Transnational Corporations: International Citizens or New Sovereigns?

• Published date: 01 December 2002
• DOI: http://doi.org/10.1111/1467-8594.00143
• Date: 01 December 2002

Transnational Corporations:

International Citizens or New

Sovereigns?

DENNIS A. RONDINELLI

No tinder sparks the f‌lames of the globalization debate fas-

ter than a discussion of transnational corporations (TNCs).

And few debates escape virulent disagreements over the

impacts of TNCs’ expanding public roles. As transnational corpo-

rations grow in number, size, and wealth, their inf‌luence is

increasing around the world. They work individually and collec-

tively with international agencies and nongovernmental organiza-

tions (NGOs) on def‌ining policy issues and voluntarily intervene to

solve social problems. They combine within and across industries

to develop and implement codes of self-regulation and privately

certify their compliance. Their executives and lobbyists help to

shape regulatory policies or administrative decisions by govern-

ments and international organizations on crucial business issues.

TNCs provide increasing amounts of private foreign aid to poor

countries and disadvantaged groups in rich countries through

direct corporate contributions, corporate foundations, and execu-

tives’ personal and family foundations. International corporations

seek to sway public opinion through socially targeted advertising

campaigns and use their enormous wealth to inf‌luence the way

governments deal with social, economic, and environmental prob-

lems. Policies in both advanced economies and developing countries

to privatize a wide range of what had previously been thought of as

‘‘public goods’’ and services—telecommunications, transportation,

health services, education, utilities, job training and vocational

Dennis A. Rondinelli is the Glaxo Distinguished International Professor of Management at the

Kenan-Flagler Business School, University of North Carolina at Chapel Hill.

Business and Society Review 107:4 391–413

Ó2002 Center for Business Ethics at Bentley College, Published by Blackwell Publishing, Inc.

350 Main Street, Malden, MA 02148, USA, and 108 Cowley Road, Oxford OX4 1JF, UK.

education, and even safety and security—has moved decision-

making about resource allocation, terms of service provision, service

coverage, and pricing from the public sector to the private sector.

1

As giant corporations exercise increasing public inf‌luence, ques-

tions arise about their impacts on both business and public policy

around the world, about whether or not they act primarily in their

own interests to the detriment of unorganized and poorer groups,

and if their public roles distort or pre-empt the legitimate regulatory

functions of sovereign national governments. Debates about glob-

alization focus increasingly on whether the growing public roles of

TNCs ref‌lect a new and stronger sense of corporate citizenship or an

attempt to expand their political inf‌luence in ways that weaken the

sovereign powers of national governments.

2

Corporate citizenship

broadly def‌ined includes those activities that ensure compliance

with laws and regulations, maintain ethical behavior, contribute to

social and economic welfare, and generate prof‌its that provide a fair

return to investors.

3

‘‘Citizenship’’ in its usual sense not only

imposes responsibilities and obligations on corporations but also

confers the right to inf‌luence policy decisions.

4

Some critics see the expansion of TNCs’ public roles as under-

mining national sovereignty or as threatening democratic decision-

making by legitimately elected governments. National sovereignty

has generally been def‌ined as the ability of the political authority of

the state to exercise ultimate control over activities within its

political jurisdiction and over its foreign affairs.

5

In international

law, states have supremacy over domestic matters and the right to

regulate their territory and citizens without external pressure or

intervention.

6

But globalization has blurred the concept of national

citizenship, generating new concepts of ‘‘transnational’’ or ‘‘post-

national’’ citizenship. Transnational citizenship implies that funda-

mental human rights transcend national boundaries in a world in

which the responsibilities and privileges of citizenship are quickly

becoming de-nationalized.

7

Much has been written about how the expansion of international

trade and investment, the spread of telecommunications and

transportation technology, and the growth of international com-

merce have given TNCs the ability to operate beyond the con-

straints of any one nation’s laws and regulations. They have

growing capacities to act in ways (e.g., electronically transferring

information and capital almost without restriction) that can be

both benef‌icial and detrimental to host countries.

8

In a globalizing

392 BUSINESS AND SOCIETY REVIEW