Social Licence as a Regulatory Concept: An Empirical Study of Australian Company Directors

Growth of ‘social licence to operate’ (‘SLO’) may reflect a turning point in the evolution of the stakeholder/shareholder debate, and a potential expansion of the power of employees, investors and society generally, described by the smart regulatory model as third party or ‘surrogate’ regulators of corporate activity. However, despite the broad implications of SLO for corporate regulation, little is known about the perceptions of company directors in relation to SLO. This paper reports the findings of an empirical investigation of the SLO perspectives of Australian directors, undertaken in the wake of a highly controversial Australian Securities Exchange proposal to formalise regulatory use of SLO. Directors’ responses provide support for theoretical models of the regulatory value of third-party surrogates, identifying SLO and concepts of trust, relationships and reputation as important and, crucially, as part of the future. However, responses also reveal a range of potential limitations in SLO’s contours that impact its use as a regulatory concept, including the difficulty of coordinating government and third-party pressure. There is a need for regulatory systems to account appropriately for the complex phenomenon of SLO, in order that its potential benefits are harnessed effectively.