Multinational Corporations, Transnational Law: The United Nation's Norms on the Responsibilities of Transnational Corporations as Harbinger of Corporate Responsibility in International Law
Larry Catá Backer
Pennsylvania State University, Penn State Law
Columbia Human Rights Law Review, Vol. 37, 2005
This article considers the ramifications of current efforts to internationalize the regulation of corporate social responsibility. The primary focus will be on current United Nations efforts to regulate transnational corporations through the development of its Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises With Regard to Human Rights. The Norms are critically important for two reasons. First, the Norms themselves point to the evolution of fundamental changes in global thinking about corporations, the character and source of their regulation that together will have significant ramifications for American domestic law. The Norms evidence an increasing taste, at the international level, for a shift from a private to a public law basis for corporate regulation. The corporate social responsibility debate is ultimately a debate about the fundamental character of corporations as principally private or public entities. Second, the development and continued life of the Norms and the ideas it embodies illustrate the development of a mechanics of interplay between national, international, public and private law systems in allocating, and competing, for power to regulate. The regularization and institutionalization of these mechanics evidence transnational law coming into its own as a separate field of power.
The article first briefly describes the traditional domestic context of the debates about so-called corporate social responsibility and its relation to basic issues of corporate governance. The article then turns to the changing context in which the Norms were conceived. A critical analysis of the Norms in this context points to potential critical changes in global consensus with significant ramifications for American domestic law. First, the Norms considerably alter the framework of the debate about corporate social responsibility. Corporations, seen as social, political, and economic actors, would serve not merely a broadened set of traditional stakeholders, but also the state and international community as well.
Traditional constraints on action against shareholders, and especially corporate shareholders, would be effectively disregarded for virtually all purposes. Second, the Norms enlist transnational corporations as agents of international law implementation, even against states that have either refused to ratify certain international instruments or have objected to the gloss advanced by international institutions. The Norms create an effective system for the implementation of international law norms through private law. The Norms are implemented through the law of contract between individuals rather than by treaty or state action. Because the Norms are based on a number of international instruments that have not been ratified by all states, the Norms use transnational corporations as a means of end-running states, and in the process, create the basis for the articulation of customary international law principles that will apply to states. Third, the Norms substantially alter the balance of power over corporate governance between inside stakeholders (shareholders, lenders, etc) and outside stakeholders (community, society, the state) by providing a substantial role to NGOs to monitor TNC conformity to the requirements of the Norms.
The article ends with a preliminary consideration of the Norms in a broader context. It analyses the Norms, not as substance, but as symptom of two great fundamental changes in the allocation of governance power in a global setting. First, it illustrates rearrangements in the relative power of systems of domestic, international, public and private systems of governance. Second, the Norms provide a template for the character and form of interaction and communication, among these systems of governance.
Number of Pages in PDF File: 92
Keywords: Corporate social responsibility, human rights, corporate governance, international law, comparative law, development
JEL Classification: D63, E11, F02, F15, K19, K22, K42, O20, P16
Date posted: April 5, 2005