Constraining global corporate power: a short introduction.

• Author: Spiro, Peter J.

TABLE OF CONTENTS I. PRIVATE LAWMAKING II. MIXED PUBLIC-PRIVATE REGIMES III. FULL LEGALIZATION IV. CONCLUSION: CONTINUUM OR TRAJECTORY? The rise of non-state actors is among the most important facets of globalization. It is also among the most challenging, both with respect to theory and empirics. International law in its traditional articulation allowed little discrete space for non-state actors. Making more room for them risks destabilizing the theoretical project. On the empirical side, although the fact of increasing non-state actor power is now difficult to reject in the face of mounting anecdotal evidence, it is almost impossible systematically to document. Non-state power is sprawling, diverse, bottom-up, and nonisomorphic. Scholars have yet to develop the metrics by which to prove the rise of non-state power.

In the meantime, however, it seems appropriate to follow intuition and the institutional logics which point to the reality of that power. It seems particularly appropriate for researchers to follow the perception of power. Academics are better positioned than policymakers to undertake early mapping of developing phenomena. Free of operational responsibilities, academics can take greater intellectual risks because the stakes are so much lower. Out of the trenches and unburdened by vested material interests, academics can add broad perspectives and test new approaches. If non-state power turns out to be a chimera, little is lost beyond a few professorial person-hours. If it turns out that the global system is being transformed, then academics will have laid the groundwork for assimilating the place of non-state actors into the institutions of the new order. It may be true, as Jean d'Aspremont suggests, that by turning their sights on non-state actors scholars open up new channels to expand their intellectual turf. (1) But academics cannot manufacture and sustain an alternate reality. Either there is real change on the ground, which warrants attention over the long haul, or we are stuck in a Westphalian rut and all the talk about non-state power does not amount to much.

I count myself among those who believe that non-state power is on an inevitable upward trajectory in the wake of material changes in human interaction. (2) This is emphatically not to celebrate the shift as grounding some sort of utopian postnational system. There are aspects of non-state power that facilitate accountability and representation, but, as with any form of human association (including in the form of the nation-state), there will be pathologies. It is only by acknowledging and anticipating the migration of power that scholars can better address the dark sides of non-state power. To the extent that non-state power is no longer accountable to states, rejecting its existence will compound the difficulty. Institutions are always playing catch-up to material developments. The first phase in the response is the acknowledgement of power. Only then can instruments of constraint be devised and refined.

Non-state actors comprise a broad range of entities. Nongovernmental organizations (NGOs) tend to attract favorable treatment in the social science literature. NGOs have been strongly correlated to progressive causes, at least in the public's mind. (3) However, conservative NGOs are mobilizing in international institutions as they come to understand the need to advance their interests in international fora. 4 Religious organizations, often conservative in orientation, are among the most powerful non-state actors, a Also counted among global non-state actors are transnational criminal organizations)

Most powerful among non-state actors are multinational corporations. (7) Globalization has empowered multinational corporations vis-A-vis states insofar as it has facilitated the mobility of capital. As capital grows more mobile, firms exploit regulatory competition to lower production costs. States must balance the risk of capital flight against the desirability of higher regulatory standards. Even where capital is not mobile, as is typically the case with respect to the exploitation of natural resources, states often lack regulatory capacity or regulatory wills Developed countries are no longer well positioned to regulate multinational concerns either. (9) Corporations have offshored production facilities. Attempts to regulate such extraterritorial activities can result in a corporate shell-game among developed states, who are themselves not immune to regulatory competition. (10) The international trade regime also constrains the capacity of states to incentivize good corporate conduct. (11)

To the extent that states are less able to regulate them, then, globalization empowers multinational corporations. They are subject to fewer constraints in the pursuit of reduced production costs. Traditional state-based efforts are unlikely to reverse this trend. The response has been to undertake initiatives at the global level. (12) Global regulation minimizes problems of regulatory competition. Because these initiatives are in their infancy, they are characterized by experimentation and competition in regulatory design. What form works for the new world?

This Essay sets out three models of institutional constraint of global corporate power. First is private lawmaking, in which the nonstate power of firms is countered by the non-state power of civil society organizations. Second are nonlegalized processes under public institutional umbrellas, in which public entities host standard-ssetting mechanisms. Finally, there is the prospect of fully legalized regimes, the equivalent of global regulation. These models have been emerging bottom-up rather than as part of a grand scheme. After describing the three models, this Essay considers the future of global regimes aimed at constraining corporate conduct. Distinct institutional approaches could persist. Alternatively, there may be a progression toward more robust public regulation at the global level. Power may migrate to something approximating global government, directly regulating corporations and other entities.

1. PRIVATE LAWMAKING

   At the advent of globalization, nongovernmental activists looked to harness consumer power to the end of disciplining corporate behavior. These initiatives took the form of codes of conduct and certification schemes. Business has also moved to self-regulate through standard-setting regimes. These approaches are private in the sense that they are not subject to government supervision.

   In a wave beginning in the 1990s, multinational corporations adopted codes of conduct with respect to labor and environmental practices, in which contexts they remain prominent. (13) They are particularly effective where branded goods are implicated. (14) Firms need to protect brands from political tarnishment, as this may affect bottom-line sales. This is most obviously the case in the face of potential boycotts. But tarnishment can occur even in the absence of boycotts, which will be called only in extreme cases--hence the normalization of "naming and shaming" as a mobilization tool. The brand phenomenon explains the success of codes of conduct in the apparel industry. (15) The recent episode involving Foxconn, Apple's production facility in China, presents another example, le Claims relating to work conditions there motivated Apple to join the Fair Labor Association in January 2012, which subsequently undertook an audit of Apple's compliance with its workplace code of conduct. (17)

   Certification and labeling schemes directly mobilize consumer sentiment by certifying goods as produced or harvested in conformity with codes of conduct, is Examples include certification schemes sponsored by the Forest Stewardship Council (FSC) and the Marine Stewardship Council (MSC) for tropical woods and endangered fish stocks, respectively. 19 Similarly, Fairtrade International aims to ensure that producers in the developing world are adequately compensated. (20) These schemes leverage consumer sentiment by affixing compliance badges rather than through targeted opprobrium. Consumers are willing to spend a premium on goods produced in socially responsible processes. (21)

   Both the codes and related certification schemes have matured into refined standards resembling legal regulatory constructs. They are now also subject to monitoring and dispute resolution by third parties. (22) Indeed, a complex has emerged around the private lawmaking regimes. (23) The International Social and Environmental Accreditation and Labelling Alliance has issued a code for the codes--a set of best practices for "sustainability standards systems." (24) A number of third-party monitoring firms are substantial enough to be publicly traded corporations. (25) Some schemes include adjudicatory-type procedures for resolving complaints and other disputes. (26) Established codes have arguably been internalized by corporate actors, so that conformity with codes of conduct is driven as much by the "logic of appropriateness" as by the "logic of consequences." (27)

   Nonetheless, voluntary initiatives have come under fire for a lack of enforcement architecture. (28) For example, a series of workplace tragedies in Bangladesh have highlighted the shortcomings of apparel industry standards. (29) In some cases, codes may be vulnerable to co-optation by their corporate targets. (30) Insofar as codes of conduct are not subject to regulatory supervision, they may suffer accountability deficits. NGOs appear to be playing a policing function, however, even against each other. For example, the MSC has come under fire in recent years for being overly lenient in its certification of sustainable fisheries. (31) If it fails adequately to respond, it risks the tarnishment of its own brand, creating opportunities for competitor schemes. Where industry has attempted to establish its own more relaxed standards, as Steven Bernstein and Benjamin...