Oxford Professor of Justice Systems Chris Hodges delivers the third FLJS Max Watson Annual Lecture by announcing his Cabinet Office endorsed proposals to transform business ethics through a trust-based approach to regulation.
Professor Hodges draws on new findings in behavioural psychology and economics to present some challenging new directions, arguing that “we have been unable to stem the tide of major scandals in corporate behaviour” in recent years, citing the corporate cases of LIBOR fixing, subprime derivatives, the VW emissions cheat device, Payment Protection Insurance, and – in public life – MPs expenses, phone hacking, doping in sport etc.
He also predicts that “in America at the moment, where they are deconstructing regulation and removing barriers to private enforcement, in a few years’ time they are bound to have a number of major corporate scandals.
Professor Hodges confronts the prevailing orthodoxy in regulation, stating that "Many legislators, enforcers, and judges seek to respond to wrongdoing by increasing deterrence. The truth, however, is that there is little empirical evidence that deterrence is effective in affecting future behaviour, certainly in the regulatory context: it is a widely-held myth.”
Citing recent work by the Committee on Standards in Public Life and the Department for Business Innovation & Skills, which have endorsed Professor Hodges’ research, Professor Hodges shows how the UK is leading the way within Europe in driving this shift away from deterrence, and argues that the EU’s approach to regulation is “ completely dysfunctional”.