Regulators are People Too

By Carson Smith

Regulations aren’t black and white. There’s a gray area where individual identity and organizational culture influence implementation. Like the law, regulation is endogenous—it comes from within. Ultimately, organizations interpret laws to serve their own needs (Edelman, “Law at Work,” p. 337). Individuals’ interpretations vary, however. Prior experience, race, and gender can be significant indicators of an individual’s willingness to accept symbolic compliance (Fuller, et al., “Legal Readings,” p. 206). After the financial collapse of 2008, a confidential report from the Federal Reserve Bank of New York revealed a culture that was too risk averse. The Fed went on a hiring spree to create an outspoken New Guard of bank examiners (Bernstein). Like any cultural shift, this caused a lot of friction. Was the New Guard’s confrontational style damaging the Fed’s credibility? Was the Old Guard stuck in the pocket of big banks? These are easy questions to ask, but they don’t get to the truth of the matter. It’s not likely either side was acting dubiously for any sinister reason. Instead, this friction was a result of experienced individuals confronting a generalist system of regulation that often accepted internal logic and symbolic compliance in order to avoid personal and organizational risk.

In “Law at Work: The Endogenous Construction of Civil Rights,” Lauren Edelman outlines how the law is “generated within the realm it seeks to regulate” (p. 337). There are two main sets of compliance professionals: lawyers and management consultants. Lawyers provide the first reading of new rules—examining any potential threats and providing insight to academic journals, other lawyers, or management consultants. Management consultants are responsible for diffusing the legal information throughout the organization. Since they work within the organization, their interpretation of the law is more likely to represent the views of the business. Edelman also observed how these compliance professionals mythologized and exaggerated claims against companies. They’d tell stories about ridiculous settlements for consumers and employees for organizations that did not meet standards (p. 342). A lack of any mythologizing and the separation between lawyers and management consultants were the central problems of the Federal Reserve. Bank examiners work in the banks they’re regulating as management consultants. Most examiners have introductory knowledge of a variety of regulations. They’d have to call Fed HQ to get any specialized information from lawyers. In practice, however, it was easier to question the people in the bank about complex transactions first. This essentially gave banks incredible influence in regulating themselves (Bernstein). Furthermore, the management consultants lacked any real way to mythologize their positions. Given the nature of financial regulation, improper implementation may come at a large cost overall but, at the same time, a small cost to individual consumers. Although it’s important for the banks to have some say in realistic implementation, this should not get in the way of the regulation’s real purpose. Separation of information and thought between these two entities—lawyers and management consultants—combined with a lack of story-telling helped organizations gain stronger sway over how the law was diffused in the industry.

What happens when individuals enter this workplace with a lawyer’s mindset? Sally Fuller, Lauren Edelman, and Sharon Matasik explain how individuals within organizations interpret and mobilize law differently due to personal history and existing legal structures. They explain how people with more experience in a certain area of law are less likely to accept symbolic messages and more likely to judge a policy based on how it is actually implemented (“Legal Readings,” p. 206). When the Fed started its hiring spree, they were looking for experienced employees for this exact reason. The New Guard of bank examiners were not generalists. Some of them had worked directly with banks in the past on complying with complex rules. Their entire job depended on their ability to understand how laws should actually work (Bernstein). By replacing management consultants with lawyers as bank examiners, the Fed was demonstrating a cultural shift to begin properly regulating the banks.

Carmen Segarra had worked with CitiBank for ten years, helping them comply with a variety of rules and regulations. She was hired as a bank examiner for the Federal Reserve Bank of New York and went after Goldman Sachs for not meeting standards on their conflict of interest policy. She spent seven months building her case, but when she was about to publish her findings, she ran against the Old Guard. Her supervisors were confused as to why this was an issue at all. Goldman Sachs’ Code of Conduct included something that at least looked like a policy. Wasn’t that good enough? Segarra knew it wasn’t, and other Fed lawyers have confirmed this. In the end, she’s forced to act like Goldman had a policy before publishing her findings (Bernstein). The policy in Goldman’s Code of Conduct was a symbol—something put there to give an illusion of following higher standards. Segarra had spent years helping banks make policies like these and knew that how strongly the reality differed from the symbol. Since the other management consultants lacked Segarra’s lawyerly experience, they were more sensitive to the bank’s views. Furthermore, they lacked the urgency in story-telling that would normally characterize legal threat minimization. They worried more about credibility than reality. The mere presence of a symbol remained important to them, whether or not it worked. 

The reason any of this became public was because Carmen Segarra was fired from her job and sued the Fed for wrongful termination. Right now, she’s appealing the case. In response to questions about her termination the Fed said it was based “entirely on performance grounds, not because she raised concerns as a member of an examination team about any institution” (Bernstein). This is believable to some Fed employees who thought Segarra had “sharper elbows”. For Segarra, however, the symbol has strayed from reality. 

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Bernstein, Jake. ""The Secret Recordings of Carmen Segarra"" This American Life. 

Edelman, Lauren, "The Law at Work"

Fuller, et al, "Legal Readings"

Gender, Gendering, and the Law

By Jihad Komis

Gender is perhaps better understood as a verb than a noun. It is a process that ensures that everything from what we wear, read and watch, to the ways we think, feel and even perceive our future carries a gendered undertone. Gender can be a significant lens through which we shape our identity and how we choose to interact with different spheres of society. One such sphere is the law. Examining the different ways the two ends of the gender spectrum, men and women, interact with and understand the law can lead to observing many clear differences along gender lines. Elizabeth Hoffman’s work in analyzing cooperative working environments illustrates such a situation. While cooperative organizations intend to flatten traditional hierarchical power dynamics and create an atmosphere in which all individuals feel comfortable utilizing company laws to settle disputes, Hoffman’s work demonstrates that gender still influences who is willing to use various forms of procedures. It can be difficult to understand why the removal of traditional boss/subordinate dynamics in a workplace fails to eliminate the variations in the procedures men and women are comfortable using. However, when applying the evidence and logic collected in the study performed by Grasmick, which investigates the ways gender affects how a person interacts with laws, it becomes clearer why gender is about so much more than just power dynamics. 

Hoffman’s report asserts that women are more likely to utilize formal procedures when resolving workplace disputes, while men prefer more informal avenues. There are claims that the reasoning behind such a trend is that women simply did not have access to the male dominated system of “networking” that is required for successfully using informal approaches. While the noted difference in such access is undoubtedly a factor, the motivation of such women is much more complex and can be in some ways subconscious. The informal procedures in Hoffman’s analysis carry more risk and require a higher degree of assertion on the part of women.  Informal procedures also often revolve around direct confrontation between two parties. These added components may leave women feeling at a distinct disadvantage due to the way women are socialized to perceive risk, confrontation and conflicts differently than men. Through different mechanisms of societal reward and punishment, women are ingrained with notions that favor avoiding confrontation because to do otherwise is to “engage in status threatening behavior by failing to appear passive, dependent or fearful.” Thus methods that require such confrontation may seem less favorable to women. Attempting to eliminate traditional power hierarchies in a work place doesn’t erase decades of engendered socialization that leaves women feeling that they cannot argue and advocate for themselves in the same manner men can.

Formal procedures at the company in question tend to incorporate a spokesperson to speak on behalf of wronged women. In addition, they require a degree of objectivity and ensure all aggrieved parties get an opportunity to voice their concerns. In essence there is a greater atmosphere of control. Grasmick’s study conveys that women tend to experience an increased amount of control over their lives by parents, family members and other authority figures.  This pattern can lead to women feeling more familiar with controlled processes and procedures as opposed to the loose nature of informal conflict resolution. Arguing or debating over the course of a conflict can be associated with aggression and anger which are other characteristics society punishes women for exhibiting. The ability for women to have representatives speak on their behalf when incorporating formal conflict resolution methods may subconsciously alleviate some of the concerns women may have about others perceiving them to be less like what society has defined to be “womanly.”

Grasmick and company do argue that the ways in which man and women interact with the law is converging. This overarching conclusion does not render the evidence found in their article incompatible with the results of Hoffman’s for a variety of reasons.  One explanation for the reduction in variability observed between men and women’s interaction with the law offered by Grasmick is that there are more women in in the work force and in employed office settings. There are also more women in authoritative positions and living in a more empowered context, and thus able to mimic men’s interactions with the law. While these claims may be true, they are not entirely applicable to the co-op case study examined by Hoffman. While the working community overall has more women workers, the coop organization is comprised of only 16 per cent women. In addition, of the various semi-authoritative positions available in the co-op, a majority of these positions are held by men. In fact only one position of great power is held by a woman. Lastly, Hoffman asserts that for women cab driving is often considered an unconventional occupation - which can influence interpretations of the power dynamics by women. So while Grasmick’s evidence supports a growing trend in which women are able to mirror the actions of men in a legal framework in society as whole, the specific characteristics of the co-op in Hoffman’s article are not conducive to women feeling as though they are on the same playing field as men.

Hoffman may be right in attributing her observed variation is usage of formal/informal procedures along gender lines to women not being a part of the “boys club,” but gender in this case study is about so much more than exclusion. It dictates perceptions of success and what the stakes are. When society punishes women for playing the game the same way men do, it is not surprising that they rely on more structured methods to trespass through the “dangerous” domain of pursuing restorative justice. 

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Work Cited

Hoffman, E. (2005). Dispute Resolution in a Worker Cooperative: Formal Procedures and Procedural Justice. Journal of the Law and Society Association, 39, 51-82.

Grasmick, H., Blackwell, B., & Bursik, R. (1993). Changes in the Sex Patterning of Perceived Threats of Sanctioning. Journal of the Law and Society Association, 27, 679-705.