ARE SELF-REGULATED FIRMS TRUSTWORTHY? A GAME-THEORETIC APPROACH TO COMPLIANCE TRAPS

Abstract

Governments are increasingly prosecuting companies that fail to demonstrate prior adoption of a crime prevention model or compliance program following the discovery of a crime by one of their managers or employees. In addition, penalties are being increased when human rights violations or white-collar crimes are involved. As a number of publications have shown, the promotion of corporate criminal liability relief for companies that implement compliance programs implies, or should imply, a significant degree of trust on the part of states or regulators towards these companies. Is that trust really possible? To answer this question, we will consider some of the criticisms that these programs have received, paying special attention to both cosmetic compliance programs and the so-called “compliance trap”. A game-theoretic model will let us analyze whether the regulator should rely on companies to allow them to develop compliance programs that avoid both the compliance trap and what we call the fake compliance trap. The game-theoretic result indicates that the greater the regulator's control capacity, the greater the trust in companies. In the absence of this control capacity, the regulator will be forced to rely on the role of the “compliance officer” or to give up promoting compliance programs.