I have recently studied what behavioural science has to say about legal compliance. Scientists have studied questions such as “Why do people follow rules?” and “What do we need to do to make more people follow certain rules?” The body of research seems to me to be somewhat straggly and abstract and the results quite context-based. The questions that seems to have been studied the most is compliance with tax laws or, more to the point, how to make people pay their taxes correctly and on time.
What can we learn from this body of research for the field of legal compliance? How should Compliance Officers in companies and their external advisors draft their compliance programs, courses and communications in order to increase the likelihood that employees will follow them?
Some basic guidelines emerge from behavioural research, all of which should be a relief to companies, because the are able to cut the costs of ensuring compliance considerably:
- Value-based approaches are more successful than approaches based on control and penalty: It works better to put compliance programs on a firm basis of “We do not pay bribes at this company, because we believe that bribes hurt the economy and society in general” as compared to “Don´t pay bribes, because we will control what you do and punish you for paying bribes”. That should make companies happy, since both internal monitoring and external audits of compliance are extremely costly.
- Plain language works best: People focus only on what they can understand. Therefore people are much more likely to follow the rules if they are drafted in a plain and simple way which everyone understands. This is something which the Washington State Department of Revenue discovered, to their delight, when rewriting a form letter to people who owed taxes increased positive responses by 43 %. Let´s be honest: we lawyers have a tendency to use complicated language and this is especially counter-productive when it comes to compliance issues. So it is a great idea to give our texts a plain-language-makeover or ask a plain language expert to do just that.
- Make it easier to play by the rules than breaking them: People love routine and not disturbing the status quo. They are also much less likely to stop doing something than failing to start doing it. So, wherever you can and with the help of templates, checklists and IT solutions, make compliant behaviour the default solution and non-compliance the opt-out way. While this will not deter people with criminal energy who are bent on breaking the rules, you will prevent people from breaking rules just by “going with the flow” or taking the path of least resistance in their daily work.
- Peer pressure: People usually do not want to stick out of the crowd when it comes to non-compliance. In Sweden, this universal rule of not wanting to stick out goes under the name of jantelagen, or the law of Jante. People want to play by the rules if they know that their neighbours, co-workers etc. play by the rules. So Her Majesty’s Revenue and Customs (the British tax agency), with the help of behavioural scientists, wrote letters to people who did not pay their taxes stating that “Nine out of 10 people in the UK pay their tax on time. You are one of the few in [your home town] who have not paid us yet” and thus increased tax payments considerably.
- If you are a Compliance Officer in a company – apply those rules to your program and reduce monitoring costs.
- If you are a lawyer in a law firm supporting the Compliance Officer: Show our client that you apply those rules in your advice, thus saving your client´s budget and making the compliance officer happy!