The Imperfect Science: Structural Limits of Corporate Compliance and Co-regulation

Although the virtues of corporate compliance are widely acknowledged, co-regulation and compliance management schemes constantly meet with failure, as emerges from the empirical records. This chapter is about the structural limits of corporate compliance and the factors that make it inevitable that in some cases the programs to prevent corporate wrongdoings will fail. The failure of existing compliance models should therefore not come as a surprise, since these models suffer from three structural limits. The understanding of these limits is crucial to identify what corporate compliance can realistically achieve and to isolate those deviant behaviors that require different and more effective measures. First, compliance is an imperfect science when it comes to rulemaking, resulting in the fact that no compliance program can perfectly avert failures of all sorts. Second, from a criminological point of view, compliance presents a second structural weakness in its inability to prevent the individuals in control of a company from acting illegally. Finally, the third limit stems from the economic framework in which compliance models are applied and the fact that these models, designed for large public companies, are frequently unfit for small- and medium-sized entities (SMEs).