Social Conformity and Adaptation to Norms: The Compliance Society

Conformity with routines and procedures is a standard reaction to uncertainty. Under uncertainty, Boards use routines, norms, and procedures as reference points for any decisions. Rule of appropriateness and procedural rationality are behind Boards’ decision-making processes more often than maximization or optimization efforts. However, we argue in this chapter that, according to our interviewees, uncertainty is not higher during the current crisis; it is just more persisting. The persistence of uncertainty and crisis affects the way Boards’ decisions are scrutinized. Rituals of verification were embedded in norms and procedures, according to the so-called “Audit Society”; today, companies are continuously under scrutiny by media and public opinion. Rituals of verification are not enough anymore; we live in a “Compliance Society”, where Boards are required to daily comply with an increasing number of rules, procedures, values, promoted by law, media, and public opinion. From this perspective, Boards are called to conform with norms, principles, and regulations; the pressure to conform reduces the managerial leeway of Board members. Consequently, we live in a societal context where departing from what is widely accepted has moral implications, as the principles of ESG clarify. Order is based on acceptance so challenging what is widely accepted is against socially accepted order. In this sense, conformity is preserving order and morality. Nevertheless, we argue that Boards’ decisions are still expected to be engines of social transformation. In other words, if in the current Compliance Society Boards are required to conform and preserve order and morality, they do not play the role of encouraging innovation at the business level. Therefore, a potential clash between the Compliance Society and the need of innovation seems to emerge from this currently persisting crisis.