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An integrated theory of corporate environmental compliance and overcompliance

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Abstract

Prior research on corporate environmental behavior has produced myriad factors that explain offending and overcompliance, yet the literature lacks cohesion and would benefit from disentangling corporate- and individual-level explanations. In this study, a cross-level integrated theory of corporate environmental behavior uses Gunningham et al’s. (2003) license framework and Paternoster and Simpson’s (1993; 1996) rational choice theory of corporate crime to portray how individuals within corporations decide to offend or to overcomply with environmental regulations while accounting for the organizational context. Specifically, external pressures (legal, social, and economic) on the corporation, plus internal corporate policies and culture, affect individual-level cost-benefit analyses. In turn, these cost-benefit calculations impact the behavioral decisions made by corporate managers. Four sets of hypotheses based on this integration are tested using an environmental vignette survey of individuals. The results provide mixed support for the integrated theory. It is also noted that predictors of environmental offending are different from those predicting overcompliance. Implications for theory and practice are discussed.

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Notes

  1. Although one of their five “ideal types” of environmental management – environmental laggards – was described as noncompliant in nature, they state on page 102 of their book that “Based on our research in 1998–1999, none of the facilities in our sample fitted the description of an Environmental Laggard.” Thus, a sample with more variability in offending behavior is needed to assess the framework’s applicability to environmental crime.

  2. A reviewer commented on the similarities between neo-institutional theory [41] and the license framework. Although both approaches recognize the need to situate individual decisions in larger contexts, there are key differences that render neo-institutional theory less appropriate for the current study. First, neo-institutionalism emphasizes networks of organizations, explicating how industry-wide pressures impact the organization. As such, the approach focuses on institutionalized practices that may be hard for an individual corporation to resist (see [16]). This focus is more appropriate for non-compliance that arises from an inability to adapt to changing legal requirements [28]. The license framework, although it mentions competitive influences, assumes an organization that is more independent from its sector. Another difference lies in the specificity of the external influences on the corporation; neo-institutional theory lumps social and legal pressures together ([16]: page 1034) whereas the license framework makes a strong argument for why the corporation’s situation may be affected uniquely by its social, economic, and legal environments. Finally, when neo-institutional theory incorporates internal operations into its purview, the focus seems to be on the “mosaic of groups” (Greenwood and Hinings: page 1033) within the organization as opposed to the influence of one or a few top managers as in the license framework. In fact, neo-institutionalism in the sociological tradition is suspicious of individual rationality (see Powell and Dimaggio, pages 9 – 10), a perspective that is likely more relevant to analyzing unintentional behaviors and which warrants future research. For the purpose of this study, which analyzes individual managers’ decisions and how they are affected by the larger context in which the corporation is placed, Gunningham et al.’s license framework is a more suitable perspective to use.

  3. A reviewer noted that managerial attitudes may be incredibly influential on the behavior of subordinates while corporate culture may not actually permeate all aspects of a corporation. Note that the assumption made here relates only to the definition of the behavior and how the measures are constructed in this particular survey. The relative influence of corporate culture as opposed to individual attitudes on the behavior of subordinates is an empirical question that should be assessed by studying multiple individuals within one corporation, but it is beyond the scope of the current research.

  4. Much literature clearly demonstrates that managers consider the benefits and costs to the corporation as a whole, in addition to costs/benefits to themselves as individuals. I include these individual-level perceptions of costs/benefits to the corporation in the conceptualization of the licenses—although the perceptions may be at the individual level, the potential consequences or rewards are at the level of the corporation and therefore should be considered as part of the external license framework.

  5. Note that this theory de-emphasizes the role that lower-level employees play in corporate behavior. Although lower-level employees are involved in creating the final product of the corporation (including environmental waste or responses to regulations), I make an assumption that corporate crime only occurs at lower levels of the organization when lower-level employees act in response to leadership decisions and policies (see, for example, Eric Holder’s [26] DOJ memorandum on criminally charging corporations).

  6. Here, I am making an assumption that top management goals and priorities are generally in line with those of corporate ownership. As Cohen and Simpson [6] point out, this may not be the case and there may in fact be conflicting desires at those levels, especially in larger corporations. Given that most corporations in the United States are small enterprises, it seems likely that the owner/manager are often the same individual or are in constant communication. Future research should examine different relationships/communication styles further and see what implications they have for theories linking the corporation to individual-level decisions.

  7. Note that it is sometimes inappropriate to infer causality in the analyses conducted in the present study. Many independent variables of interest are not measured using a randomized vignette dimension (e.g., the hypothetical company was mandated to publicly release information) but instead come from the post-scenario questions (e.g., the certainty and severity of legal sanctions). All outcome variables also come from the post-scenario survey. When one survey response is regressed on another survey response, the relationship is correlational in nature. These methodological issues may be why there were fewer significant relationships using the randomized dimensions. Future research should examine these hypotheses using methods that will enhance the internal validity of the results.

  8. Unfortunately, the specifics of this search are proprietary information and therefore more information on how this sample was targeted is unavailable. However, the descriptive information (see results section) indicates that we were successful in reaching people involved in organizational decision-making. Future research should attempt to reach individuals located in (and in charge of) larger companies and perhaps individuals with higher levels of education.

  9. This response rate is not atypical of that seen in previous studies on web-based surveys [40, 45]. Web-based surveys lack certain features that would increase the likelihood of response—researchers cannot include tangible incentives (e.g., pens, stickers), the formatting of web surveys may make the questionnaire appear longer and less professional, respondents may feel that data integrity is not secure, and technical issues may affect responsivity [45, 53].

  10. I examined potential response bias by comparing characteristics among responders and non-responders in a random sample of 500 individuals from the 5,919 who received the invitation to participate. I compared characteristics about these 500 people to non-respondents, including: the type of business, the type of profession, the size of the company, and the gender of the individual. The only significant difference between the two groups was in the size of the company, such that respondents came from slightly larger companies (mean = 14.04 employees) than non-respondents (mean = 9.59 employees). Given how small the typical company is for each of these groups, I do not think this difference is likely to affect generalizability.

  11. The 11-point scale was used to allow for the respondents to report percentages on the “certainty” questions (0 = 0 % – 10 = 100 %), and we maintained an 11-point scale for severity/rewards questions to maintain consistency.

  12. The exact questions read “What this manager is doing: 1 = “violates an unwritten contract” – 7 “does not violate an unwritten contract” and “What this manager is doing: 1 = “violates an unspoken promise” – 7 “does not violate an unspoken promise.” We did not specify who the contract is with or whom the promise was made to, but maintained the questions as they were written in the original scale.

  13. I ran correlations between an indicator of the missing outcome variable and the independent variables. Very few variables were significantly related to missing outcomes, and the significant relationships were inconsistent in terms of how they are related to environmental values. The inconsistent relationships with missingness (and the small correlation coefficients) indicate that dropping cases with missing outcomes is unlikely to result in a strong sample bias, although these research questions should certainly be re-tested using different methods.

  14. I also ran the regressions on the original dataset, without imputed data. As one might expect, there were changes in the significance of variables but all variables are consistent in magnitude and directionality regardless of the imputation procedure.

  15. I ran both scenario types using various models to check how robust my results are to different strategies; results were substantively the same.

  16. However, see Simpson et al. [62], which combined responses from the current sample and responses from people located in large corporations. The location of the respondent was not significant in the regression models, and the models looked substantively similar between the two samples.

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Acknowledgments

Many thanks are due to Sally Simpson (University of Maryland, College Park), Mark A. Cohen (Vanderbilt University), and Michael Vandenbergh (Vanderbilt University) for the use of their data as well as for their incredibly helpful feedback. I would also like to thank Jay Kennedy (University of Cincinnati) for his comments on an earlier draft of this paper. Any errors that remain are, of course, my own.

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Appendix: examples of vignettes

Appendix: examples of vignettes

Below are examples of the scenarios that a respondent might have seen. The bolded words embedded in the paragraphs are the randomized vignette dimensions that varied from one respondent to the next.

Offending scenario

Lee, an upper-level manager at AmCorp, asks an employee to discharge toxins into a local waterway that exceed permitted levels by 200 %. Lee believes that discharging toxins into a local waterway may strengthen the firm’s competitive position. USACorp is currently experiencing growing sales and revenues in an industry that is economically deteriorating.

AmCorp is a subsidiary of USACorp, a privately held U.S. based firm. USACorp owns and operates several fully-integrated manufacturing facilities in a suburban area near a large city. The facilities, which are new, are designated as major dischargers according to the EPA ranking system with an environmental compliance record that generally has met EPA compliance standards. Last year, USACorp was contacted by the EPA to participate in a voluntary pollution reduction program but declined to do so.

The firm has been mandated to release public information regarding the type and amount of toxic substances released by its facilities.

At USACorp, ethical considerations guide top management hiring decisions, performance evaluations, and promotions. The firm has mandatory ethics training, but the firm took no action against an employee who was recently discovered violating environmental regulations.

Overcompliance scenario

Lee, a middle-level manager at AmCorp, is asked by an executive to enhance security around toxic chemical storage sites. This practice is common in the industry. Lee believes that enhancing security around toxic chemical storage sites may weaken the firm’s competitive position. AmCorp is currently experiencing declining sales and revenues in an industry that is economically deteriorating.

AmCorp is a publicly held U.S. based firm. AmCorp owns and operates one fully-integrated manufacturing facility in a suburban area near a large city. The facility, which has been refurbished, is designated as a minor discharger according to the EPA ranking system with an environmental compliance record that generally has met EPA compliance standards. Last year, AmCorp volunteered to participate in an EPA sponsored pollution reduction program.

At AmCorp, ethical considerations guide top management hiring decisions, performance evaluations, and promotions. The firm has internal random environmental audits in which violations of compliance can be uncovered, but the firm took no action against an employee who was recently discovered violating environmental regulations.

Lee decides to comply with the manager’s demand.

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Rorie, M. An integrated theory of corporate environmental compliance and overcompliance. Crime Law Soc Change 64, 65–101 (2015). https://doi.org/10.1007/s10611-015-9571-9

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