Matthew Johnson on Regulation by Shaming

Back in 2009, David Michaels, then director of the Occupational Safety and Health Administration (OSHA), decided that OSHA would begin to issue press releases announcing fines of $40,000 or more. He called it “regulation by shaming,” suggesting that press releases impose a cost on employers and add a disincentive to violate OSHA regulations.

Matthew Johnson
Duke University

Does regulation by shaming work? 

Matthew Johnson, an assistant professor at the Sanford School of Public Policy at Duke University, has looked at the question in a paper titled – Regulation by Shaming: Deterrence Effects of Publicizing Violations of Workplace Safety and Health Laws (American Economic Review, June 2020).

Johnson found that publicizing a workplace’s violations led other facilities to substantially improve their compliance and experience fewer occupational injuries and that “OSHA would need to conduct 210 additional inspections to achieve the same improvement in compliance as achieved with a single press release.”

Prior to 2009, OSHA was not issuing press releases?

“It varied,” Johnson told Corporate Crime Reporter in an interview last month. “OSHA had these regional offices around the country. Two of these regional offices had been following this policy of issuing press releases for major fines – fines of more than $40,000. David Michaels made that a national policy for all of the regions.”

“I was interested in the question – what is the impact of this kind of publicity? Typically, OSHA goes in and finds all of these violations at say a stamping plant. They issue fines. I was interested – what impact does the adverse publicity about these fines have on safety outcomes at these plants?”

“To compare before and after 2009 is a bit difficult. What made this a cool study from a research perspective was that OSHA had this kind of arbitrary rule that said – if OSHA issued a fine above $40,000, it would issue a press release. That was the cut off.” 

“So you could compare the cases where there were press releases and those where there were not press releases. I could use that comparison to tease out the effect of this publicity.”

In a previous paper, you looked at OSHA inspections. And you found that when OSHA did inspections, what was the result? 

“When OSHA did an inspection of a workplace, that workplace went on to experience significantly fewer injuries relative to similar workplaces that didn’t get inspected.”

And in the adverse publicity study, you found a similar effect when OSHA issued press releases?

“In fact, an even bigger one. OSHA does not conduct that many inspections. OSHA conducts maybe 30,000 to 50,000 inspections a year. That’s less than one percent of the workplaces it regulates. Inspections are great, but the effects are limited.”

“The press releases have a much greater impact beyond the one workplace in question.” 

‘I looked at compliance and injuries not just at that one facility. I was looking at a spillover or general deterrence effect. What does that publicity do to other workplaces that are nearby? What impact did that publicity have on other workplaces that were nearby? The news would spread through manager networks or worker networks. I found that this spillover effect was large and far reaching.”

“I took two workplaces – one that got adverse publicity and one that didn’t. I looked at the compliance and safety regulations of workplaces within a ten mile radius of that one plant. I could see what happened to compliance at workplaces within that ten mile radius. And I compared that to the compliance of workplaces of that second workplace that didn’t get the publicity.”

“I found these dramatic reductions in violations of safety regulations in that first group.”

“Those workplaces were much less likely to violate safety regulations and much less likely to experience workplace injury.”

There couldn’t have been many press releases where there were fines of $40,000 or more.

“OSHA doesn’t put out all that many press releases. When the Trump administration came in, they dramatically cut this practice of fining and putting out press releases.” 

“At the time I was looking at the press releases, there weren’t that many because OSHA didn’t have that many big fines of $40,000 or more. Only one percent of OSHA inspections resulted in a fine of $40,000 or more. There were hundreds per year.”

“My study period ended in 2014. But there was a steep decline thereafter. It went from a few dozen a month to four or five a month.” 

There is a history of studying adverse publicity against corporate crime. Forty years ago, John Braithwaite and Brent Fisse wrote a book titled The Impact of Publicity on Corporate Offenders. And he came to a similar conclusion.

What corporations fear most is adverse publicity. They don’t care about the size of the fine. For large corporations, fines don’t matter. What matters is their corporate reputation. That’s why this battle over press releases and adverse publicity is so important to them. It’s the key underreported part of deterrence. 

Outside of your study, did you look at these other studies?

“The CEO of a big company told former OSHA director David Michaels once that the CEO didn’t care about OSHA fines. But he dreaded the prospect of a press release. And that’s because of the impact of adverse publicity. I saw an anecdote of a company that was a supplier of Starbucks. And Starbucks dropped this supplier once there was a press release about that supplier’s OSHA violations.”

“And second, I have seen some recent research. Jonas Heese at Harvard Business School – he and some co-authors wrote a paper a year or two ago titled – When the Local Newspaper Leaves Town: The Effects of Local Newspaper Closures on Corporate Misconduct.

“They looked at whether local newspapers were effective corporate watchdogs. They found that over the last couple of decades, when a local newspaper shut down, that led to an increase in corporate crimes – violations of not just OSHA violations, but a broad range of regulatory violations.”

“Local newspapers are particularly likely to write about a story when a local company is caught violating the law. National media often doesn’t cover cases where smaller companies are violating the law. The study found that once a newspaper shut down, companies recognized the risk of negative publicity was lower and it gave them more license to violate regulations.”

What research do you have on deck?

“I have a couple of projects that are a bit related but in different ways.”

“Many of these enforcement agencies rely on workers to complain about workplace hazards. Something like 30 percent of OSHA inspections are triggered by the worker complaining. A worker can complain by phone, online, or go to a local office. And in many of those cases, OSHA will follow up with an inspection. EEOC will only inspect a workplace if a worker complains. Something like 80 percent of wage and hour inspections are triggered by a worker complaint.”

“But there are all kinds of reasons why workers might fear complaining. There could be a threat of retaliation. So, I’m interested in looking at how this reliance on worker complaints affect the efficacy of workplace safety regulation and affect employers’ calculus about what kind of workplace they are providing their workers. That’s one thing I’m looking at.”

“I’m in the early stages of looking at the role of local newspapers. My colleague and I are looking at the decline in newspapers and how the decline in local newspapers has adversely affected labor union organizing over the last couple of decades. We are going to look over a longer time horizon.” 

Why would you think that a decline in local newspapers would lead to a decline in labor union organizing?

“There is all of this evidence that employers retaliate against workers for organizing. On paper, this is illegal. But there is very little enforcement of this law prohibiting it. If a worker does complain to the National Labor Relations Board and there is a finding, the fines are effectively peanuts. There is very little enforcement against retaliation. As a result, employers have become more emboldened in retaliating against workers for organizing.”

“Local newspapers, in reporting on this retaliation, could deter employers from retaliating.” 

“Local newspapers often covered local union organizing drives. And in covering this, they gave publicity to ongoing local union organizing efforts, which may have spurred other organizing efforts.” 

Maybe if the papers were radical labor newspapers. But most local newspapers I’m familiar with just don’t cover corporate crime or labor organizing.

“We are going to be looking at newspapers in the 1970s, 80s and 90s. Back then, many local newspapers would cover union organizing. And it wasn’t just progressive newspapers. Newspapers had labor reporters and they covered labor union organizing.” 

“But this is in the very early stages. And I’m also looking at the economic and labor market effects of non-compete agreements.”

[For the complete q/a format Interview with Matthew Johnson, see 37 Corporate Crime Reporter 28(12), July 10, 2023, print edition only.]

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