Putting regulation before responsibility: Towards binding norms of corporate social responsibility

Cornell International Law Journal

Volumn 40, Issue 1, 2007, Pages 171-200

  McInerney, Thomas ^a  

^a Intl Development Law Institute   (Italy)

Author keywords

[No Author keywords available]

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EID: 34547745388     PISSN: 00108812     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Review

References (47)

1. See, e.g., Tim Pringle & Stephen Frost, The Absence of Rigor and the Failure of Implementation: Occupational Health and Safety in China, 9 INT'L. J. OCCUP. ENV'T. HEALTH 309 (2003).
2. Examples of these initiatives include AccountAbility 1000 Framework; AA1000 Assurance Standard; Business Principles for Countering Bribery; CERES Principles; Clean Clothes Campaign: Model Code; Eco-Management and Audit Scheme; Ethical Trading Initiative: Base Code; Fair Labor Association: Workplace Code of Conduct; UN Global Compact; Global Reporting Initiative; Global Sullivan Principles of Corporate Social Responsibility; ICC Business Charter for Sustainable Development; Marine Stewardship Council's Principles and Criteria for Sustainable Fishing; The Natural Step Principles; OECD Guidelines for Multinational Enterprises; Shell Business Principles; SIGMA: Sustainable Guidelines for Management.
3. Among OECD countries, these areas are generally thought to be delimited by the law and thus CSR is sometimes assumed to refer to efforts to exceed legal requirements. Other discussions, particularly those concerning developing countries, invoke CSR as a way of supplanting or overcoming inadequacies in domestic legal orders. Confusing matters further is the recent trend among business interests in the United States and elsewhere to re-define the term by leaving out the word "social." Hence, one sees press conferences with business executives promoting "corporate responsibility," which usually amounts to no more than executives and firms obeying the law. The precise boundary between CSR initiatives and legal requirements are unclear in these discussions. For the purposes of this paper, I will consider CSR as the effort to overcome inadequacies in existing legal structures and enforcement regimes in developing countries with respect to the social issues identified above. This paper criticizes the attempts by various actors to remedy these problems primarily through voluntary measures.
4. See, e.g., OECD, REGULATORY POLICIES IN OECD COUNTRIES: FROM INTERVENTIONISM TO REGULATORY GOVERNANCE (2002) (describing the need to maximize voluntary compliance).
5. See, e.g., Dara O'Rourke, Outsourcing Regulation' Analyzing Non-Governmental Systems of Labor Standards and Monitoring, 31 Pol'y Stud. J. 1 (2003).
6. See, e.g., U.N. ENVIRONMENT PROGRAMME, GUIDE TO THE GLOBAL COMPACT: A PRACTICAL UNDERSTANDING OF THE VISION AND NINE PRINCIPLES at 25, available at http://www.uneptie.org/outreach/compact/docs/gcguide.pdf ("Whilst recognizing that the role of governments in ensuring respect for human rights remains extremely important . . ."). Although this comment seems quite strange-rather than just extremely important, most people view the state as the central, dominant authority in ensuring adherence to human rights law-it is a formulation that is quite common in CSR literature.
7. Indeed, in the European Commission's statement on CSR, voluntarism is an essential defining element of these initiatives. See COMMISSION GREEN PAPER ON PROMOTING A EUROPEAN FRAMEWORK FOR CORPORATE SOCIAL RESPONSIBILITY (July 18, 2001), at 8 (defining CSR as "a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with stakeholders on a voluntary basis"). This bias towards voluntarism with respect to adherence to fundamental human rights by firms has generated some unseemly formulations. In a brochure on CSR from the international law firm Freshfields Bruckhaus Deringer, clients are advised that "companies should seek to avoid compulsory or child labor" and "take due account of the need to protect the environment." FRESHFIELDS BRUCKHAUS DERINGER, CORPORATE SOCIAL RESPONSIBILITY 5 (2004) (emphasis added). It should go without saying that on any formulation, firms have an absolute moral imperative to avoid compulsory labor. Likewise, does the notion of "taking due account" of the environment in countries of operations not seem incredibly weak in contrast to similar legal obligations?
8. See, e.g., Michael Santoro, Beyond Codes of Conduct and Monitoring: An Organizational Integrity Approach to Global Labor Practices, 25 HUM. RTS. Q. 407 (2003). The introduction to this article illustrates the central focus on issues of outsourcing by multinationals: At the turn of the century, multinational corporations (MNCs) have learned-often the hard way as a result of embarrassing exposés-that their bottom line can suffer when they fail to live up to public expectations about honoring human rights in third world countries. Among other things, global marketing firms are being asked to provide transparent assurance that their suppliers in third world nations avoid the use of child labor and honor workers rights to acceptable living wages, overtime pay, safe and healthy working conditions and free association.
9. Id. at 408. Similarly, Freshfields Bruckhaus Deringer contends that the rationale for CSR is attributed to globalization of business and market liberalization that has led many companies to initiate international operations. Freshfields Bruckhaus Deringer, supra note 7, at 5.
10. See Nicola Phillips, State Debates in International Political Economy in GLOBALIZING INTERNATIONAL POLITICAL ECONOMY 82, 82 (Nicola Phillips ed., 2005) (describing hyperglobalist view); DAVID HELD, GOVERNARE LA GLOBALIZZAZIONE 30 (2005) (stating that many have posited the end of the nation state as a result of globalization).
11. CYNTHIA DAY WALLACE, THE MULTINATIONAL ENTERPRISE AND LEGAL CONTROL: HOST STATE SOVEREIGNTY IN AN ERA OF ECONOMIC GLOBALIZATION 11 (2002) (citing dominant view that MNCs can take advantage of the complexity of political and legal systems to create a world of their own which must accommodate itself in the conduct of its operations to many legal systems but is not in any real sense subject to any of them).
12. See generally PETER A. HALL AND DAVID SOSKICE, VARIETIES OF CAPITALISM (2001).
13. Id.
14. Id. at 4 ("Our premis[e] is that many of the most important institutional structures-notably systems of labor market regulation, of education and training, and of corporate governance-depend on the presence of regulatory regimes that are the preserve of the nation-state.").
15. LINDA WEISS, STATES AND THE GLOBAL ECONOMY: BRINGING DOMESTIC INSTITUTIONS BACK IN 10 (2004). See also HELD, supra note 9, at 30.
16. WEISS, supra note 14.
17. WALLACE, supra note 10. A common but mistaken argument is that because the revenues of MNEs often exceed the budgets of various developing countries, the private firms essentially dominate those states. See Pall A. Davidsson, Legal Enforcement of Corporate Social Responsibility within the EU, 8 COLUM. J. EUR. L. 529 (2002) (stating that economic power of MNEs often surpasses that of states). But this is a rather hasty conclusion to draw from comparing these figures. As will be described later in the article, states wield many instruments with which to enforce law and regulation, and it cannot be said ipso facto that modest state revenues preclude states from enforcing law against even the largest international firms.
18. Studies of tax rates, supposedly a key driver of firm arbitrage between jurisdictions, suggest, that the race to the bottom argument is misleading. See Geoffrey Garrett, Global Markets and National Policies: Collision Course or Virtuous Circle?, 52 INTERNATIONAL ORGANIZATION 787, 801 (1998) (citing tendency for multinational producers to locate in countries with large public economies and high taxes); M. Ramesh, Globalization and Social Security Expansion in East Asia, in WEISS, supra note 14, at 83 (showing significant expansion of social welfare in Korea and Taiwan during period when they were integrating rapidly with the global economy); John M. Hobson, Disappearing Taxes or 'Race to the Middle'? Fiscal Policy in the OECD, in WEISS, supra note 14, at 49 (noting that states have been able to attract increased foreign investment while simultaneously maintaining and, in some cases, increasing corporate income tax yields).
19. See Freshfields Bruckhaus Deringer, supra note 7.
20. See ROBERT BALDWIN AND MARTIN CAVE, UNDERSTANDING REGULATION: THEORY STRATEGY AND PRACTICE (1999) (describing rise of regulatory state in Britain throughout nineteenth century).
21. ALAN BRINKLEY, LIBERALISM AND ITS DISCONTENTS 38 (1998).
22. CASS SUNSTEIN, AFTER THE RIGHTS REVOLUTION: RECONCEIVING THE REGULATORY STATE 12-13 (1990).
23. Lochner v. New York, 198 U.S. 45 (1905).
24. SUNSTEIN, supra note 21, at 20.
25. Id. at 24 (noting that between 1930 and 1940, the federal government created 17 new agencies but that later expansion of the regulatory state far exceeded this number. Between 1960 and the mid-1980s, more than 55 new agencies were created).
26. Id. See generally BRUCE ACKERMAN, WE THE PEOPLE: FOUNDATIONS (1991).
27. SUNSTEIN, supra note 21, at 21.
28. Id. at 29.
29. NICOLAS SPULBER, MANAGING THE AMERICAN ECONOMY FROM ROOSEVELT TO RFAGAN 107 (1989).
30. OECD, TOWARDS FULL EMPLOYMENT AND PRICE STABILITY (1977).
31. See INS v. Chada, 462 U.S. 919 (1983). Congress's attempt to create a legislative veto was a particularly noteworthy instance of a larger movement for legislative oversight.
32. SUNSTEIN, supra note 21, at 30.
33. See JAMES M. BOUGHTON, THE SILENT REVOLUTION: THE INTERNATIONAL MONETARY FUND 1979-1989 (2000). The author describes these developments in reference specifically to the IMF experience; however, the observations have wider applicability: "The term 'silent revolution' . . . refers here to a shift in the prevailing paradigm for international economic and political relations, away from tendencies toward autarky, insularity, mercantilism, and governmental planning and control over economic activity; and toward a common set of beliefs and policies based on open international trade and finance, competitive pricing and production decisions, and cooperation between countries. To a great extent, the silent revolution of the 1980s resulted from a shift in economic philosophy toward a new classical synthesis in which government has an indirect role in, but not a direct responsibility for, ensuring national economic prosperity; in which private economic activity is promoted through good governance and the development of physical and social infrastructure." Id. at 3 (footnote omitted).
34. See generally Exec. Order No. 12,291, 46 Fed. Reg. 13,193 (Feb. 17, 1981).
35. Id.
36. Id.
37. See, e.g., BOUGHTON, supra note 32 (referring to the generally light-handed approach to the regulation of markets by the Reagan Administration).
38. See generally, OECD, supra note 4.
39. BALDWIN AND CAVE, supra note 19, at 35-39.
40. Id.
41. SPULBER, supra note 28, at 107.
42. See INTERNATIONAL FINANCE CORPORATION, DOING BUSINESS IN 2004: UNDERSTANDING REGULATION (2004).
43. See, e.g., Rainforest Foundation, Forest Management Transparency, Governance and the Law: Lessons from the Congo Basin 39 (2003), available at http://www.forests monitor.org/afleg/en/ Case_studies.pdf.
44. BOUGHTON, supra note 32.
45. See, e.g., MICHAEL U. KLEIN & BITA HADJIMICHAEL, THE PRIVATE SECTOR IN DEVELOPMENT (World Bank 2003) ("Openness and competition are key reasons we can have hope for poverty reduction.").
46. DEAN BAKER et al., GLOBALIZATION AND ECONOMIC POLICY (1998).
47. See, e.g., KLEIN & HADJIMICHAEL, supra note 44.