Reputational Regulation: The Public Governance Functions of Reputation

Abstract Many public governance strategies are based upon assumptions of how social evaluations work. Mandatory reporting regulations seek to change the behaviour of the regulated not by establishing a floor for conduct but by releasing information to the public that will influence a corporation’s behaviour. Government agencies have similarly influenced corporate conduct by publicly disclosing adverse information about it. It has also been well recognised that litigation imposes costs on corporate defendants beyond the courtroom; even lawsuits that ‘fail’ can penalise corporations in the court of public opinion. These assumptions of the mechanisms, penalties, and effectiveness of social evaluations drive regulatory choices in the US and the EU. In the former, academics and policymakers have even advocated for greater deregulation by the state in favour of the disciplining power of the markets. This chapter describes a range of regulatory choices that depend on social evaluations: legislation, regulation, enforcement strategies, and litigation. It then identifies their common assumptions about how social evaluations function in promoting the different regulatory objectives. The chapter concludes with a list of research questions that should guide social evaluations research if it is to have meaningful application in public governance strategies.