A Behavioural Economics Perspective on Compliance

Protecting employee whistle-blowers is important, as this is a significant source of uncovering wrongdoing, both for public, and private organizations. How whistle-blowers make decisions is complex, and potential whistle-blowers may not have complete information on the strategies that are chosen by their organizations in response. Hence, whistle-blowers must undertake decisions in uncertain conditions. It is in dealing with this uncertainty where behavioural economics is informative. This paper reviews the behavioural economics perspective on compliance with rules (broadly) and with whistle-blowing and antitrust compliance (more specifically) culminating in a series of recommendations for organizations seeking to improve employee compliance and detection of potential infringements of the law. I focus on four main points: First, is the importance of voluntary compliance (as opposed to enforced compliance). This is important because it carries a broader set of actions than enforced compliance (which typically pertains to behaviour that is observable). Highlighting non-pecuniary rewards, such as benefits to society, reputational gains, and career impacts, are critical. Second, is the importance of perceptions and beliefs. Focusing on whistle-blower protections and correcting beliefs regarding the risks (and potential losses) associated with reporting are critical. Third, beliefs are typically the result of social norms: shared expectations of behaviour. Collecting information on norms and correcting misperceptions is an important way to increase compliance. Fourth, selecting the right workers: Selecting workers with strong preferences for compliance (those that are more pro-socially motivated) allows for increases in compliance without the need of strong monetary incentives.