental inspectors, secondary data analysis, and a vignette survey to shed light on the relative merits of these strategies aimed at companies that fail to comply with environmental regulation (specifically, the National Pollutant Discharge Elimination System as authorized by the Clean Water Act). Our results reveal that inspectors adopt both cooperative and punitive strategies as they interact with the regulated community. Only some of this regulatory activity is “officially” recorded, with an even smaller percent reported in the Permit Compliance System— the database we utilized for our secondary data analysis. Analysis of the firm-level data found little evidence of a deterrent effect for either punitive or cooperative intervention strategies. Firms with the worst environmental records are inspected and sanctioned more often, with little effect on company recidivism. Larger companies (those with more employees) and firms that owned more facilities were inspected more often. Facility ownership was positively associated with more severe sanctions. Overall, more profitable companies had better environmental records. Our survey results were more promising regarding compliance strategies. Formal legal sanctions and compliance strategies that build on ethical evaluations of managers and effective internal compliance systems have a substantial effect on managerial decision-making. The surveys also reveal that pro-social environmental actions by managers (such as responsiveness to terrorism threats and a strategy of “over-compliance”) are more likely when there is shared agreement and consistent communication within the firm about environmental goals. 2 This document is a research report submitted to the U.S. Department of Justice. This report has not been published by the Department. Opinions or points of view expressed are those of the author(s) and do not necessarily reflect the official position or policies of the U.S. Department of Justice. Table of Contents Acknowledgements……………………………………………………………………4 Overview………………………………………………………………………………5 I. The Nature and Context of Local Environmental Enforcement: ………… 9 What have we learned from interviews with inspectors? Joel Garner Design and Scope 11 Effectiveness of Enforcement 17 What have we Learned? 23 II. Company Characteristics, Compliance, and Recidivism: ………………...25 An analysis of secondary data. Sally S. Simpson and Carole Gibbs Sample and Industries 26 Effluent/Measurement Violations 32 Violation Rate 44 Reporting Violations 50 Firm Characteristics 70 Sanctions and Recidivism 81 Inspections and Recidivism 92 Firm Characteristics and Sanction Type 100 III. Compliance and Managerial Decision-Making: …………………………..116 An analysis of vignette data. Sally S. Simpson Survey Design 117 Analysis 126 Summary and Conclusions 144 IV. Research Appendices……………………………………………………….163 Appendix I 163 Appendix II 164 Appendix III 193 V. References …………………………………………………………………..206 VI. Endnotes……………………………………………………………………..214 3 This document is a research report submitted to the U.S. Department of Justice. This report has not been published by the Department. Opinions or points of view expressed are those of the author(s) and do not necessarily reflect the official position or policies of the U.S. Department of Justice. ACKNOWLEDGEMENTS This project could not have been completed without the helpful assistance and hard work of EPA staff, research organizations, consultants, scientific advisors, and students. In particular, we would like to acknowledge the following: ABT Associates Federal EPA, Mike Barrett, Joseph Acton, Jackie Mills, and especially Steve Rubin Administrators and inspectors at state EPA (Maryland, West Virginia, Virginia) Consultants and Scientific Advisors, Mark Cohen, Winston Harrington, and John Horowitz University of Maryland Graduate Students, Brian Barth, Dawn Cecil, Nadine Frederique, Katherine Martinez, Natalie Schell, Lee Ann Slocum Brian Wolf (University of Oregon) University of Maryland Undergraduate Students, Sophia Kuziel, Jessica Mislevy 4 This document is a research report submitted to the U.S. Department of Justice. This report has not been published by the Department. Opinions or points of view expressed are those of the author(s) and do not necessarily reflect the official position or policies of the U.S. Department of Justice. Overview Sally S. Simpson and Carole Gibbs Rationale for the Present Study In 1997, the U.S. Department of Justice, Office of Justice Programs published “Preventing Crime: What Works, What Doesn’t, What’s Promising.” In this research report, numerous crime prevention programs within multiple institutional areas (including corrections, markets, policing, families, and schools) were assessed as to their respective successes. This evidence-based approach to crime prevention has had a tremendous impact on how scholars and policy-makers think about traditional crime intervention and control programs. Unfortunately, we have seen little spill-over into nontraditional crime areas-- including the prevention and control of corporate offending. The goal of this research project is to offer evidence on the relative merits of cooperative and punitive strategies aimed at a particular kind of corporate offender, those that fail to comply with environmental regulations. We examine, through a variety of analytic techniques, individual and firm-level factors that increase and decrease the risk of corporate noncompliance. In addition, we explore whether there are distinct types of corporate citizens (extreme volunteers, mere compliers, bad citizens) and whether there are differences in how legal interventions are applied according to citizenship type or firm characteristics. Finally, we evaluate the effectiveness of various interventions (by source and type) especially in regard to future offending. 5 This document is a research report submitted to the U.S. Department of Justice. This report has not been published by the Department. Opinions or points of view expressed are those of the author(s) and do not necessarily reflect the official position or policies of the U.S. Department of Justice. Data and Methods Three kinds of data were collected to address these questions: (1) interviews with environmental inspectors were conducted to learn more about the context of enforcement, inspector perceptions of successful and unsuccessful enforcement strategies, and the correspondence between inspector reports of noncompliance and official records; (2) secondary data for a sample of U.S. companies was used to track each firm’s economic, environmental and enforcement compliance history; and (3) a factorial survey was developed and administered to company managers tapping into perceptions of the costs and benefits of pro-social (e.g., over- compliance, responsiveness to counter-terrorism initiatives) and anti-social (noncompliance) conduct for themselves and their companies. Each data component presents a unique picture of
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