Co-Constructing Business Governance

Abstract

This Article explores how to structure global enterprises to make a positive contribution to economic development when many of the host states of corporate activities are non-democratic. In today’s globalized world, global supply chains are dominated by authoritarian regimes: China is “the world’s factory,” and nearby countries such as Vietnam and Cambodia are popular “China Plus One” destinations. Literature on transnational business governance, however, has largely dismissed the potential of host states as willing or able regulators of supply chain conduct. I argue that because authoritarian regimes directly regulate global supply chains, today’s transnational business governance is enmeshed with host states’ autocratic agendas. This necessitates studying and understanding the structure and underlying logic of “authoritarian legality”; that is, a system designed to derive benefits from formal law and legal institutions while minimizing risk to political stability and social control. Only by understanding the political economy of autocratic systems and matching the incentives of actors involved can international and transnational law bridge the so-called “governance gap” created by the globalized, fragmented nature of supply chains. Drawing insights from comparative law and sociolegal studies of authoritarian regimes, this Article examines three case studies—China, Vietnam, and Cambodia—to illustrate how the logic of authoritarian legality drives transnational business governance in each respective jurisdiction. It ends with a normative suggestion: Mediation—a form of non-judicial remedy that so far has attracted little attention in the context of business and human rights—can be a viable forum for business-related human rights disputes in autocratic host states.

Keywords: Business Governance, Corporate Social Responsibility, Comparative Law, Authoritarianism, Asia

JEL Classification: K20, K22, K33