Part 9: The U.S. National Contact Point: Corporate Social Responsibility Between Nationalism, Internationalism and Private Markets Based Globalization

 (Pix Source HERE)

This Blog Essay site devotes every February to a series of integrated but short essays on a single theme. For 2013 this site introduces a new theme: The U.S. National Contact Point: Corporate Social Responsibility Between Nationalism, Internationalism and Private Markets Based Globalization.

Part 9:  Transnational Law and the Construction of a New Jurisprudence of Governance--The Role of the NCP and the Specific Instance.

This series builds on some ideas I have been working through for a number of years relating to a fundamental shift in the approaches to corporate governance that broaden the ambit of corporate governance issues from a singular focus on internal governance (the relationships among officers, shareholders and directors) to one that includes corporate behavior and the standards by which officers, directors and shareholders exercise their respective governance authority. This shift also changes the scope of what is understood as "law" to be applied to issues of corporate governance, from one principally focused on national law to governance norms that may be sourced in the declarations and other governance interventions of public and private international bodies. Lastly, it appears to point to an evolution to the role of the state from the principal source of standards and enforcer of law to a vehicle for the implementation of international standards  in which enforcement power is left to global market actors--principally consumers and investors function of the decisions of global actors.  All of this is inconsistent with traditional notions of the role of law, the scope of corporate governance and the nature of corporate social responsibility int he United States.  The extent to which the United States participates in the construction of these autonomous international systems may suggest the direction in which government policy may be moving away from the traditional consensus of corporate responsibility to something perhaps entirely new.

This post focuses on the self conception of the U.S. National Contact Point under the OECD Guidelines for Multinational Enterprises (2011) (MNE Guidelines). Subsequent posts will consider the American National Contact Point within the context of the NCP system and note the divergence of the US approach to that of important European counterparts by considering its specific instance jurisprudence.

(Pix (c) Larry Catá Backer 2013)

Part 9:  Transnational Law and the Construction of a New Jurisprudence of Governance--The Role of the NCP and the Specific Instance.

While, on the one hand, the disciplinary establishments increase, their mechanisms have a certain tendency to become ‘de-institutionalized,’ to emerge from the closed fortresses in which they once functioned and to circulate in a ‘free’ state; the massive, compact disciplines are broken down into flexible methods of control, which may be transferred and adopted. (Foucault, Michel. Discipline and Punish: The Birth of the Prison. New York: Vintage, 1995. P.211)

Transnational actors can act as “self-regulating” entities, which are able to create and set new inter-systemic harmonized regulatory frameworks throughout their operations as well as within their industry. This can be done without the presents of any public institutions, however, with and by cultural and social pressures from all levels of society. It provides an international standard that aims at harmonizing these standards throughout all national boundaries. Due to the freedom of transnational capital moving to and from any national legal system of their choosing, this framework aims for inter-systemic harmonization. Harmonization can be voluntary and non coercive, as well as compulsory and coercive; and transnational actors are able to implement these frameworks throughout their entire industry. Many are continuing to struggle to conceptualize the challenges globalization creates and “this ‘reality’ reflects deep running transformations of the normative and institutional regulatory landscape…. of intertwining, both public and private, that is hybrid, forms of regulation that can no longer be easily associated with one particular country or, for that matter, one officially mandated rule-making authority.” (Zumbansen, Peer, Transnational Comparisons: Theory and Practice of Comparative Law as a Critique of Global Governance (February 7, 2012). Osgoode CLPE Research Paper No. 1/2012) Under current international law, corporations do not have the same legal obligations to as State (they are, however, obliged to follow the laws of the national government they are operating in). (McCorquodale, Robert. "Corporate Social Responsibility and International Human Rights Law.") The goal is to harmonize the current legal frameworks internationally, creating an overarching global regulatory apparatus. If the dominant company within an industry institutionalizes these norms throughout their operations, it would force its value chains and business relationships to follow its practices. If civil society could apply pressure to the dominate institutions within a particular industry, and within a particular social context, and monitors its operations, it could generalize throughout its entire industry as well as that social context.

State systems can act as the sole nexus point in creating and enforcing certain behaviors within its enclosed social-legal system. Law, as popularly conceived, is derived from the State, and the State in this regard, is the ultimate expression of democratic governance, where the will of the people are expressed realized. Laws, which are arms of the State, are the expressions of this “will of the people”and States can also reinforce these laws due to its claim on “the monopoly of legitimate physical force in the enforcement of its order.” (German Translation: das Monopollegitimenphysischen Zwanges. See, Weber, Max, and Talcott Parsons. The Theory of Social and Economic Organization. New York: Free, 1964.p.154). Weber suggest that “the use of physical force is neither the sole, nor even the most usual, method of administration of political corporate groups….the threat of force… is the method which is specific to political associations and is always the last resort when others have failed.” (For a description of Weberian concepts in relations in today’s social and cultural life, also see,e.g., Sica, Alan. Max Weber & the New Century. New Brunswick, NJ: Transaction, 2004).

Laws, then, restrains and shapes certain behavioral patters within a society, but there are, however, other forms of law that can manifest outside the jurisdictional limits of State power, such as social, cultural, and ideological norms, which can penetrate every aspect of human life. Foucault once conceptualized the interaction between disciplines and their relationships with dominate power structures in society. He suggested that disciplines manifest within and throughout all forms of social and cultural systems. Disciplines are ways of conducting and organizing human behavior, which are built within a normative cultural system that all members accept as natural. It can systematize its policies by means of socialization, harmonization, and by control of behavior through subtle norms.

As Foucault suggests,“‘[d]iscipline[s]’ may be identified neither with an institution nor with an apparatus; it is a type of power, a modality for its exercise, comprising a whole set of instruments, techniques, procedures, levels of application, targets; it’s a ‘physics’ or an ‘anatomy’ of power, a technology.” (Foucault, Michel. Discipline and Punish: The Birth of the Prison. New York: Vintage, 1995. P.215). Foucault stressed further that a disciplinary society “ has infiltrated the others, sometimes undermining them, but serving as an intermediary between them, linking them together, extending them and above all making it possible to bring the effect of power to the most minute and distant elements.” (Ibid. p. 216). These disciplinary apparatuses, then, are imbued and embedded within our existences, ever-presents, and all natural, having the effect of shaping the political and social cultural expectations of whoever operates within it.

These ‘disciplines,’can also act as forms of soft law, where governance can exist within and without the apparatus of the State, where“soft international law has begun to provide incentives for the management of a values-based behavior structure for multinational corporations…[and]… serve as a vehicle for the enhancement of a market environment in which corporate stakeholders, and principally consumers and investors, might incorporate information about corporate social behavior in their consumption and investment decisions.” (Larry Catá Backer, "From Moral Obligation to International Law: Disclosure Systems, Markets and the Regulation of Multinational Corporations," 39 Georgetown Journal of International Law 591 (2008))

Companies that are in search of financial support from a lending company, looking for value chains to contract with, or partnering with a governmental body, may be sanctioned if they do not abide by human rights standards. The scope and integration of transparency is an issue in this regards. Hence, NGOs will be the driving mechanics in advertising the effects of corporate behavior. When there is an abuse, they document it, and release it to the public, as well as mainstream media outlets. This will force companies to think twice before their company violates human rights. This will create an atmosphere of cautions “since its reputation in this respect will influence its capacity of attracting outside funding and the valuation of the company.” (Larry Catá Backer, Masculinities, Enterprise Global Governance, and the OECD, Law at the End of the Day, March 19, 2010).

The business press has discussed, in detail, the power of reputation and how many companies “are starting to realize that a good name can be their most important asset—and actually boost the stock price." ("What Price Reputation?" Bloomberg BusinessWeek. 09 July 2007. Web) A consulting firm, Communications Consulting Worldwide,led by sociologist Dr. Pamela Cohen and strategist Jonathan Low, conducted a study about public perception and their affection company's stock. Cohen and her team tracked consumer perceptions, employee approval, investor’s views, corporate press releases, newspaper articles, and daily stock movements Ibid).They concluded that “[i]ndeed, a company's reputation for being able to deliver growth, attract top talent, and avoid ethical mishaps can account for much of the 30%-to-70% gap between the book value of most companies and their market capitalization.” (Ibid). This is not to say there study is “fact”or correct. It does show that companies are cognizant about reputation (regardless if they have a real affect or not), and this could be used to shape the way companies operate due to brand reputation.

Companies are well aware of the effects of branding preservation and how it drives market forces.  Global NGOs “have used surveillance and disclosure as methods of enforcing corporate regulatory regimes between multinational corporations,” (Backer, Larry Catá, Global Panopticism: States, Corporations and the Governance Effects of Monitoring Regimes. Indiana Journal of Global Legal Studies, Vol. 15, 2007) and this method can be vital in influencing the behavior of capitalist institutions. Civil society can induce legitimizing institutions, such as media outlets, to motivate private enterprises to behave in socially acceptable ways, because of the risk of diminishing their brand. The relationship between due diligence, like that at the heart of the Guiding Principles' "human rights due diligence" project, surveillance, marketing, risk management and financial reporting is complex and evolving.  These are relationships that are unavoidable even as stakeholders seek to magnify and privilege one or another aspect of the practices of generating, harvesting, analyzing and making decisions based information acquires through due diligence exercise.

The UN and the OECD have developed soft power instruments that are not legally binding to regulate corporate behavior its trends in creating a meta-governance network outside any one state, creating an incentive structure where private enterprise is guided through soft power mechanics. Sociologist Bob Jessop described meta-governance as “best employed as an umbrella concept for the redesign of the relationship among different modes of governance…[which]… involves re-articulating and 'calibrating' the different modes of governance….involve[ing] managing the complexity, plurality, and tangled hierarchies found in prevailing modes of co-ordination. It is the organization of the conditions for governance and involves the judicious mixing of market, hierarchy, and networks to achieve the best possible outcomes from the viewpoint of those engaged in meta-governance.” (Bob Jessop, ‘Governance and Meta-governance: On Reflexivity, Requisite Variety, and Requisite Irony’, published by the Department of Sociology, Lancaster University, Lancaster LA1 4YN, UK, at http://www.comp.lancs.ac.uk/sociology/papers/Jessop- Governance-and-Metagovernance.pdf). This effectively creates intra-industry regulations outside any particular regulatory apparatus encompassed within any one state. (To see the effects of the regulatory environment due to “soft-law mechanics,” see, Backer, Larry Catá. "On the Evolution of the United Nations' "Protect-Respect-Remedy" Project, supra., p. 9 ) This is being done by producing a regulatory apparatus within the context of the existing legal architecture, to influence transnational institutions to work towards public goods and to reduce corruption and human rights violations, especially in countries with weak governmental infrastructure. The international IO system is “forming external global governance partnerships with civil society and transnational businesses” by “relying on a matrix of human rights governance networks to globally govern economic and social rights” (Kelly, James P., "The Matrix of Human Rights Governance Networks," Engage: The Journal of the Federalist Society's Practice Groups, Volume 9, Issue 1, February 2008). It must be noted, the author is arguing against the UN’s global network as an infringement of a nations sovereignty, stating: “While some people who desire expanded UN global governance over economic and social affairs welcome these developments, others are concerned that, by forming external global governance partnerships with civil society and transnational businesses, the UN is exceeding its mandate and undermining the authority and sovereignty of its Member States.” (Ibid).

These methods act to globally govern human rights abuses by altering the behavior of corporations through a “polycentric multilevel law-governance system.” (Backer, Larry Catá. "On the Evolution of the United Nations' "Protect-Respect-Remedy" Project: The State, The Corporation and Human Rights in a Global Governance Context." Santa Clara Journal of International Law 9.37 (2011): 37-80. ) Soft law can “provide incentives for the management of a values -- based behavior structure” (Ibid) for international corporations and businesses. Transnational corporations cannot extricate themselves from the social context of any society (Ibid), so they must then conform to it. The power of cultural and social expectations, these pressures can apply force toward corporations. These methods can systematize a societal norm that would be able to influence private organizations and other governance institutions within this societal context. (Ibid). With the mixture of soft power mechanisms, the attempt to internationalize this “regulation” is a way remedy abuses and force corporations to act in due diligence. (Ibid).

The OECD attempts a new social normative framework to shape the behavior of private entities. (Larry Catá Backer, "From Moral Obligation to International Law: Disclosure Systems, Markets and the Regulation of Multinational Corporations," 39 Georgetown Journal of International Law 591 (2008)). This is being done by producing a regulatory apparatus which operates beside but beyond the context of the existing legal architecture, but which is also facilitated through the governmental apparatus of the state.  Rather than the formal constructs of law, it uses the forms of law to influence transnational institutions to work towards a social good and to reduce corruption and human rights violations, especially in countries with weak governmental infrastructure.

This regulatory ideal affects the form of the system.  This is illuminated by the norm creation mechanism of the NCP in which international public law soft law franeworks are both layered  atop each other and marbled together into a complex unified mass, which exists beside law systems and serves as a generator of norms to be transposed within domestic legal orders. The Organization for Economic Co-operation and Development (OECD), for example, incorporate the United Nations initiatives to regulate transnational economic actors into many of their standards (OECD Principles of Corporate Governance [OECD 2004], the OECD Guidelines on Corporate Governance of State-Owned Enterprise [OECD 2005] and the Guidelines on Multinational Enterprise [OECD 2011]). The UN and the International Organization for Standardization (ISO) have both also incorporated many elements of the GP into various compacts and standards. (See, Lee A. Tavis, ‘Novartis and the U.N. Global Compact Initiative’, Vand. J. Transnat'l L. 36 (2003)). The NCP system presents represents another, and perhaps crucial, norm-governance-soft-law group that is transnational in character, whose product contributes to the development of a jurisprudence that can affect the way enterprises operate within the global economic system.

There is an emphasis on the singularity of the MNE Guidelines system, and its difference from law-based systems. The MNE Guidelines are soft law global mechanizing which does not have any binding force. As the clause suggests “The Guidelines are recommendations jointly addressed by governments to multinational enterprises. They provide principles and standards of good practice consistent with applicable laws. Observance of the Guidelines by enterprises is voluntary and not legally enforceable.” Civil society members can file a complaint if a corporate actor is in violation of the MNE Guidelines. “Trade unions and civil society groups can file complaints claiming corporate violations of the Guidelines, but in keeping with the "soft" approach, they should not call them "complaints." They must style them as "inquiries" in "specific instances" seeking "clarification" of the Guidelines. Although it is no longer the case, for many years the OECD prohibited "inquiries" from even naming the corporations whose conduct gave rise to them.” (MNE Guidelines). At the end of the process, there needs to be a clarification from the Investment Committee, formerly the Committee on International Investment and Multinational Enterprise, CIME, which cannot reach conclusions on the cases.

The OECD system is creating is “institutionalizing quasi-judicial organs” effectively created a form of soft power mechanisms producing effects of “hard law beyond the state.” ( Lee A. Tavis, ‘Novartis and the U.N. Global Compact Initiative’, Vand. J. Transnat'l L. 36 (2003) ). The heart of that is the NCP system and its specific instance authority; one that is embraced by some OECD NCP and rejected to some extent by the United States.  There has been tension with “supra-national soft law systems with a polycentric element in the absence of substantial harmonization between the legal regimes applied in a specific state and the global social norms applied under soft law regimes that draw on these…illustrated in the context of both procedural and substantive rules under the OECD Guidelines for Multinational Corporations.” (Larry Catá Backer, An Analysis of the U.N. Protect, Respect and Remedy Framework Guiding Principles, Part VI--Section By Section Analysis, the Corporate Responsibility to Respect, Law at the End of the Day, (09/10/2011)). Through soft power mechanisms to internationalize certain social norms so where then dominate industries can institutionalize certain norm structures within their operations. In effect, this would create a non-binding intra-industry regulatory apparatus outside the state and within industry. (Ibid).

The NCPs then represent, in function (though not in form) a global initiative to produce through engagement  a form of jurisprudence that is now operating outside the scope of traditional mechanics of the state and that is directed to the reconstruction of consensus on custom and practice managed through the normative prism of the complex web of international standards developed as soft law. This framework, then, aims to harmonize the Guiding Principles inter-systemically without the presents of hard law, which poses a series of concerns. Transnational can be pressured by social and cultural norms to become “self-regulating” bodies, and force them to create inter-systemic harmonized regulatory frameworks. Corporate activism influence bank lending firms, corporations, and contractors. Soft power is operationalized through the communication between corporate and non-state actors mediated through state agencies in channels distinct from those reserved for domestic law.  Through soft power mechanisms to internationalize certain social norms so where then dominate industries can institutionalize certain norm structures within their operations with incentives to respect human rights. 

Yet, as much as frameworks like the OECD MNE Guidelines and UN Guiding Principles projects attempt otherwise, soft law is a cultural object for organic change- it is very effective but does lend itself well to instrumentalism; it cannot be controlled.  It is “not an institution, and not a structure; neither is it a certain strength we are endowed with; it is the name that one attributes to a complex strategically situation in a particular society.”(Foucault, Michel. The History of Sexuality. New York: Pantheon, 1978. P.93).  Foucault is referring to his verion of power. I have switched it, and claimed his definition of power is similar to that of soft law/soft power mechanics. He stresses further that “power must be understood in the first instance as the multiplicity of force relations immanent in the sphere in which they operate and which constitute their own organization; as the process which, through ceaseless struggles and confrontations, transforms, strengthens, or reverses them; as the support which these force relations find in one another, thus forming a chain or a system, or on the contrary, the disjunctions and contradictions which isolate them from one another; and lastly, as the strategies in which they take effect, whose general design or institutional crystallization is embodied in the state apparatus, in the formulation of the law, in the various social hegemonies.”(Ibid p.92-3).

It is clear, though, that this is a jurisprudence, a promise and a development that is as much filled with contradiction as it is clearly articulated and precisely delivered.  The last several posts have sought to construct  a framework for understanding these contradictions and the movements--both forward and traditionalist--that envelop them, shape them and ultimately help construct the realities of the NCP systems within these OECD projects that are themselves embedded within global efforts at norm construction by the very states that resist their imposition. The next several posts returns a focus on the US NCP as a prism through which the contradictions--the promise and the institutional drag--of the MNE Guidelines systems, is better revealed.