Responsible researcher: Bruno Benevit
Original title: Regulation by Shaming: Deterrence Effects of Publicizing Violations of Workplace Safety and Health Laws
Author: Matthew S. Johnson
Intervention Location: United States
Sample Size: 150,000 inspections
Sector: Labor Economy
Variable of Main Interest : Compliance
Type of Intervention: Press release
Methodology: RDD
Summary
Internal company policies have shown increasing relevance in public opinion, reinforcing the importance of public image. In this sense, the disclosure of information about socially undesirable conduct can pressure companies to adopt compliance in their management. This study looked at how the release of press releases from a government agency about health and safety violations affected company behavior. The results revealed that disclosing one facility's violations led other facilities to substantially improve their compliance and experience fewer occupational injuries. The author estimated that one press release promotes the same improvement in compliance as performing 210 inspections. Evidence from the study indicated that employers improved compliance to avoid worker costs.
Advertising related information plays a crucial role in the management of companies, influencing their decisions and behavior. Ratings, scores and disclosures of aspects of a company's quality or performance have proliferated, helping to mitigate moral hazard problems by providing information that encourages companies to invest in quality. The public disclosure of information about quality leads companies to improve the attributes in question, especially when inadequate or inefficient practices come under the scrutiny of interested agents.
Social networks and the media have played a relevant role in this phenomenon, commonly using " shaming " strategies to pressure companies to improve their behavior. By releasing lists of companies that fail in certain aspects, as the Food and Drugs Administration (FDA) did with pharmaceutical companies in 2018, both “specific deterrence” of the targeted corporation and “general deterrence” are sought, encouraging other companies to avoid being targets of future negative publicity (JOHNSON, 2020). In this way, regulatory agencies have played an important role in exposing undesirable conduct by firms and agents regulated by them.
In this context, the Occupational Safety and Health Administration (OSHA), the regulatory agency responsible for establishing and enforcing occupational safety and health standards in the United States, adopted a press release policy in 2009. This policy began to publicly expose employers who violated occupational health and safety standards based on standardized and objective criteria in accordance with the value of the fines applied. Thus, this initiative provides an opportunity to identify the impacts of disclosing low performance on the behavior of employees in non-compliant companies.
Created in 1970, OSHA is the federal regulatory agency responsible for ensuring health and safety conditions at work in the United States, establishing and enforcing standards. The agency divides the country into 10 regions, with regional offices and 90 area offices that oversee inspections and enforcement. With jurisdiction over 28 states, OSHA conducts inspections to monitor compliance, citing violations and imposing financial penalties. The agency also focuses on specific programs and event-based inspections, dealing with a limited number of establishments due to budget constraints.
Since the early 2000s, OSHA regional offices have issued press releases about inspections as directed by the Office of Public Affairs (OPA). These communications were sent to local media and industry press, detailing the results of the inspections. The policy was intended to expose major offenders to the public and highlight OSHA's enforcement activities, encouraging other companies to improve their practices to avoid negative publicity.
Although there were criteria based on fines above a certain amount, the application of this rule was not rigorous, which resulted in some inconsistencies in the issuance of communications. OSHA inspections varied, with some resulting in reports even below the cutoff value, depending on the nature of the violations found. In May 2009, OSHA Headquarters standardized the criteria for issuing advisories, resulting in a significant increase in the number of advisories issued and media coverage of OSHA violations. This standardization aimed to standardize disclosure and increase the transparency of the agency's inspection activities.
Integrated Management Information System database , which contains detailed information on all inspections performed by the entity. Key variables included the start date of the inspection, the reason (such as complaints or accidents), characteristics of the inspected site (industry, number of employees, union representation, etc.), and details of violations detected, including financial penalties applied.
The data covered inspections carried out between January 2009 and December 2013. The analysis carried out focuses on inspections with penalties applied from October 2009, the period after the change in the press release policy. The sample selection excluded inspections in 22 states with state OSHA offices, in Regions 2 and 3 (New York and New Jersey), and in the mining sector, which is under another jurisdiction. Inspections outside the limits established for press releases in each region were also excluded. The sample included inspections with penalties between $30,000 and $55,000, depending on the region.
The sample totaled around 150,000 inspections, of which only 1% exceeded the thresholds for press releases. The average penalty was $4,600, and most inspections find two violations, while the average rises to more than eight in the subset near the limit. Scheduled inspections accounted for 60% of the total, while complaints, referrals and fatalities account for 34%. Inspections focused on the construction and manufacturing sectors, and variables were adjusted to reduce the influence of extreme values.
The study estimated the effect of publicizing violations of OSHA standards on establishment compliance (specific business facilities). The regression discontinuity model (RDD) was used to explore the discontinuity in the criteria for issuing the announcements. The running variable was the value of the penalties imposed, with the financial limit as the cutoff point. The Intent-to-Treat (ITT) effect was estimated by comparing facilities around the threshold, controlling for the penalty amount and other factors. To deal with imperfect adherence according to the cutoff criteria, a Fuzzy to estimate the effect of Treatment on Treated (TOT).
Additionally, the models considered an algorithm with a triangular kernel, giving greater weight to observations close to the cutoff point. Regarding the model's polynomial, a linear polynomial was adopted on both sides of the limit, considering different inclinations. To improve accuracy, control variables related to the construction sector and the type of inspection (scheduled or unscheduled) were included.
The treated and control groups were defined based on exposure to press releases, considering establishments with penalties above or below a pre-determined financial limit that defines the company's exposure in the release. Those with penalties above the limit were considered treated, as they were more likely to have publicized violations.
Before estimating the models, the author verified the validity of the RDD method based on the behavior of the density of the number of inspections according to the penalties, as well as the behavior of the control variables around the cutoff point. In both situations, the validity of the model was confirmed. Finally, the author also verified the existence of side effects. Specifically, we analyzed how press releases impacted: (i) subsequent compliance with OSHA for previously exposed establishments, and (ii) the improvement of health and safety indicators through the number of inspections caused by fatalities in companies that were exposed.
Public disclosure of environmental penalties through press releases has shown significant impacts on reducing environmental violations in facilities close to those penalized. Within a 5 km radius, violations decreased by 73%, while at distances of up to 50 km, the drop was 30%. These effects were limited to the same sector as the penalized facilities, indicating that deterrence occurs within specific industrial boundaries. Furthermore, the results show considerable persistence, with effects lasting up to 36 months after the press releases were published. More severe penalties have increased adherence to environmental standards, especially in cases with a high potential for environmental risk. Thus, the strategy of making the results of inspections and punishments public can be considered an effective tool to encourage compliance with regulations and reduce environmental damage.
The publication of press releases has also had significant effects on increasing compliance with OSHA regulations, with clear impacts on reducing serious workplace injuries. The analysis revealed that these reductions were most evident in locations located between 10 and 25 km from the penalized facility, indicating that geographic proximity plays a central role in disseminating information and motivating compliance. Furthermore, indirect benefits were particularly significant in regions where companies faced higher risks of future penalties. The improvements observed in occupational safety highlight the relevance of deterrence effects in the context of occupational health. Overall, transparency in the penalties applied contributed not only to compliance with standards, but also to the creation of safer working environments that are less prone to serious accidents.
The reduction in workplace injury rates was particularly pronounced in regions with a high presence of unions, suggesting that these organizations play a crucial role in amplifying pressure for compliance. Unions, by mobilizing workers and highlighting the importance of workplace safety, reinforce adherence to standards after the announcement of penalties. On the other hand, in areas where unionization is low or where there is less political and organizational power, the effects were less evident. This indicates that the impact of press releases also depends on institutional factors and local political capital. Furthermore, the combination of rigorous supervision and public exposure of penalties appears to be more effective when accompanied by a social environment favorable to corporate accountability. Thus, institutional support is essential to transform information into concrete prevention actions.
In this article, the author analyzed the effects of OSHA press releases on compliance with occupational safety and health standards and on the reduction of occupational accidents. The results indicated that public disclosure of the penalties generated a significant reduction in violations of standards and serious accident rates, especially in locations close to the penalized establishments. Additionally, it was found that the effects persisted over time and were greater in intensity in regions with greater union density.
The results of this study highlight the role of transparency and public disclosure of penalties from regulatory agencies in promoting regulatory compliance in companies. Evidence indicates that targeted communication strategies and the consolidation of inspection policies that integrate public exposure can be useful to increase adherence to standards, reduce accidents and protect workers' health.
References
JOHNSON, MS Regulation by Shaming: Deterrence Effects of Publicizing Violations of Workplace Safety and Health Laws. American Economic Review , vol. 110, no. 6, p. 1866–1904, 1 jun. 2020.
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