International Law in the Boardroom
54 Pages Posted: 4 Mar 2022 Last revised: 11 Apr 2022
Date Written: February 28, 2022
Conventional wisdom predicts that international law must proceed through a “state pathway” before regulating corporations: it binds national governments who then bind corporations through enactment and enforcement of domestic laws and regulations. But recent corporate practices confound this story by presenting two realities difficult to reconcile under this traditional view: The Trump administration withdrew the United States from several international agreements and organizations. But, surprisingly, American corporations complied with these same international laws even when the state pathway broke down. This unexpected compliance leads to three questions: How did corporations comply? Why did they do so? Who enforced international law? These questions are important for two reasons. First, many international laws depend on corporate cooperation in order to succeed. Second, the state pathway is not robust, then or now. It is therefore vital to identify alternatives to the state pathway in order for international laws – on human rights, climate change, labor rights, corruption, and other issues – to reach corporate boardrooms, C-Suites, offices, and supply chains.
This Article synthesizes two traditionally separate fields – public international law and corporate governance – to offer a descriptive account of how corporations incorporate international law into board governance, management decision-making, and contractual relationships. Through original research, it offers three case studies in climate change, human rights, and sustainable development that reveal important incentives and mechanisms for international law compliance that are neglected under the traditional view. It explains that corporations comply in order to manage risks, appease stakeholders, and advance corporate purpose and strategy. Proxy advisors, investors, civil society actors, and even peer corporations enforce international law when a government actor will not. Normatively, these insights enrich academic debates concerning the operation and effectiveness of international law. On a policy level, this Article offers three recommendations for designing international agreements in order to encourage corporate compliance: facilitate comparability, create indicators, and identify corporate purpose compatibility. It applies these lessons to two international agreements in development: (a) treaty on business and human rights, and (b) treaty on pandemic prevention and preparedness.
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