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Does Transparency lead to more Compliance? Critical Remarks on the Relation between Transparency and Compliance Albert Meijer *
Enforcements agencies increasingly publicise the results of their inspections on the Internet. This information is meant to support consumer choice and an important underlying assumption is that transparency stimulates compliance. In this essay a critical analysis of forms of transparency in different enforcement domains (food safety, environmental inspections, work safety) will be presented to expose naïve assumptions about the effects of transparency. This essay hopes to stimulate the development of more sophisticated perspectives on the relation between transparency, citizens and compliance. 1
I. Introduction
Transparency – defined as “lifting the veil of secrecy”2 – is crucial for the public sector.3 Public organizations should be open about their organisation and processes to ensure their legitimacy. Transparency is increasing and organisations publicise information about their structure and policies to inform citizens. More recently, these publications are moving towards more specific and detailed information and enforcement agencies have started to publicise individual enforcement results. A well-known example is the Danish Food Safety Authority which publicises the results of inspections of individual premises on its website.4 Other enforcement agencies that publicise the results of inspections include environmental inspection agencies in the Netherlands and agencies that inspect work conditions in the UK. In all these sectors and countries the trend is similar: enforcement agencies publicise more and more results of inspections on the Internet. Why do these enforcement agencies publicise the results of inspections? Official policy documents generally emphasise two broad objectives. The first objective is to inform citizens (and other stakeholders) about the level of compliance. The argument is that people have a “right to know”: they are entitled to obtain information about issues relevant to them such as food safety and environmental risks.5 The second objective is to enhance compliance since transparency is supposed to shed a light on bad practices.6 Pressure from outside parties could create an incentive to improve compli-
ance. Enforcement agencies broadly refer to citizens who would create pressure on companies that do not confirm to the rules. Citizens can refuse to buy products or services from companies that do not comply with the rules. This argument in summarized in the following model: Transparency
Citizens
Compliance
Figure 1: Basic relations between transparency, citizens en compliance
Is this argument valid? Does transparency make citizens pressure companies into better compliance? * Albert Meijer (
[email protected]) is an Assistant Professor at the Utrecht School of Governance. His research focuses on the impact of information technologies on the public sector. 1 This paper is based on a presentation for the workshop “Transparency & Confidentiality” organized by the Dutch Food and Consumer Product Safety Authority on January 25th and 26th 2007 in The Hague. 2 J. Davis, 1998, Access to and Transmission of Information: Position of the Media, In V. Deckmyn and I. Thomson (eds) Openness and Transparency in the European Union. Maastricht: European Institute of Public Administration, p. 121. 3 M. Graham, 2002, Democracy by Disclosure, The Rise of Technopopulism, Washington D.C.: Brookings Institution Press; C. Hood & D. Heald (eds.), 2006, Transparency: The Key to Better Governance?, Oxford: Oxford University Press; R.W. Oliver, 2004, What is transparency?, New York: McGraw-Hill; D. Guina-Dornan, 2005, Disclosure of information on food control inspections. An environmental health service perspective, Unpublished thesis, University of Dublin. 4 See Country Report Denmark in this issue, 2007, p. ____. 5 D. Guina-Dornan, Disclosure of information on food control inspections. in this issue, 2007, p. ____. 6 D. Heald, 2006, Transparency as an instrumental value. In: C. Hood & D. Heald (eds.), Transparency: The Key to Better Governance?, Oxford: Oxford University Press, pp. 59 – 73.
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In this essay I will present a critical analysis of the relation between transparency, citizens and compliance. The analysis is based on explorative research in the Netherlands and other European countries. I will use evidence from the following agencies to substantiate my arguments: the Dutch Food Inspection Agency, the Danish Food Inspection Agency, the English Environment Management Agency and the Provincial Environmental Inspection in Limburg (the Netherlands).7 In this essay I will present five critical remarks concerning the relation between transparency, citizens and compliance. First I will argue that the forms of transparency that have been developed express a narrow, consumerist perspective on citizens instead of a broader democratic concept of actors in the public sphere. The second critical remark focuses on the groups of citizens that benefit from new forms of transparency. I will argue that mostly high-educated citizens use the information. Thirdly, I will argue that enforcement agencies focus only on one relation between transparency and compliance (see figure 1). I will stress that there is a wide variety of relations. My fourth argument is that transparency has an effect mainly because it affects public images of companies. The effects of transparency can only be understood if one takes the reputation of companies into account. Finally, I will argue that relations between transparency, citizens and compliance are contingent. Effects of transparency strongly depend on the institutional and administrative context. This essay aims to show that the basic argument made by many agencies concerning the relation between transparency, citizens and compliance is rather naive. Citizens are not consumers, citizens do not form a homogeneous group, society consists of citizens but also of other actors, information is
7 Qualitative research was conducted in 2006 and 2007 to assess the effects of publishing information on the Internet about enforcement. The research consisted of 16 interviews at various enforcement agencies, analysis of websites and extensive document study. The results of this study have been published in a Dutch report (Toezicht 2.0), which is available on request from the author. 8 Welch, E.W. & W. Wong, 2001, Global Information Technology Pressure and Government Accountability: The Mediating Effect of Domestic Context on Web Site Openness, Journal of Public Administration Research & Theory, Vol. 11, Nr. 4, pp. 509-538. 9 A. Hirschman, 1970, Exit, Voice and Loyalty: Responses to Decline in Firms, Organizations and States, Cambridge MA: Harvard University Press.
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not processed in a rational manner and relations are not identical across different contexts. A more sophisticated perspective on the relation between transparency and compliance can help enforcement agencies to develop better forms of transparency or embed transparency better within other strategies for stimulating compliance.
II. Consumerist approach to transparency Welch & Wong have indicated that transparency consists of both information provision and creating opportunities for (interactive) communication.8 Enforcement agencies can use websites for information provision and communication. The information can enable citizens to form an opinion about companies and they can express their opinion through the communicative potential offered by websites. They could send signals to enforcement agencies and play an active role in improving compliance. None of the websites I investigated offer serious opportunities for digital communication. All the initiatives focus on the provision of information. They do not create new channels of communication between citizens and enforcement agencies, citizens and objects of enforcement and citizens and citizens. The Dutch Food Inspection enables citizens to file digital complaints but considers requests for feedback and digital forums too complicated to include in its website. A similar position is expressed by the Danish Food Inspection who indicated that creating opportunities for interaction means more work because then inspectors have to go to the premise to check the citizen’s complaint. This failure to create opportunities for communication fits within a consumerist approach to transparency. Why would citizens need to communicate with the agency, companies or each other? They can express their opinions by voting with their feet: citizens can collectively decide not to purchase goods or services from non-complying companies. This would send a clear signal to these companies that they need to follow the rules. This consumerist approach depends on what Hirschman calls “exit” as a signal to companies.9 Consumers send a signal to their supplier that it is not doing what the consumer wants it to do by
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choosing to purchase products or services from another supplier (e.g. prices are too high or products are not of the required quality). However, Hirschman describes a second form of sending signals of dissatisfied consumers. They can also express their dissatisfaction to the producer of service provider through “voice”. They can tell them that they need to improve services or lower prices. Or, in the case of food quality or public health, comply with legal standards. The websites of enforcement agencies do not take voice into account as an important way for citizens to signal their dissatisfaction. The disadvantage from this omission is that – as we can learn from Hirschman – exit is a signal that is low in information. Consumers who choose to stop purchasing products or services from a company only send the signal that they are dissatisfied but give no clue as to why they are dissatisfied. Through voice consumers can tell companies that they are dissatisfied with the company’s compliance with formal rules. This option, however, is not (or only marginally) created through the websites of enforcement agencies. An example from a different sector can illustrate how the Internet can be used to stimulate interaction and discussion between citizens. The City of Amsterdam has introduced a website that provides information about school performance but, at the same time, creates opportunities for parents and students to discuss various issues related to school quality.10 Parents can discuss issues that they all care about – such as the quality of school administration or the nature of school testing – and can also ask each other questions about experiences with schools. This website enables parents to form an active community concerned with education. By using websites only to provide information, enforcement agencies do not enable citizens to become active actors in the public domain.11 They limit their role to that of a consumer who makes purchasing decisions on the basis of information. Granting citizens a more active role by creating opportunities for digital communicative interaction would enable new forms of citizenship. They could debate the behaviour of companies among each other and with agencies and companies. This type of collective arrangement would fit the nature of issues that transcend individual interests such as food quality and public safety.
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III. Elitist perspective on citizens Enforcement agencies do not make a distinction between types of citizens. They assume that all citizens are willing to and capable of using the information on compliance available through their websites. This would result in more equality since all citizens would have equal access to the information. The level of Internet penetration is very high in Denmark, the UK and the Netherlands so access to the information would seem to be equally distributed. None of the enforcement agencies collects information about the types of citizens who access their websites. Nevertheless, qualitative assessments clearly show that the websites are mostly accessed by high-educated citizens. Research into visits to the website of the Dutch school inspection shows that over 60% of the visitors has a college or university degree. This pattern of use – high-educated people as the dominant group of visitors to the website – cannot be attributed to access to Internet facilities but rather to the capacity to process abstract information. Smileys and numbers seem easy to interpret but qualitative evidence shows that people without a sufficient level of education will not use this type of information in their decision-making processes. One can pose the question whether it is a problem that the information on the websites of enforcement agencies is mostly used by high-educated citizens. Theoretically, one can distinguish between two types of relations between usage by an elite and effects on the whole population.12 The first pattern is that usage of enforcement data by an elite could lead to a pressure on companies to improve their compliance. All citizens would benefit from better compliance. If, for example, a small group of citizens complains about food safety at a chain of fast food restaurants, all citizens would get better food. When this mechanism applies, an elitist perspective is not problematic.
10 www.onderwijsconsument.nl. 11 For a general discussion of civic competence: A. Lupia. 2004. „The Wrong Tack (Can Deliberation Day Improve Civic Competence?)“, Legal Affairs, Vol. 3, Nr. 1, pp. 43-45. 12 A.J. Meijer, 2007, Publishing public performance results on the Internet. Do stakeholders use the Internet to hold Dutch public service organizations to account? Government Information Quarterly, Vol. 24, Nr. 1, pp. 165-185.
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However, a second pattern in the relation between information use by an elite and effects on the whole population leads to different effects. This pattern stresses that elites will use information to improve their situation only and this will not have an effect – or possibly even an adverse effect – on other groups. An example would be that elites use the information to improve food safety in expensive restaurants. This improvement will not benefit the whole population since most people will never visits these expensive restaurants. The net result would be a greater variation in food safety between expensive restaurants and cheap fast food restaurants (who will face little pressure since their loweducated clients make limited use of the information). This approaches what Michael Young calls a “meritocracy“: public interests are dominated by the better educated elite.13 Enforcement agencies should pay more attention to the variation in groups of citizens. They cannot assume that all citizens will use the information in the same way. This can mean that they will need to vary their enforcement strategies. If companies already face the pressure from high-educated citizens enforcement agencies can step back whereas they will need to step forward to companies that face little pressure from their (low-educated) clients and strengthen enforcement.
IV. Variety of relations between transparency and compliance Enforcement agencies generally focus on citizens as dominant user group of information on compliance (see figure 1). Transparency is to affect the market relation between citizens and companies. Transparency will improve the market because citizens have more complete information to base their
13 M. Young, 1958, The Rise of the Meritocracy, London: Thames & Hudson. 14 A.J. Meijer, 2007, Publishing public performance results on the Internet. Do stakeholders use the Internet to hold Dutch public service organizations to account? Government Information Quarterly, Vol. 24, Nr. 1, pp. 165-185. 15 A. Meijer, 2004, Vreemde ogen dwingen. De betekenis van Internet voor maatschappelijke controle in de publieke sector, Den Haag: Boom Juridisch. 16 A.J. Meijer, 2007, Publishing public performance results on the Internet. Do stakeholders use the Internet to hold Dutch public service organizations to account? Government Information Quarterly, Vol. 24, Nr. 1, pp. 165-185.
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decisions on. A better market will eventually result in better compliance since this will benefit all (leaving market failures aside for the moment). This argument fails to take into account that there are also other relations between transparency and compliance.14 These relations may take different forms: – Public eyes. Companies feel that their performance is out in the open. Public eyes are on them. Even if no other actor reacts to the information, it may still have an effect on compliance. Research into the publication of data by environmental agencies in the Netherlands provides support for this relation. Compliance with environmental regulation increased significantly when the City of Eindhoven started publishing compliance records on a website which received few hits.15 Transparency has an effect in spite of the limited number of visits to the website. – Media effects. Media may use the public information to write articles about objects of enforcement. These articles may have an effect on compliance. Danish newspapers often write about the food safety of restaurants and shops in Denmark. On a slow day they can always use the website with smileys for an easy article on the worst bakeries in Copenhagen. – Organizational effects. Central offices of chains of organisations may react to the information and put pressure on local offices to improve their compliance. The Danish Food Safety agency sends recent reports to many central offices, which use the information to assess the work of local managers. The performance related pay is sometimes even affected by this information. – Other stakeholders. A variety of stakeholders (financers, insurers, pressure groups, unions, etc.) may use the information in various negotiations with objects of enforcement. Consumer unions in the Netherlands are highly interested in obtaining information about the compliance of large retail chains as an addition to their own assessments. Research indicates that these other relations seem to have a stronger effect than the relation between citizens and compliance.16 Especially direct effects and media effects seem to be important. This means that enforcement agencies should reconsider whether they should aim their websites primarily at citizens. They could consider aiming more directly at other stakeholders by integrating more
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sophisticated features for handling the data on the website so that stakeholders can tailor the information better to their own needs.
V. Image is everything Transparency is often assumed to have an impact through consumer decisions. Consumers are supposed to make rational decisions – how much are they willing to pay extra for better hygiene? – and these rational decisions influence companies. This would mean that transparency would only have an influence on companies when consumers actually change their behaviour. Qualitative research shows that companies change their choice even if consumers do not seem to be interested in information about these companies.17 Companies in the City of Eindhoven, for example, feared that the publishing of compliance data concerning environmental regulation would be picked up by the media and affect their reputation on a negative manner. Fear of damage to their reputation is the driver for these changes. Companies want to prevent damage to their image. The argument seems to be that companies are too late when they change their behaviour in response to consumer behaviour. They need to change their behaviour before consumers do. It is not yet clear whether this reaction or anticipation to damage to a business’ reputation will be a lasting effect. One could emphasize that transparency will only have a lasting effect when the information is actually used by citizens or stakeholders. If companies notice that the transparency has no effect at all on consumers, they may not anticipate damage to their reputation. On the other hand, one could also argue that in the information age “image is everything”. Management of reputation is a continuous key task for companies.18 The effects related to damage to reputations will only apply in specific circumstances. The research seems to indicate that this effect is stronger when reputations are important. Reputation is for example important for high priced restaurants or chains of restaurants. A bad reputation could immediately result in lower profits. At the other extreme are individual fast food restaurants serving meals at a low price. Their reputation is unlikely to be strongly influenced by the Internet. Another aspect concerns the link between the value of reputation and costs of
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improving a reputation. The effect will be stronger when improvements can be made at a limited cost. The discussion about reputation is directly linked to “naming and shaming” (or “naming and faming”), which is a way to directly influence the reputation of a company. Should an enforcement company resort to naming and shaming to have a maximum influence on a company’s behaviour? If an enforcement agency decides to do so, it should realize that not all companies will be affected. Additional strategies will be needed aimed at companies who do not have much vested interest in their reputation.
VI. Contingent relations and different contexts A final critical remark relates to the universality of relations between transparency, citizens and compliance. Enforcement agencies in different domains start from the same assumptions concerning the relations between these three variables. These assumptions have been criticized in the previous sections. Additionally, I would like to criticise the presumed universality of relations. The market-context, institutional context and administrative context vary considerably and affect the relations between transparency, citizens and compliance. A first element of the context is the market companies operate on. There are great variations in the number of companies citizens can choose from. Transparency seems to have less influence on compliance if citizens do not have much choice. This is the case in towns where there is only a limited number of restaurants or shops. Information from Food Safety Agencies then only has little influence on consumers and on companies. Lack of choice is generally also the case when it comes to environmental safety. Theoretically, citizens have the choice to move away from dangerous locations but practically they will only do that in extreme situations. The effects of transparency will be greater when citizens can choose between different organizations. 17 A.J. Meijer, 2007, Publishing public performance results on the Internet. Do stakeholders use the Internet to hold Dutch public service organizations to account? Government Information Quarterly, Vol. 24, Nr. 1, pp. 165-185. 18 J.G. Hutton, M.B. Goodman, J.B. Alexander, 2002, Reputation management: the new face of corporate public relations? Public Relations Review, Vol. 27, pp. 247-261.
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A second element concerns the sanctions enforcement agencies can impose. Some enforcement agencies can impose various administrative and legal sanctions whereas other enforcement agencies mainly rely on their capacity to persuade companies to adhere to the rules. The qualitative research indicates that transparency is more important when the enforcement agency has few other sanctions to choose from. These enforcement agencies can suddenly use transparency as a sanction. The Dutch School Inspection Service is an example of an agency, which lacked formal sanctions and it can now use transparency as a means to pressure schools into compliance. A third element is the administrative arrangement for enforcement. Centralised enforcement agencies will have more options to standardise information and they can create a website that it widely known. Decentralised agencies find it more difficult to obtain a prominent position. The provincial environmental inspection in the Netherlands, for example, has an excellent website but it is not well known and, therefore, not used much. Centralisation of the Danish Food Inspection Agency has enabled it to become visible. It has created a website that is well-known all over Denmark.
VII. Lessons and suggestions I started this essay with a description of the simple policy theory that underlies many of the efforts to enhance the transparency of enforcement. On the basis of this critical analysis we can draw three important lessons: – There is little evidence for a simple policy theory that states that information will change citizen behaviour and hence improve compliance. If behaviour changes, it applies mostly to a citizen elite. – There is some evidence for other relations between transparency and compliance. Reputation is important but it will only have certain effects on compliance and is no panacea. – Enforcement agencies can-not simply copy transparency practices since transparency may have different effects in different markets, administrative arrangements and institutional contexts. These lessons provide the basis for suggestions to enforcement agencies. Most of the specific sugges-
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tions have already been made in the previous sections but I would like to make three overall suggestions, which relate to the perspective developed by enforcement agencies: – Enforcement agencies should try to enhance their understanding of the other relations between transparency and compliance. A strong focus on citizens may not be helpful for understanding the overall effects of transparency. – Agencies should try to discuss differences in enforcement organisations and policies and how these relate to transparency. Why does transparency fit within a certain policy whereas it may cause frictions with other policies? – Enforcement agencies should position transparency and its effect on compliance within the broader framework of the legal and political situation. Does this environment constrain or enable changes? Enforcement agencies should realise that the effects of transparency are limited. Transparency is a useful addition to their collection of policy instruments, which can be useful in specific situations. The first reason why the effects are limited is that few citizens or stakeholders use the information and put a pressure on companies to improve their compliance. A second reason is that companies may not receive these signals. Restaurants may notice that they are losing some customers but they may attribute this to other factors. They may not realize that public information on compliance has influenced consumer choice. A third reason is that companies may not be able to comply with standards since they lack the capacity to do so. Chinese restaurants sometimes have different standards for hygiene. What they need is not pressure to comply but support. Enforcement agencies can specifically indicate how compliance can be improved. This essay is based on explorative research and should be regarded as a plea for a broader perspective on the relation between transparency and compliance. Policy plans and also research projects should not be based on naïve assumptions but acknowledge the complexity and diversity of enforcement. Stakeholder interactions and reputation effects need to be better understood. A more sophisticated understanding of the relations between transparency and compliance should replace simple concepts.
