Abstract
The aim of this chapter is to analyse the impact of cultural differences on the creation, application and interpretation of compliance norms, and on the practical ways to eliminate the difficulties in building uniform compliance normative systems for international financial institutions. The results of the research conducted in the writing of this book confirm the hypothesis that different cultural conditions have an impact not only on the manner of regulation within the corporation, but also on the assessment of legal risks, and even on the selection of issues covered by the compliance regulations. The aim of this chapter is also to present the results of detailed research that compared the differences and identified the similarities between differences in legal cultures within the financial institutions.
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Notes
- 1.
B. Maurer, International Political Economy as a Cultural Practice: The Metaphysics of Capital Mobility [in] R. W. Perry, B. Maurer [ed.] Globalization Under Construction: Governmentality, Law and Identity, Minneapolis 2003, p. 72 et seq.
- 2.
On the regulatory role of banking supervision, see A. Jurkowska-Zeidler, Status prawny Komisji Nadzoru Bankowego jako organu administracji publicznej w świetle wyroku Trybunału Konstytucyjnego z dnia 15 czerwca 2011 roku, Gdańskie Studia Prawnicze XXVIII/2012, p. 144.
- 3.
E. M. Fogel, A. M. Geier, Strangers in the House, Rethinking Sarbanes-Oxley and the Independent Board of Directors, Deleware Journal of Corporate Law 32/2007, pp. 33–72.
- 4.
R. Aggarwal, V. Azofra, F. Lopez, Differences in Governance Practices Between US and Foreign Firms: Measurement, Causes and Consequences, Review of Financial Studies 23(3)/2010, pp. 3131–3169.
- 5.
On the requirements for compliance functions in financial institutions in the US cg. P. Moles, R. Parrino, D. S. Kidwel, Corporate Finance, Glasgow 2011, p. 26.
- 6.
S. Oded, Corporate Compliance, Cheltenham 2013, p. 143.
- 7.
I. Maher, Limitations on Community Regulation in the UK: Legal Culture and Multi-Level Governance, Journal of European Public Policy 3(4)/1996, p. 577 et seq.
- 8.
D. W. Ewing, Justice on the Job: Resolving Grievances in the Nonunion Workplace, Harvard 1989, p. 312.
- 9.
L. B. Bingham, D. R. Chachere, Theoretical and Empirical Research on the Grievance Procedure and Arbitration: A Critical Review [in] A. E. Eaton, J. H. Keefe [ed.] Employment Dispute Resolution and Worker Rights, Champaign 1999, p. 137.
- 10.
This is not an isolated approach—the same is true for corporations operating in other jurisdictions of the continental cultural circle of Europe, such as the Netherlands and Germany. See E. Blankenburg, The Infrastructure of Legal Culture in Holland and West Germany, Law and Society Review 28(4)/1994, p. 790 et seq. Cf. also: J. L. Gibson, G. A. Caldeira, The Legal Cultures of Europe, Law and Society Review 30(1)/1997, p. 60.
- 11.
More on this subject: J. Bell, French Legal Cultures, Cambridge 2001, p. 50 et seq.; J.-L. Halperin, F. Audren, La culture juridique francaise: Entre mythes et realite, Broche, 28 November 2013 passim.
- 12.
Cf. L. Góral, Zintegrowany model publicznoprawnych instytucji ochrony rynku bankowego we Francji i Polsce, Warsaw 2011, p. 98, also E. Bouretz, J.-L. Emery, Autorite des marches financiers et Commission bancaire: Pouvoirs de sanctio et recours, La Revue Banques 702/2008, p. 50 et seq.; P.-E. Partsch, Droi bancaire et financier europeen, Paris 2009, p. 105.
- 13.
A. Garapon, French Legal Culture and the Shock of “Globalization” [in] D. Nelken, J. Feest [ed.] Legal Culture, Diversity and Globalization, Social and Legal Studies 4/1995, p. 493.
- 14.
See J. Pelisse, From Negotiation to Implementation: A Study of Reduction of Working Time in France, Time and Society 13(2/3)/2004, p. 226.
- 15.
Cf. M. Faure, Tort Law and Economics, Cheltenham 2009, p. 444.
- 16.
J. H. Bracey, Exploring Law and Culture, Long Grove 2006, p. 121 et seq.
- 17.
See R. Michaels, J. Pauwelyn, Conflict of Norms or Conflict of Laws? Different Techniques in the Fragmentation of International Law [in] T. Broude, Y. Shany [ed.] Multi-Sourced Equivalent Norms in International Law, Oxford 2011, p. 40.
- 18.
See L. Benton, Law and Colonial Cultures, Cambridge: Cambridge University Press 2002, p. 32 et seq.
- 19.
E. J. Rudolph, The Board Must Take the Lead in Establishing a Corporate Culture of Ethics and Compliance, 1 July 2014, www.Corporatecomplianceinsights.com (download 14 March 2019).
- 20.
Difficulties in harmonizing internal corporate norms are also due to many other reasons. See e.g. G. Bierbrauer, Toward an Understanding of Legal Culture: Variations in Individualism and Collectivism, Law and Society Review 2(2)/1994, pp. 243–264.
- 21.
Interestingly, these issues are currently of interest to shareholders, but also to the media and other entities external to companies, to the extent that banking institutions include information about them in their annual reports alongside financial reports.
- 22.
Comments on the meaning of certain concepts rooted in European legal culture, see A. Sulikowski, Z zagadnień teorii i filozofii prawa. W poszukiwaniu podstaw prawa, Acta Universitatis Wratislaviensis 2878/2006, p. 235 et seq.
- 23.
See R. Cotterell, The Concept of Legal Culture [in] D. Nelken [ed.] Comparing Legal Cultures, Brookfield 1997, p. 15.
- 24.
Apart from the subject of this study, there are other, existing in practice, supra-regional factors influencing the unification of bank operations in different jurisdictions. One such factor is the supervisory role of the European Central Bank in relation to the financial stability of banks operating in the European Union. See more on this subject M. Fedorowicz, Op. cit., p. 379 et seq.
- 25.
Cf. T. M. J. Moellers, Sources of Law in the European Securities Regulation—Effective Regulation, Soft Law and Legal Taxonomy from Lamfalussy to de Larosiere, European Business Organisation Law Review 3(11)/2010, p. 379.
- 26.
P. R. Wood, op.cit., p. 97.
- 27.
There are also exceptions, which include areas where certain compliance procedures are not part of everyday activities, such as private transactions in securities by bank employees.
- 28.
On the cultural differences in understanding of the changes in law due to the frequent withdrawal of countries from their traditional role and the fact that global business organizations take over the field in this respect, see A. C. Aman, The Democracy Deficit: Taming Globalization Through Law Reform, New York 2004, p. 139 et seq.
- 29.
See J. Winczorek, Systems Theory and Puzzles of Legal Culture, Archiwum Filozofii Prawa i Filozofii Społecznej 1(4)/2012, p. 106.
- 30.
In the interpretative practice of corporate standards containing recommendations for specific actions, the term “common sense test” is even used to determine the assessment to which such recommendations should be subjected in a given legal environment.
- 31.
See S. Schelo, Bank Failing or Likely to Fail. Restoring Confidence. The Changing European Banking Landscape, London 2014, p. 23.
- 32.
A separate but indirectly related issue outside the scope of this study is the consideration of the different functions that the law performs depending on the cultural legal traditions. In particular on the communication function, including the function of programming and coding social attitudes through legal rules in the examined cultural conditions. See N. Luhmann, Law as a Social System, Oxford 2004, p. 173 et seq.
- 33.
On cultural differences in the understanding of what is and may not be lawful, see e.g. S. S. Silbey, Legal Culture and Cultures of Legality [in] J. R. Hall, L. Grindstaff, M. Ch. Lo [ed.] Handbook of Cultural Sociology, London and New York 2010, p. 472.
- 34.
Taking away passports from employees as a guarantee of loyalty is still common practice in some developing countries-based service centers of financial institutions and other international corporations.
- 35.
On the limitation of labour and wider human rights by corporations engaged in global trade, see M. B. Likosky, The Silicon Empire. Law, Culture and Commerce, London 2005, p. 185 et seq.
- 36.
S. Shanahan, S. Khagram, Dynamics of Corporate Responsibility [in] G. S. Drori, J. W. Meyer, H. Hwang [ed.] Globalization and Organization: World Society and Organizational Change, Oxford 2006, p. 196 et seq.
- 37.
On increasing corporate social responsibility in the context of the role of corporations as ‘global private authorities’ shaping, by means of normative instruments, the general pro-social attitudes as expected by them, see R. Shamir, Corporate Social Responsibility [in] B. de Sousa Santos, C. A. Rodriguez-Garavito [ed.] Law and Globalization from Below, Cambridge 2005, p. 92.
- 38.
About the role of compliance in building internal cohesion of companies through employee involvement in CSR activities, see R. Hurley, X. Gong, A. Waqar, Understanding the Loss of Trust in Large Banks, International Journal of Bank Marketing 32(5)/2014, p. 350.
- 39.
Quote from the internal procedure for ensuring the uniform application of compliance norms in one of the international financial institutions: “The role of compliance is to support management in fulfilling the above responsibilities. This involves pro-active support in identifying, assessing and evaluating risks including compliance risk, monitoring, reporting and certification, as well as promoting a corporate culture based on compliance with uniformly understood laws and optimising relations with regulators.”
- 40.
On the role of culture creating power of decisions on the validity of the law, see B. Maurer, The Cultural Power of Law? Conjunctive Reading, Law and Society Review 38/2004, p. 843 et seq.
- 41.
Large multinational corporations, adapting their activities to local conditions, change these conditions at the same time, being at the same time considered as a more important influence agents on the shape of what is currently the global economic turnover than politicians or structures of international political organizations. See A. Mickleth, A. Wooldridoe, The Company: A Short History of a Revolutionary Idea, Washington 2005, p. 159 et seq.
- 42.
On the differences in interpretation of similar legal norms in various jurisdictions, see W. Twining, Social Science and Diffusion of Law, Journal of Society and Law 32(2)/2005, p. 210 et seq.
- 43.
On the subject of contradictions in practice of interpretation of norms by social institutions, including commercial ones due to cultural differences, see P. Ewick, The Structure of Legality: The Cultural Contradictions of Social Institutions [in] R. A. Kagan, M. Krygier, K. Wiston [ed.] Legality and Community, Berkeley 2002, pp. 149–155.
- 44.
More on the linguistic aspect of the law, see J. Jabłońska-Bonca, Wprowadzenie do Prawa. Introduction to Law, Warsaw 2012, p. 28.
- 45.
Cf. L. Rosen, Law as Culture, Princeton 2006, p. 76.
- 46.
See L. Morawski, Główne problemy…, p. 271.
- 47.
On the role of social norms referred to in communication between regulators and regulated entities, including how useful they are in enhancing the effectiveness of communication and how much reference to these norms facilitates the interpretation of the content of legal norms today, see S. Martin, 98% of HBR Readers Love This Article. Businesses Are Just Beginning to Understand the Power of Social Norms, Harvard Business Review October 2012, p. 23.
- 48.
It is precisely the establishment of this cultural context that becomes crucial in the process of every reading of legal norms, especially in the confrontation of these norms with the social tasks they perform. T.W. Aldorno writes that the inclusion of the objective spirit of the epoch in the concept of culture from the very beginning points to an administrative point of view which, from the perspective of the people above the hierarchy, has the task of collecting, dividing, evaluating and organizing. T. W. Aldorno, Culture and Administration [in] J. M. Bernstein [ed.] The Culture Industry: Selected Essays on Mass Culture by Theodor W. Aldorno, London 1991, p. 93.
- 49.
M. Zirk-Sadowski, Wprowadzenie…, p. 170 et seq.
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Braun, T. (2019). The Impact of Cultural Differences on Compliance Norms. In: Compliance Norms in Financial Institutions. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-24966-3_5
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