When it comes to sanctions for wrongdoing by companies, research has mainly been focussed on the effects of the various sanctions from the victim's perspective. Other investigations were focused on the infringers' response to the imposition of the sanction. Franziska Weber, Professor of Law and Economics, and Pieter Desmet, Professor of Quantitative Empirical Legal Studies, have explored a new perspective. The professors from Erasmus School of Law examined the willingness of infringers to pay a fine and compared this with their willingness to pay compensation to the victim.
There are several different sanctioning types in the legislator's toolbox to design enforcement responses to legal violations. It is, therefore, important that the legislator is aware of the effectiveness of each sanctioning type. While imposing a fine is commonly used in public law, paying compensation is very common in private law. More knowledge about the two sanction options is therefore of great importance for legislators.
The research by Weber and Desmet shows that, regardless of the victim's characteristics (NGO or company), the majority prefers to pay compensation to the victim: infringers are willing to pay higher amounts in compensation than in fines. They experience paying compensation as a suitable option and believe compensation is a better tool to restore their reputation. However, the nature of the sanction seems not to affect the precautions offenders take to prevent their wrongdoing.
All things together, the findings of Weber and Desmet can be regarded as valuable additions to existing research and can be included in considerations that are made in the political debate.
Read the entire research 'Infringers' willingness to pay compensation versus fines' here.