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Regulators can avert corporate behaviour that inflicts risks on society, but is nevertheless compliant with the law. Such regulatory interventions beyond the law evoke contentious questions about their objects, legitimacy, methods, and the norms employed. No framework yet exists to analyse these questions in conjunction. Therefore, this paper proposes a typology of the extralegal frontier. The typology is based on a range of discretionary attitudes of regulators towards their enforcement mandate. This range comprises four types of regulators, with an increasingly extensive attitude: Law Enforcer, Legislative Agent, Social Broker, and Public Architect. The typology integrates diffuse scholarly insights into a coherent framework, which offers regulators and their stakeholders a starting point for reflection on interventions beyond the law.
I. Introduction
Corporate behaviour can be compliant with relevant legislation but nevertheless harmful to society.1 Examples of this are loophole seeking behaviour,2 hazardous workplace practices,3 tax avoidance, and toxic waste emissions that meet the legal threshold but pollute needlessly.4 Such corporate behaviour provides regulators with a particular puzzle that leaves them three options to react. One option is to simply refrain from regulatory action and accept the resulting societal damage. A second option traditionally considered5 is to create, or lobby for, additional legislation constraining this corporate behaviour. Yet this ubiquitous course of action can evoke the vicious circle of risk aversion and overregulation referred to as the "risk regulation reflex".6
However, in practice a third course of action seems to gain importance: regulators avert harmful but legal corporate behaviour without creating new legislation. Indeed, Sparrow contrasts a legal model with an expert model of regulation, and thereby observes that "[t]he regulatory world at large is currently leaning...toward the expert model", "...where regulators focus on harm reduction and invent alternative methods for influencing behaviors thatmay be harmful but not illegal. ...Reasons for this include increased public pressure for better protection in thewake of the attacks on September 11, 2001, theGlobal Financial crisis, and other perceived 'regulatory failures'."7 One common example of such regulatory interventions beyond the law is moral suasion by the regulator, coaxing companies through regulatory conversations8 to domore than what is legally required. Regulators can, for instance, prompt companies to reduce emissions further than environmental legislation requires.
Indeed, in the current timeframe regulators may increasingly...