Presentation by Frédérique Six at the OECD Workshop on “Joint Learning for an OECD Trust Strategy” on 14 October 2013. Mr. Six discusses effective regulation, the trust triangle, compliance and a trust regime.

1. Trust in regulation
Frédérique Six
VU University Amsterdam
OECD, October 14, 2013

2. Effective regulation
• Is perceived by regulatee as legitimate and
procedurally just
• Is responsive:
– distinguish trustworthy from “distrustworthy”
• Strengthens regulatee’s self-determination
and intrinsic motivation
• (Makes use of whole network of actors around
regulatee to strengthen willingness and ability
to attend to public interests)
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3. Trust triangle in regulation
- Client
- Employee
- Neighbour
Citizen
Trust?
Organization
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4. Trust triangle in regulation
- Client
- Employee
- Neighbour
Citizen
Trust?
Trust?
Regulatory
supervisor
Supervision
Organization
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5. Trust has positive effect
on compliance
• The more directors perceive inspectors trust
them, the higher their compliance at next
inspection (Braithwaite & Makkai, 1994)
• The more tax payers trust the tax inspector, the
higher their intention to comply (Murphy, 2004;
Murphy et al, 2009)
• When mining inspectors were ‘ordered’ to
distrust mining firms instead of a more
cooperative approach, both parties agreed that
over time mining safety had declined
(Gunningham & Sinclair, 2009)
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6. Procedural justice and process
more important than outcome
• Why people obey the law (Tyler, 1990; 2006)
– People’s motivation to cooperate with legal
authorities rooted in social relationships and ethical
judgments
– Legitimacy key and procedural justice as basis for
legitimacy (see also Murphy et al, 2009)
• Perceptions of procedural justice more effect on
regulatees’ trust than outcome (Murphy, 2004)
• Process (fairness, equity) large effect on citizen
trust in civil servants, often larger than outcomes
(Van Ryzin, 2011)
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7. Trust, control and compliance
in regulatory relations
Self-determination
enhancing
regulator controls
+
Regulator
general propensity
to trust regulatees
Source: Six, 2013
Regulatee
internalization
+
of regulator values
+
Regulator trust
+
+
+
Regulatee
compliance

8. Much research into citizens’ trust
but not government’s trust
• Dutch National Ombudsman: “Government
distrusts citizens”.
• Officials’ trust is relevant for citizen participation
(Yang, 2005)
• “Distrust unless otherwise proved” = rationalistic
bureaucratic value (Yang, 2005)
• 47% of inspectors showed a general propensity to
distrust regulatees, while only 31% showed a
general propensity to trust (Mascini & van Wijk,
2009)
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9. 9

10. Conceptual confusions
1. Trust is doing nothing
 Trust is hard work
2. Trust and control are substitutes
 Control and trust may be complementary
3. Trust and distrust are two ends of one
continuum
 Trust and distrust are separate constructs
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11. Willingness to comply generally high
• Tax office: appr 85% willing to submit
acceptable tax return; appr 65% actually do.
Difference due to competence
• Most food entrepreneurs support working
safely and hygienically with food (van Wijk &
Six, forthcoming)
• Ministry of Social Affairs: compliance to social
benefits rules 91-99%; most violations not
intentional
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12. Principles for trust approach
• Focus on controlling relevant risks
• A business is trustworthy when it is willing and
able to structurally control the risks it imposes
on society
• Distinguishing trustworthy business from the
rest
• Different regimes
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13. Trust regime
• More principle-based norms
(i.o. rule-based)
• More requirements to only report
(i.o. asking permission before and control after)
• Inspections aimed at management system to
control risks (i.o. purely on output or input)
• Fewer inspections on output
• Obligation of business to voluntary report
violations, together with measures taken to
correct and prevent in future
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14. Trust regime: sanctions
• It is inevitable that occasional violations will occur
in complex processes
• Regulatory justice principles (Macrory 2006)
– Damage to third parties needs to be compensated,
irrespective of cause of violation
– (Unintended) gains from violation need to be creamed
off, irrespective of cause of violation (level playing
field + to reduce temptation)
– Only if after this extra sanction is warranted, this will
be applied (e.g. because of intention to violate, or
severe negligence, or repetition of violation)
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15. Potential for trust approach
Varies by sector, for example
• Dutch international shipping fleet: 80-95%
compliance & most may qualify
• Dutch fishing fleet: 40-50% compliance &
none may qualify at present
Source: interview director Human Environment and Transport Inspectorate (ILT) , 2012
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16. Intentions, risk control and trust
Business intentions
Principled
Context-sensitive
Business
behaviour
Voluntary
risk control
Inspector trust
in business
High trust
Calculative
Enforced
risk control
Influence
inspector
Low distrust
On purpose
violation
High distrust
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17. Dynamic categorisation
possible triggers for move
• New management
w good intentions
• Implementation required
measures
• Appoint competent staff
• Improved financial situation
• ….
• New management
w/o good intentions
or lacking competence
• Deteriorated financial
position
• (Severe) violations
•….
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18. Regulatory costs
Supervision costs: to show compliance
to supervisory agency
Compliance costs: to comply with regulation
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