What happens when government regulation wanes?

Faculty, business leaders and advocacy groups search for answers at this year’s Kellogg-Aspen conference

It’s one thing for a government and a corporation to rebuild a country together. It’s another for a government to keep tabs on a corporation’s business practices.

Indeed, government regulation of corporate behavior has waned over the past decade, and the global nature of commerce often puts effective regulation beyond the reach of any one country or region. Emerging to fill this void, private politics — voluntary participation in corporate regulation — has gained the favor of politicians and activists alike. But while many NGOs and activists target perceived violators, Kellogg research suggests a different way to get corporations to voluntarily conform.

At this year’s Kellogg-Aspen Business and Society Leadership Summit, held Feb. 27-28 in Evanston, the discussion focused on the rise of private governance: Can privately regulated corporations — under tremendous pressure to cut costs and expand revenues — always be expected to safeguard society and the environment, especially in the absence of a government regulatory authority? Does the threat of reputation damage trump the pursuit of profits?

The research findings of Brayden King, assistant professor of management and organizations, suggests that it doesn’t, but private efforts should supplement rather than replace government enforcement. King offers three strategies for those nongovernmental organizations seeking to influence corporate behavior:

  1. Focus on collaboration with key stakeholders.NGOs should proactively work with businesses and government agencies to deepen their relationships and take more ownership over the implementation of private standards.

  2. Strengthen monitoring capabilities. NGOs should shift resources away from public relations efforts and back toward working at a community level, boosting membership and instructing local chapters on grass-roots monitoring.

  3. Validate ratings systems and labels.NGOs need to better police the sea of ratings systems and ensure that standards actually drive socially responsible corporate behavior.

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