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

Growth of ‘social licence to operate’ (‘SLO’) may reflect an evolution of the stakeholder-shareholder debate, and an 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. Despite the broad implications of SLO for regulation, little is known about the perceptions of company directors in relation to SLO. This article reports on an empirical investigation of Australian directors’ perspectives, undertaken after the Australian Securities Exchange’s proposal to formalise regulatory use of SLO. Directors’ responses provide support for theoretical models of third-party regulators. They identify SLO and concepts of trust, relationships and reputation as important and, crucially, part of the future. However, responses also reveal potential limitations in SLO’s contours that impact its use as a regulatory concept. Regulatory systems must account appropriately for the complex phenomenon of SLO, so its potential benefits are harnessed effectively.