Written evidence from Professor Paul M Heywood[1] (PGG10)

The Public Administration and Constitutional Affairs Committee

Propriety of governance in light of Greensill inquiry

This submission is made in a personal capacity and does not necessarily represent the views of any of the organisations mentioned above.

1. This response addresses the question of the use of rules, codes and laws to regulate behaviour, particularly of public officials.

2. The core argument is that there has been an increased use of such codes and regulations to govern the behaviour of those in public life, often in response to revelations of (perceived) impropriety or abuse of privilege.  However, the creation of ever more regulatory frameworks that require compliance is arguably not only ineffective, but can actually have counter-productive consequences.  We should therefore look at different ways to promote and sustain cultures of public integrity.  The argument set out here is based on Heywood and Rose (2015).

3. The regulation of standards in public administration is often, and arguably increasingly, managed through formal rules, laws and codes (Evans, 2012: 104). These formalised codes aim to ensure compliance with a minimum standard of integrity by delineating situations in which certain actions are prohibited and regulating the processes by which non-prohibited actions ought to be conducted.

4. This approach is based upon the underpinning logic that such rules can be used to create an environment in which corruption and malfeasance cannot occur, since they remove the space for such acts. However, despite increasing efforts to manage and prevent integrity breaches through regulation, concerns about standards of behaviour in public life continue to proliferate.

5. Research by Heywood and Rose (2015) has questioned whether the increased use of legislation, rules and formalised codes can ensure high standards of integrity, rather than functioning at best as a partially effective way to reduce corruption.

6. The practical regulation of public sector ethics has often been conceptualised in terms of two traditions: a values-based approach and a compliance-based approach (Paine, 1994; Roberts, 2009; Scott and Leung, 2012; Bies, 2014; Maesschalck, 2004). Each places a different emphasis upon the regulation of integrity: the personal values of public servants (values) or direct and specific regulation (compliance).

7. Compliance-based regulations seek to define exactly what can and cannot be done by public servants, and the procedures that must be followed when conducting such actions. There is often an emphasis upon detecting and punishing violations of the rules (Paine, 1994: 106). If sufficient formal regulations can be developed, corruption will become very difficult, since there is little ‘space’ for corrupt acts to occur.

8. This approach, when functioning adequately, can be effective in reducing corruption, but is poor at ensuring integrity. This is particularly a problem in times of societal change, where challenging ethical situations emerge faster than regulations can be adapted (Pendse, 2012).

9. Compliance-based systems work with the idea of incentives. People are expected to adhere to the rules within a compliance-based system regardless of their fundamental nature; the rules seek to abstract away the need for notions such as trust by creating a system of incentives that make compliance the optimal choice.

10. However, once the need for ethical considerations has been abstracted away, a reliance upon the incentive system becomes problematic. It has been well demonstrated that incentive schemes are difficult to design, and even punitive incentive schemes can be problematic. A punishment is merely another factor to include in any decision calculus.

11. Values-based approaches place emphasis on individual public servants making ethical choices. Public servants are conceptualised as reflexive evaluators and are expected to ‘have a moral code that enables them to determine appropriate courses of action within the norms and values prescribed by their organizations’ (Scott and Leung, 2012: 39).

12. The individual’s moral code is expected to operate in conjunction with the law, but the moral code will provide contextualising information that allows the public servant to adhere to the letter of the law in a way that maximises public integrity. This is seen as especially necessary in situations in which laws and regulations provide no firm guidance on the appropriate course of action.

13. The fundamental logic of values-based measures is based upon trust (Bies, 2014: 231; Lewicki et al., 1998), assuming that employees are responsible and sensible. The approach relies on the capacity of individual civil servants to make appropriate judgment calls on ethical matters and uphold organizational values independently and autonomously.

14. However, there are practical situations in which values-based regulations may not be the optimal choice. For instance, when public officials themselves are not trustworthy, it is probable that placing trust in the officials, and thus making the public at large vulnerable to those officials, will simply result in increased corruption.

15. The values-based approach might not be particularly appropriate for the substantive goal of anti-corruption in situations where corruption is pervasive, unlike compliance-based measures that are designed to tackle corruption more directly.  In turn, a key advantage of values-based systems is that they can offer the promise of promoting integrity, something that is difficult under compliance systems.

16. This distinction highlights the importance of considering the substantive goal of regulations: is the objective to reduce corruption or to promote integrity?  Each goal points to a different ideal form of regulation. However, the trade-offs are more complex than they at first appear and speak to the limits of compliance-based rule governance for the maintenance of probity.

17. Compliance-based approaches usually fail to provide a desire to avoid corrupt or unethical behaviour other than the prospect of punishment. This can result in rational utility maximisers to engage in unethical behaviour wherever the cost punishment is less than the potential reward.

18. Since real-world regulation inevitably mixes values-based and compliance-based measures, it may be questioned whether such self-conscious ethics-free utility maximisation is likely to occur in practice. The core question is whether some element of values-based approach within a wider compliance framework can be sufficient to prevent the hollowing out of ethics from public sector work.

19. If utility maximising behaviour is unlikely to occur in practice with even a moderate level of values-based regulation, there is no cost to implementing compliance policies whenever it appears right to do so. However, if compliance-based policies themselves undermine integrity values then there is always a cost to the implementation of compliance-based measures.

20. This can be demonstrated through a matrix that shows how the two traditions of ethical regulation can be seen as reflecting different combinations of trust and distrust:

21. The values-based policy is represented in the ‘high trust and low distrust’ quadrant, and the compliance-based model in the ‘low trust and high distrust’ quadrant. The other two quadrants represent mixes of these ideal types.

22. The ‘high trust and high distrust’ quadrant represents a ‘trust but verify’ model (Bies, 2014: 231) that can emerge either deliberately or as a result of adding more compliance-based policies to a values-based system, or vice-versa. Thus, moving from a values-based system to a compliance-based system almost inherently requires going through the intermediary step of the ‘high trust and high distrust’ system.

23. Adding ever more compliance-based policies to a values-based system is not a neutral act; instead, it actively asserts increasing levels of distrust. Importantly, this is the case regardless of changes in the underlying level of ‘trust’ (as opposed to distrust) vested in officials. Under such circumstances, many of the negative effects of high distrust can still emerge.

24. This is not only in terms of the high cost of maintaining institutions of distrust – e.g. regulatory agencies and compliance procedures – but also in terms of the effect upon individual values. Generally, distrust begets distrust, which weakens the values-based motivations for engaging in self-regulation, and particularly in ethically reflexive self-regulation (Tyler, 2014: 273).

25. This appears to apply in many situations in which degrees of coercive policies are introduced. Research by Alison et al. (2013: 426) on police interviews of terrorists found that ‘even minimal instances of [coercive or hostile interactions from police] profoundly and significantly reduced [interview] yield and increased suspect resistance’. It seems that even small levels of distrust may undermine the opportunities afforded by values-based approaches.

26. The argument here is that compliance strategies may not only cease to be productive, but in fact they may become actively counter-productive. Thus, in many contemporary public administrations, where public officials are broadly trustworthy and corruption is not a deeply entrenched issue, compliance strategies may generate more unethical behaviour than they solve.

27. Assuming bad faith on the part of public officials, and thus strongly regulating behaviour through compliance policies, can in turn cause acts of bad faith, even among those officials who otherwise would not have engaged in such action.

28. There is a very real danger of creating an us-vs.-them attitude among groups of officials whose work is stripped of an ethical discourse, which in turn can create the space for conflicts of interest between group loyalties and obligations to the law.

29. Regulatory frameworks should be just that: they should provide a framework within which public officials are expected to exercise appropriate discretion based on a culture of public service.  We should be wary of creating ever more compliance-based rules to manage and control specific behaviours and instead concentrate on ways to enhance public service values.

30. These considerations are important for any proposed revisions to how to manage lobbying, business appointments, conflicts of interest, and so forth.  Too great an emphasis on controlling activities through the use of compliance-based regulatory frameworks can run the risk of unintended consequences, in particular in relation to the promotion and maintenance of high standards of integrity.

May 2021

References

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Bies, R. J. (2014). Reducing Criminal Wrongdoing Within Business Organizations: The Practical and Political Skills of Integrity. Am. Crim. L. Rev., 51, 225-317.

Evans, M. (2012). Beyond the integrity paradox–towards ‘good enough’ governance?. Policy Studies, 33(1), 97-113.

Heywood, Paul M. and Jonathan Rose. (2015). The Limits of Rule Governance. In Alan Lawton, Zeger van der Wal and Leo Huberts (eds), Ethics in Public Policy and Management (London: Routledge).

Lewicki, R. J., McAllister, D. J., & Bies, R. J. (1998). Trust and distrust: New relationships and realities. Academy of management Review, 23(3), 438-458.

Maesschalck, J. (2004). Approaches to ethics management in the public sector: a proposed extension of the compliance-integrity continuum. Public Integrity, 7(1), 20-41.

Paine, L. S. (1994). Managing for organizational integrity. Harvard business review, 72(2), 106-117.

Pendse, S. G. (2012). Ethical hazards: A motive, means, and opportunity approach to curbing corporate unethical behavior. Journal of business ethics, 107(3), 265-279.

Roberts, R. (2009). The Rise of Compliance-Based Ethics Management. Public Integrity, 11(3), 261-278.

Scott, I., & Leung, J.  Y.  (2012).  Integrity management in post-1997 Hong Kong: Challenges for a rule-based system, Crime, law and social change, 58(1), 39-52.

Tyler, T. R. (2014). Reducing Corporate Criminality: The Role of Values. Am. Crim. L. Rev., 51, 267-317.