With this post I continue to share with the class and interested "others" summary study notes for the course readings. For this post we consider the last part of Section I of the materials: I. What is Law? E. Law Beyond Law: Social Norms, Surveillance, Monitoring, Disclosure. Comments and discussion most welcome.
The Table of Contents for all of the Lecture Notes may be accessed HERE: Elements of Law 3.0: Table of Contents for Lecture and Reading Notes for An Introduction to U.S. Legal Theory and Practice.
--Melvin Eisenberg, Corporate Law and Social Norms, 99 Colum. L. Rev. 1252 (1999). READ Section I--PP. 2-7 of the WESTLAW VERSION, or 1257-1264
--Michael Reed, "From the ‘Cage’ to the ‘Gaze’? The Dynamics of Organizational Control in Late Modernity," in Regulation and Organizations: International Perspectives 17 (Glenn Morgan & Lars Engwall eds., 1999). READ 28-31.
-- Michel Foucault, Security, Territory, Population, Lectures at the Collège de France 1977-1978. (Graham Burchell, trans. New York: Picador Palgrove Macmillan, 2007). READ pp. 87-110; 115-120.
-- Larry Catá Backer, "From Moral Obligation to International Law: Disclosure Systems, Markets and the Regulation of Multinational Corporations," Georgetown J. International Law, 39(4):591-653 (2008). Available http://ssrn.com/abstract=1112882,
To the command aspects of statute were added the techniques of surveillance to more minutely manage human behavior in selected activities of importance to the state. The concept and use of surveillance in and as law was useful as a framework for introducing students to several aspects of law that have emerged in the last half century. First, was the idea that the nature of regulation has been changing, from one based on commands and prohibitions, or one based on risk management and allocation for certain conduct, to one based on the seamless management of behavior centered on specific groups of human activities--financial markets, labor-management relations, product safety, activities that might affect environmental conditions,and the like. That change in the objectives of regulation have required a change in approach to regulation itself. First it helped shift the locus of regulation from legislatures to administrative agencies, as generalist legislatures increasingly sought to delegate management oriented regulatory projects to organizations staffed by experts who could devote substantially all their time to the object of regulation. Second, that move to management also required increasing reliance on the techniques of information gathering to better manage the behaviors that were the object of regulation. As a consequence the techniques of implementation, rather than the formal commends of formal regulation become increasingly important. As a further consequence what might be characterized as regulatory implementation techniques increasingly operate functionally as law. Third, this movement toward seamless management through what had been the techniques of operationalizing implementation opened the door to the idea that an organization could create methods that function like law without actually having to engage formally in conventional law making. Last, if it is possible to conceive of regimes of functional law without formal law, created and operated by states, it might also be possible to conceive of regimes of functional law in any form created and operated by non-state organizations especially in those areas of governance (transnational) where state power is weakest.
Thus, from common law to administrative regulation, the student could begin to see the spectrum of legal forms now at the disposal of the U.S. political community. Additionally, the student could observe in the movement from form to function in law making an increasing acceptance of the idea that law was changing from a system of command and risk allocation to one of behavior management in which the state could "make" law without adhering to the traditional "forms" of law. The answer to our initial question, what is law, then serves as an organizing framework for considering the growing range of forms, from (1) a passive system of socially based dispute resolution techniques with substantive content developed through within a slowly dynamic system of behavior rules extracted from the aggregate decisions of courts applying rules by close analogy to prior application, through (2) more proactive enactments meant to modify or steer behaviors and develop commands that furthered political policy objectives in the form of statutes, to (3) systems of behavior rules extracted from the articulation and application of complex sets of comprehensive rules by agencies that, in their own way, mimic the behaviors of common law but deliberately with statutorily defined objectives.
Our first reading, from Melvin Eisenberg, "Corporate Law and Social Norms", 99 Colum. L. Rev. 1252 (1999), exposes students to the governance frameworks that exist in what in the United States has come to be called (misleadingly and dismissively) as social norms. They are social norms and not law precisely because they do not conform to the conventional form of law: arising in common law, or statute or by way of administrative regulation. Yet they may well function like law int he sense of their organization and consent based power to extract or compel obedience. The interplay of form and function--something introduced with the discussion of the Institutes in the first class, appear here again in another guide. Professor Eisenberg considers the way that social norms interact with and serve as a source of governance that supplements corporate law as developed through conventional statutes and judicial construction. Eisenberg starts by describing three kinds of social norms, which he describes as behavioral patterns, practices and obligational norms. He then considers the ways in which these social norms intermesh with core areas of corporate law, focusing on fiduciary duty, corporate governance, the composition of the board of directors, the role of institutional investors and takeovers.
David Hume (, 1978) was the first to call attention to the central role that norms play in the construction of social order. Norms define property rights, that is, who is entitled to what. They determine what commodities are accepted as money. They shape our sense of obligation to family and community. They determine the meanings we attach to words. Indeed it is hard to think of a form of interaction that is not governed to some degree by social norms. (H. Peyton Young, Social Norms, Department of Economics Discussion Paper Series No. 307, Oxford University (ISSN 1471-0498, Jan. 2007, who cites the following book length treatments: Lewis, David. 1969. Convention: A Philosophical Study. Cambridge MA: Harvard University Press; Ullman-Margalit, Edna. 1977. The Emergence of Norms. Oxford: Oxford University Press (Book review HERE); Sugden, robert. 1986. The Economics of Rights, Cooperation and Welfare. Oxford: Basil Blackwell; Young, H. Peyton. 1998. Individual Strategy and Social Structure. Princeton NJ: Princeton University Press; Posner, Eric. 2000. Law and Social Norms. Cambridge MA: Harvard University Press; Hechter, Michael and Karl-Dieter Opp, eds. 2001. Social Norms. New York: Russell Sage Foundation; and Bicchieri, Cristina. 2006. The Grammar of Society: The Nature and Dynamics of Social Norms. New York: Cambridge University Press.)).
In any case, Eisenberg excludes legal rules as the base line system against he seeks to determine the characteristics and operative force of social norms. He excludes organizational rules--which he defines as "formal rules adopted by private organization" (Eisenberg, supra., 1255)--because he understands them as backed by legal sanctions and because "they tend to operate in a much different way than other legal norms.; in fact they tend to operate in many ways like legal rules." (Ibid., 1256). I disagree with the exclusion of organizational rules from the study of social norms for precisely the reasons Eisenberg would exclude them--organizational rules, especially those of corporations and other non-state governance institutions, function like legal rules and the organizations from which they originate sometimes function like governments. (Backer, Larry Catá, Economic Globalization and the Rise of Efficient Systems of Global Private Lawmaking: Wal-Mart as Global Legislator. University of Connecticut Law Review, Vol. 39, No. 4, 2007). It is that functional equivalence that makes this form of social norm among the most interesting vehicles for the expansion of law beyond the state that society has experiences in over half a millennium. (e.g., Backer, Larry Catá, Multinational Corporations as Objects and Sources of Transnational Regulation. ILSA Journal of International & Comparative Law, Vol. 14, No. 2, 2008). We will discuss these possibilities, central to globalization, later in the course. Still, using Eisenbverg's definitional constraints is quite useful for distilling the critical insights about social norms that can help students understand the way that functionality, increasingly, has overtaken formal exposition, as a basis for governance, especially for the development of regulatory systems that function like but do not mimic the forms of conventional law and that are developed beyond the state.
Eisenberg divides social norms into three broad categories, based on the degree of self-consciousness and obligation they involve. (Eisenberg, supra., 1256). The first category include most unconscious patterns of norms grounded for the most part in the natural order and corresponding, as the student will note, to the basest form of natural law identified in the Institutes. These are social norms that do not entail either a sense of obligation or any self conscious direction. Eisenberg includes things like dressing warmly in cold weather and statistical regularities (he points to auto accidents peaking during holidays) (Ibid). But he also includes simple cultural habits--like drinking coffee with with breakfast (ibid). Yet this last is not natural in the sense of the others; rather it refers to cultural norms which involves little or no repercussion if an individual disregards them. These are self-concious but non-obligatory.
The second category, which Eisenberg labels "practices" (Ibid, 1257) consists of "rules and regularities. . . self-consciously adhered to or engaged in" but which do not entail obligation (Ibid. 1256). These include determining the time for the start of classes in a law school. These Eisenberg suggests are adhered to consciously but do not entail any sense of obligation, because, as Eisenberg describes it, they can be waived with impunity. (Ibid). I am not sure that is entirely correct--his example, the commencement time for one hour classes that are held for fifty minutes during the course of a school day, I think suggest a much greater set of constraints that produce obligation than indicated in Eisenberg's text. It is true enough as Eisenberg suggests that there would be no criticism of faculty who changed start and end times and perhaps even the length of the fifty minute hour "as long as she could comfortably fit the schedule of her class into the schedule of other classes" (ibid), but that may no longer be entirely true. The rule may in fact implement constraints that are memorialized in organizational rules (those producing ABA accreditation of the law school for instance) that may may changing the fifty minute class rule more difficult and the law school itself may impose an organizational rule making such flexibility impossible. The point is that though Eisenberg is right within the very narrow context of the social norm rule standing alone, it is also likely that thse second category social norms are almost always embedded in organizational or legal rules. As such, considered more fully, Eisenberg begins to tease out implicitly, the concept of polycentricity in law-normative systems--that is the idea that laws and rules may exist in a layered form with respect to any activity and that an individual unconsciously and consciously must navigate the relationships among these layered rules, especially where they may conflict. While the example Eisenberg gives is simple--its insight is important in a transnational context where national, international and soft law frameworks may apply simultaneously with respect to a specific activity.
More importantly, Eisenberg categorizes legal terms of art as falling within this category--his example the industry usage rules of specific contract regimes, or signs for activities like hitchhiking (Eisenberg, supra, 1256-57). Again, these norms are deeply related both to organizational rules and legal rules. They are strengthened principally through their enforcement, for example, in contract, or by their use to signal obligation or meaning in proceedings involving risk allocation or fault. And they tend to operate like legal rules--these come closer to functional regulation though they may not take the form of rules--the common law of equivalent of social norm.
The third category, obligational rules, "consists of rules or practices that actors not only self-consciously adhere to or engage in, but feel obliged in some sense to adhere or engage in, although (by hypothesis) the rule or practice is neither a legal nor organizational rule." (ibid., 1257). The touchstone is whether breach produces self-criticism or criticism by others. Eisenberg includes moral norms. This includes religion and moral-ethical rules. (Ibid., 1262-1263). But some moral rules may also be organizational rules, consider the rules in the Talmud or Canon law. Non moral obligations include the convention that one wears formal attire to opening night of the opera in New York City. (Ibid). Still one wonders whether the criticism for violating practice norms in the context of contract arrangements might produce a tendency toward greater criticism than the failure to wear black tie to the NYC Metropolitan Opera.
Eisenberg then suggests that the effects of social norms are dependent on two variables, (1) whether the norm is obligation, and (2) if it is obligation, whether it has been internalized by the relevant actor." (Ibid., 1257). Internalized norms are efficient--these avoid utility analysis or external monitoring; the actor follows the rule she presumes it is the only or right thing to do. (Ibid., 1258-59). Thus the utility of sin in religious systems and guilt in moral-ethical systems. "For regular Metropolitan Opera goers, not dressing formally for opening night may be no more of an option than picking pockets." (Ibid, 1259). Yet what this may really suggest is that any social norm may be made obligation simply by internalizing its substance. In that sense communal expectations may transform anything into an obligational and internalized norm.
Eisenberg distinguishes non-internalized norms by reference to the way in which individuals may come to adhere to them. For these, adherence is measured by personal benefit. (Ibid., 1260). Yet these instrumental reasons themselves, it seems, may produce internalization if the norm is to be stabilized--that is if the norm is to have a deep impact on behavior. Absent that, on-internalized obligational norms "will probably collapse." (Ibid). Eisenberg notes the transitory nature of non-obligational norms, and its tendency to assume the character of oblgational norms depending on the context and the perspective of the actors who may be subject to their strictures. All norms, though, will be applied, changed or managed by reference to the consent and application of the community of actors to whom these rules are important. To that extent, and in ways that are similar to the development and strength of customary law, social norms develop with respect to certain determinants of social consent: critical mass, tipping points and other aspects of equilibria (ibid, 1263-64). Critical mass, of course, effectively confirms that norms require a sufficiently large and sustained community of consenting individuals who by their action apply the norm. Tipping points refer to the number of individuals within a community necessary, by their actions, to point to a change in the way the norm is applied, interpreted or followed. Equilibria are those points where no intrinsic or extrinsic forces are sufficiently strong to cause tipping.
Yet for Eisenberg, social norms appear to become important only when they interact with legal or organizational rules. It is in its subordinate though polycentric aspect that social norms might become interesting to law. Eisenberg considers this interaction of social norms with law in the corporate law. Eisenberg notes but does not focus on social norms explicitly incorporated into into legal rules (ibid., 1265) but rather considers how the corporate law of fiduciary duty, corporate governance and takeover bids "is in significant part a result of social norms." (Ibid). With respect to the first, Eisenberg argiues that the fiduciary duty of care and loyalty standards have shifted as a matter of law to reflect substantial changes in the social norms of expectations of director conduct (Ibid., 1268-69; 1274-75); with respect to corporate governance the movement from what Eisenberg describes as a monitoring board to a managerial board, which effectuated substantial changes in expectations of board oversight of the corporation was also to some extent a movement of law to reflect changing social norms, from a passivity to an activity norm (Ibid., 1279-80); with respect to takeovers, the critical change to social norm from hostility to an embrace of hostile takeovers changed occurred when industry leaders chose to disregard the prevailing norm and adopt another (ibid., 1289-1290). Social norms, then, are powerful but dependent. Not law (and to the extent they are they mimic the form of law making), social norms suggest the interpretive underbelly of formal lawmaking. To that extent, certainly, Eisenberg suggests the semiotic element of law, a key area of lawyer training. (e.g., Jan M. Broekman and Larry Cata Backer, Lawyers Making Meaning: The Semiotics of Law in Legal Education II (Dordrecht: Springer 2013)). Social norms provide the cultural foundation on which the commands of law are made intelligible and predictable. They are the glue that permits a shared meaning of their terms among the community of those who would be bound by the command of law. But they can be nothing more than interpretive foundation--to be more requires them to change their essential character from meaning or technique, to command, from social norm to law.
With our next two readings, Michael Reed, "From the ‘Cage’ to the ‘Gaze’? The Dynamics of Organizational Control in Late Modernity," in Regulation and Organizations: International Perspectives 17 (Glenn Morgan and Lars Engwall eds., 1999), and Michel Foucault, Security, Territory, Population, Lectures at the Collège de France 1977-1978. (Graham Burchell, trans. New York: Picador Palgrove Macmillan, 2007), we come to a very modern and still quite controversial notion that, indeed, social norms have become the principal basis for governance not merely of non-state organizations, but of the state as well. Here we see what teased out as an encrustation on law in Eisenberg, now freed of its dependence. Foucault provides a foundation for understanding how changes in our collective senses of the meaning and character of our collective institutions, public and private, have produced a movement not just toward the liberation of social norms from law (to assume an autonomous role of governance in their own right), but also how what these institutions are used for (their objectives) have now produced the incentives to move from the more traditionally formal characteristics of law (in judicial decision, statute and regulation) to law expressed in functional terms--as techniques of surveillance, monitoring and assessment. Not that law is dead--by any stretch--but that it no longer has either a monopoly of legitimacy nor does it occupy the field of the governance of human behavior.
Reed focuses on changing forms of international regulation in contemporary organizations. The focus is on the development of forms of organizational control in which functional techniques substantially replace formal architectures of rule making. In particular, Reed picks up the concept raised in the Eisenberg reading--internalization--and now frees it from its dependent association with norms in the way that surveillance is freed from its dependent role as a technique of regulatory enforcement to become regulatory in its own right. Reed argues that "there is a growing perception of an immutable paradigm shift in in control regimes within contemporary work organizations which moves them away from continuing dependence on traditional mechanisms of bureaucratic control [the cage] and towards socially constructed networks of self-regulation and discipline [the gaze]." (Reed, supra, 18).
Reed points to the tension in modern regulation that highlights the increasing inability of the forms of conventional law forms to meet the policy objectives of regulatory communities.
Bureaucratic control is based on an interconnected set of regulative mechanisms coordinating temporal, spatial and social relations in such a way that they became contained and fixed within a relatively stable and enduring regime of administrative structures. [But these have] become debilitating weaknesses in conditions where 'smart control'--based on much more highly mobile, miniaturized and dispersed control techniques and practices--emerges as a prerequisite for organizational survival in a globalized economic, political and cultural marketplace. (Reed, supra, 28).To this end, Reed builds on the foundations of the work of Michel Foucault and his analysis of "panopticon control." For Reed, panopticon control "refers to the widespread diffusion of specialized techniques of surveillance and control--at every level of the 'social body' and utilized by a very diverse set or organizations (the army, police, schools, asylums, hospitals, clinics, prisons, etc.)--geared tot he construction and maintenance of a new moral order." (Reed, supra, 28-29). This new form of regulatory control is contrasted to the traditional forms of control over behavior and status through command. In contrast panopticon governance is centered around a coordinated set of social norms and expectations that produce practices that are "dedicated to the realization of internalized self-surveillance and discipline that largely dispenses with the need for the externally imposed structural controls so strongly emphasized" in traditional conventional models of law and regulation. (Reed, 29). Reed argues that this approach to regulatory control is most advanced in the internal operations of economic enterprises. (Reed, 31-34).
Foucault's Lectures at the College de France on Security, Territory and Population brings Reed's insights back to government. In the assigned reading, Foucault starts by using the mechanisms of security to consider the problem of government and of the management of its population. (Foucault, supra, 88). He notes that traditionally the art of government, and now political science, was directed as advice to the prince (now the state). But government has always been an ambiguous term--government of the self, of the soul, of conduct, of children and of the state were all common at the eve of the modern period in the West. These intersecting problems of government represented two simultaneous processes. The first was a move from feudal to territorial states, and form territorial to administrative states. The second was a movement of state centralization and religious dispersion so that the locus of government in all its senses could be consolidated within the state with few powerful enough entities to contest this movement of regulatory (governance) power. (Foucault, 89). A noteworthy consequence was a focus on the problem of defining the nature of the government of the state (now engorged with the government of others).
Machiavelli's Prince provides a focal point of the analysis; the insight here being that the analysis of the reaction against Machiavelli through the late 18th century provides a window on the way that the understanding of the power and character of government was reconstituted. (Foucault 89-94). For Foucault, that literature marks the movement, socially normative, from law based to managerial states centered on governments through which social norms are managed and applied. Among these changes are the movement from the idea of government as external to the state, one that was always under threat and which had to be protected against internal and external challengers (Foucault (91-92), to the idea of government as internal to the state and its embodiment. That is from the person of the Prince to the collective of the state apparatus (that included the many governments in social and political relations among individuals); "all these governments are internal to society itself, or to the state . . . [t]here is then both a plurality of forms of government and the immanence of practices of government to the state." (Foucault, 93). But this multiplicity and immanence also produces hierarchy, "there is a specific from that has to be identified, that of the government to be applied to the state as a whole." (Ibid). That hierarchy and consolidation, in the face of political consolidation and religious dispersion also produces a movement of political management of religion, reflecting the idea of consolidation of the management of morals and eventually as well the management of individuals, goods and wealth. (Foucault, 94). The state, then, comes to represent the aggregation of governance and the superior source for its management from individual to family to the state. Government, by the twentieth century, then, could be understood as the management of the state for the collective good through its "government" of people, things and territory. The ideal of the model state was generalized into the art of government of the state. "To govern a state will thus mean the application of economy, the establishment of an economy, at the level of the state as a whole, that is to say [exercising] supervision and control over its inhabitants, wealth and the conduct of all and each, as attentive as that of a father's over his household and goods." (Foucault 95).
But this government is not directionless. The purpose of government is the arrangement of people, things and territory towards an end. (Foucault, 98). These include (1) self preservation, usually understood as the common good or salvation for all (Foucault 98); (2) specific "finalities" (objectives, final ends) such goals as wealth maximization) (Ibid., 99); (3) the management of people and things to increase the power or wealth of the state (Ibid., 99-100). But Foucault notes the problems of government with each. For the common good, he notes that the public good can be reduced to obedience to the law, that is that the common good exsts when all citizens obey the law and conform to the rules through which social harmony is maintained. "That means that the ends of sovereignty is circular" (Ibid., 98). For finalities, Foucault argues that government will be reduced to tactics rather than law; law recedes in the sense that it is no longer perceived as the major instrument in the perspective of what government should be. "For it is in fact the government of the family that best corresponds to the art of government that was sought: a power immanent to society (the father being part of the family), a power over 'things' rather than territory, a power with multiple finalities all of which concern the well being, happiness, and wealth of the family, a peaceful, vigilant power). (Foucault 103, note).
All of this changes in the 19th century as the idea of government and the state moves from the family to the collective--from organized and hierarchical replicating organisms modeled on the biological family, to mass politics, mass movements and mass government. (Foucault 103-104). This movement, Foucault argues, is made possible by advances in statics and technology. In effect both provide the ability to incarnate what had previously been incorporeal abstractions--the people, the enterprise, the collective, the social organization, etc. Now Foucault suggests, one can see each of these abstractions--and by seeing them (through aggregated statistics for people, through financial reporting conventions for enterprise, by corporate governance norms for collectives and organizations, etc). (Foucault 104-105). To that end, the techniques of data harvesting, surveillance and social construction become the foundation of the state and its political economy. Surveillance, then, serves not just to change the face of regulation but also to organize the state as well and to incarnate what have now become its greatest stakeholders--the great collectives of individuals organized in a variety of ways and the entirely of the people now incarnated as "the people" with quite specific characteristics that can be unearthed by appropriate data harvesting and analysis. "In fact, statistics, which had heretofore functioned within administrative frameworks, and so in terms of the functioning of sovereignty, now discovers and gradually reveals that the population possesses its own regularities: its death rate, its incidence of disease, its regularities of accidents." (Foucault, 104). Surveillance and reporting, then, become central to the organization and functioning of the modern state--and expressed in the form of its rule making, both formal and social--and the state itself becomes an incarnation of the masses (its population) to the management of the welfare of which it now devotes itself.
We move from government grounded in popular sovereignty to one based on the organization and management of population and economy. In the face of the rise of the masses, what Foucault calls the population, the family recedes as a mere element within the population. The political consequence (and one affecting the breath of the scope of law making) is then that the family moves from the model of government to an instrument of governance; "it will become a privileged instrument for the government of the population rather than a chimeral model for good government." (Foucault 105). The masses (the population or collective) becomes the principle objective of government. And most important, the population is made to serve as the principal instrument of its own management. That last change requires new forms of governing--not just law but the techniques of management. "And the instruments that government will use to obtain these ends are, in a way, immanent to the field of population; it will be by acting directly on the population itself through campaigns, or, indirectly, for example, by techniques that, without people being aware of it, stimulate the birth rate, or direct the flows of population to this or that region or activity." (Foucault 105). Lastly, the population will become the point around which the practice of government is organized. The management of the population becomes itself the object of government "The constitution of a knowledge of government is absolutely inseparable from the constitution of a knowledge of all the processes revolving around population in the wider sense of what we now call 'the economy'." (Foucault 106).
Government and its regulatory structures, then, evolve form regimes of law and sovereignty to one of management and what Foucault calls governmentality. (Foucault 108. Governmentality refers to the way in which modern society is organized through "institutions, procedures, analyses and reflections, calculations and tactics that allow the exercise of this very specific, albeit very complex, power that has the population as its target, political economy as its major form of knowledge, and apparatuses of security as its essential technical instrument." (Ibid). Governmentality is centered on government and its control of population through formal and functional approaches to management that is meant ot produce self administration among the subject population in whose name all of this is done. (Foucault 108-109). Governmentality points to the result of a 500 year process that has moved law and the state from one grounded in territory, customary and written law to an administrative state governed through regulation and individual disciplines to the emerging state of affairs: "a state of government that is no longer essentially defined by its territoriality, by the surface occupied, but by a mass: the mass of the population." (Foucault 110). This is not merely governmentality but the world of globalization, of polycentric governance and of law that no longer assumes merely its ancient forms of command and the preservation of structures of hierarchy.
With our last reading, Larry Catá Backer, "From Moral Obligation to International Law: Disclosure Systems, Markets and the Regulation of Multinational Corporations," Georgetown J. International Law, 39(4):591-653 (2008), students are given a glimpse of the possibilities of approaches to law making in a world of governmentality. Students consider whether Eisenberg's social norms, including organizational rules, can be liberated from their dependence on law for actualization in governance spheres in a context where, as Foucault suggests, .
Backer argues that international law ought to 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. Without incorporating any particular set of “public” values, international law can make it easier for people to manage the “public” or “social” behavior of multinational corporations through a mandatory regime of global reporting. The heart of any such international regulation would be a mandatory system of information gathering, monitoring and disclosure. This then also picks up and seeks to develop a consequence of the move, discussed previously, from formal to functional law in the context of administrative regulations required to provide seamless management of a specific set of human activities.
Backer posits that law does not appear to compel any sort of responsibility for the working conditions of indirect employees. Law is particularly unhelpful where the indirect employees are employed in a country other than that of the indirect employer. Recent efforts to create mandatory legal obligations touching on corporate social responsibility in the international level have been forcefully rebuffed, principally by representatives of developed states. There has been a strong objection to the use of law, and especially international law, to privilege one set of behavior norms over others in a context in which there is no consensus over appropriate conduct norms for economic entities.
However, while in the recent past there might not have been even a moral obligation extending to such employees, contemporary standards suggest otherwise—there may now be a moral obligation of some kind to indirect employees. The source of this moral obligation might be derived from a variety of sources, both secular and religious, but it is not grounded in law enforceable by any state. Other sources of moral obligation might include human rights declarations from international organizations and supra-national human rights organizations. Yet even moral obligations can be enforced in the absence of enforceable standards written into hard law. Under the private law of contract, for example, the principal parties can bind themselves voluntarily to behavior standards they might deem proper. The nature and extent of that obligation may be dependent on the values of the stakeholders or the normative system under which all actors operate. Similarly, the parties might agree to certain behaviors in order to receive a certification of compliance with «good» behavior issued by a reputable third party in the business of making such certifications. Those obligations are usually enforced privately as well—through mandatory agreements to disclose information and permit the monitoring of behavior.
Such moral obligations, and the methodologies of enforcement, are coming to be institutionalized in private regulatory efforts, principally in corporate ethics and behavior codes. Institutionalization of governance, however, is not law. Virtually all of these responses have been in the form of “soft law,” usually voluntary codes that are not enforceable by any political organization. Indeed, the rise of this much-touted corporate social responsibility movement has resulted in the proliferation of a number of responses at every level of governance. The soft law character of thes efforts suggests deficiencies. Additionally, there is no institutionalized procedure for enforcement. Moreover, the proliferation of these private forms of regulating moral behavior pose a more fundamental substantive problems. These voluntary codes tend to be written in the most general terms, permitting a tremendous variation of behavior that can be claimed to be consistent with the form or substance of these codes. For those who are looking for both certainlty and consistency the private elaboration of susbtantive behavior exacerbates the problem of uniform standards.
The problem of indirect employees, then, suggests the overlapping dimensions of the problem posed by any effort to formally regulate the behavior of economic entities across borders through law: the disjunction between moral obligations across borders in the construction of economic relationships across such borders, the multiple sources of values informing regulatory policy even within states, and the difficulties of transposing moral obligation into a substantive law of corporate social responsibility that effectively reaches across borders. Yet, despite these limits it may be possible to construct a plausible system of mandatory regulation at the international level that adds value to economic activity without threatening the contemporary system of market based globalization. The foundation of that regulatory system is tied to monitoring, disclosure and reporting. These are each enforcement mechanics common to the private law of contract. Together they are the essence of modern soft regulation through which the disciplines of informed choice are realized. From out of the means by which moral obligations are enforced among private parties may come a framework for creating a plausible hard law at the international level. This framework would provide incentives (either positive or negative) for international business to consider “public” goals without actually mandating those goals in any specific form—the market would make that determination. These incentives can be provided through law, but in a way that retains a strong sensitivity to the current market bias of globalization—and to the privileging of private arrangements among stakeholders principally involved in economic transactions.
For that purpose Backer posits a global system of disclosure and transparency, consisting of monitoring and surveillance. The object of these disclosure mandates would not be to establish a definitive set of behaviors, but rather to establish a framework within which corporate stakeholders—consumers, investors, labor, and others—could adjust their relationships on the basis of the behavior disclosed. In a sense, then, monitoring regimes can serve as a framework for incorporating moral obligations within a legal structure of relationships between economic actors, without hardwiring any particular set of ethical standards in law. Backer suggests that this sort of mandatory regulatory regime is plausible as international “hard” law for five reasons. First, it only requires actions on the part of economic enterprises (the gathering and dissemination of information) that have been well internalized by the great majority of these entities. Economic entities harvest, use and report information all the time—for example to government regulators, to investors and to consumers, among others. This is not so much a new task as a modification of a core activity of business. Second, the sort of social disclosure to be targeted under international monitoring regimes are already being provided in large respect through private contract, for example in the context of supplier chain arrangements. Third, information gathering has been a task long assigned to international and transnational public actors. This sort of regulatory activity is something well suited to that sort of organization. Fourth, international instruments already contain monitoring provisions. Thus, the international community already has the skill set necessary to draft this sort of hard law (as do the nation states that must approve such endeavors). Lastly, there already exist a number of frameworks that detail the sort of information that might plausibly be gathered and disclosed that have been developed by global civil society and public actors.
Backer suggests that such a system will work at the economic level only to the extent that it can be promoted as a mechanics to global market efficiency, avoids making substantive or values driven behavior choices, limits enforcement to the compliance with the information gathering and reporting requirements of the international framework and vests enforcement at the nation-state or private level. The transformations of conventional law and administrative regulation, then, provide the template for the form of regulation, one that converts the techniques of regulation as its substantive form. The substance, like that of customary law, is derived from the social norms of the governance community (in the case of corporate social responsibility, the community of consumers, investors and enterprises). Values-based behavior would be dependent on what the principal participants think is important. The critical element that international law would add is the framework within which information is produced and choices can be made And control of the content of the values that are privileged would depend on the power to convince the critical stakeholders of the correctness of a value system put forward. In this context, values, like law, would be subject to the market, in this case the market for ideas (of values). In this market, private actors—churches, philosophers, social scientists, ethicists, and others—would have a primary role in seeking to offer product (values systems touching on matters of corporate social responsibility) and to market those products to the critical stakeholders
Eisenberg was able to draw attention to the relationship between law, organizational rules and social norms. But that analysis remains grounded in the traditional notion of the supremacy of law and the supplemental role of normative systems. Backer suggests the basis for embedding social norms within organizational rule frameworks in governance spaces where traditional law cannot reach, the activities of organizations that cross borders and cannot be contained or regulated by the law of a single state. Yet there are hints in Eisenberg's analysis that such social norm systems might be both autonomous of law and coherent without reference to an outside and "superior" governance order. And Backer suggests the way in which the techniques of regulation can be used as easily to implement and add context to social norm governance systems as can be used as functional law within administrative regulatory systems. This form of transnational functional law combines the techniques of traditional implementation with the self regulatory mechanisms of markets based discipline to create self-referencing systems of governance in which substance is contributed by the governance community through standards that are embedded (in Eisenberg's sense of practice social norms) within flexible system through which to construct a market oriented basis for legal regulation of the behavior of multinational corporations that serves both the desires to ground regulation in public law and the necessity of vesting the power to determine the content of that behavior on the choices of non-governmental actors.
For the lawyer in contemporary America, the results might eventually be quite profound. It means for her that the regulatory world facing her client is no longer the simple one defined by the structures of the traditional first year law curriculum. Indeed, to some extent, and from a client's perspective, this curriculum is obsolete in the sense that it no longer reflects the extent of the regulatory universe within which she is now required to operate both within the territory of the state in which she operates but also in those other states, and between them, when her activities reach beyond the borders of the state of residence. A lawyer who knows only law (in the senses we have discussed (common law, statutes, regulation) knows only a portion of the regulatory universe that is now evolving. In the world in which lawyers are expected to operate in this century, a lawyer will have to learn to weave law and social norm as they intersect among public and private governance organizations, and all in the service of the interests of her client.