Beyond Good and Evil: Toward a Solution of the Conflict between Corporate Profits and Human Rights
91 Pages Posted: 5 Jun 2007
Date Written: June 4, 2007
There is an ongoing social battle over the power to determine the legal, ethical, and economic substance of the regime that governs corporations and specifies their powers and duties with regard to the protection of human rights. Whereas for much of the history of the modern corporation its object and purpose were widely considered to be settled by domestic law, custom, and social contract, revelations of massive corporate fraud at Enron et al., environmental disasters at Bhopal and in Alaska, allegations of corporate complicity in widespread violations of human rights in the developing world, and the gathering transnational strength of the human rights movement have unraveled this common understanding to form two contending camps with ideologically opposed visions of how corporations should be structured and held responsible for harms connected to their conduct. Both contend upon the terrain mapped out by a new social movement, entitled corporate social responsibility [CSR], which engages a variety of state and non-state actors in contestation over a host of political and legal projects designed by their architects to restrain corporations in their pursuit of self-interest and to hold them accountable to constituencies other than shareholders for their performance along dimensions such as the protection of the environment and human rights.
For much of the past two decades the struggle between the two leading paradigms of corporate governance - shareholder theory and stakeholder theory - and, in turn, the evolution of the CSR movement, has been fought within the academy. However, the wave of corporate scandals in the first few years of the third millennium and the increasing sophistication of the international human rights movement have combined to draw the battle out of the academy and into new arenas - judicial, legislative, and regulatory. In this new phase of ideological and political contestation, the champions of shareholder theory are, naturally, many (and perhaps most) corporations and their shareholders. On the other side of the equation, a broad spectrum of nongovernmental organizations [NGOs] - pressure groups, charities, religious groups, interested individuals, and other entities organized around specific themes such as the promotion and protection of human rights, labor rights, indigenous rights, women's rights, and the environment - are the major proponents of stakeholder theory and of a much more expansive view of the obligations owed by corporations to constituencies under the rubric of CSR.
What seem like vastly divergent interests, normative commitments, and worldviews of corporations on the one hand and human rights NGOs on the other would suggest the conclusion that conflict is inevitable and cooperation is impossible, especially in the emotion-laden and politically sensitive issue-area of human rights. This conclusion might appear all the more logical in light of the salience of CSR to the international human rights movement - it has moved to the forefront of its agenda - and in view of the strategies chosen by NGOs - litigation, application of political pressure within the United Nations and domestic governance spheres, and legislative attempts to reform corporations as quasi-public entities with human rights obligations akin to those of states. Yet despite the seeming intractability of and disparity between these two diametrically opposed visions of corporate responsibility for the protection and promotion of human rights, an analysis of the strategies available to corporations and to NGOs, augmented by the use of game theory, reveals that not only is cooperation possible but that a mode of governance dependent upon self-interested cooperation can yield the simultaneous outcomes of corporate profitability and protection of human rights.
Accordingly, this Article will identify and analyze the strategies employed by NGOs and corporations in the battle over whether and to what extent corporations should bear responsibility for violations of human rights. Next, and with the assistance of game theoretic modeling, it will examine the strategic interactions between these two parties, determine optimal strategies for each party, identify any strategic equilibria, and analyze the findings. Integrative solutions will be proposed that might be adopted to facilitate the coexistence of corporate profitability and human rights and advance the theoretical debate beyond simple characterizations of NGOs as good and corporations as evil.
Keywords: corporate social responsibility, human rights, corporate governance, game theory, negotiation
JEL Classification: C70, C71, C72, G34, K00, K22, M14
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