As my contribution to the panel on "The Changing Face of Corporate Law Making" I offered the following remarks. A full version of these thoughts will be published as part of the issue of the Indiana Journal of Global Law Studies devoted to this conference.
Global Panopticism and Corporate Law Making
Larry Catá Backer
Abstract: A sovereign is said to lose its character as such when it “acts, not as regulator of a market, but in the manner of a private player within it” (Argentina v. Weltover, 504 U.S. 607, 614 (1992)). The reciprocal principal has not been accepted de jure, narrowly defined. Yet, private players now are required to play the role of regulator and have sought that role for themselves de facto. This paper examines one of the more significant of these regulatory roles, that of surveillance, both in its domestic (Sarbanes-Oxley) and in its transnational (voluntary codes) element. It focuses on the ways in which the construction of complex systems of conscious and permanent visibility affects the power relationships among states, economic entities and individuals.
I will be speaking today generally about complexity and fracture in regulatory power. Specifically, I will be focusing on surveillance as a regulatory mechanism of both private entities engaged in sovereign functions and public entities participating in the market.
It is not unusual, when people examine issues of governance—whether public OR private—to approach analysis in a way that embraces the value judgments inherent in the normative assumptions and parallels the foundational model of governance of the political community to which they belong.
--In the West, that usually translates into a fixation, of sorts, on the executive, legislative or judicial function:
--Analysis within those functional categories is usually elaborated within a normative framework
Bounded by: (A) efficiency concerns (separation of powers); and (B) fear of tyranny (checks and balances).
And expressed in: (A) formal systems (institutional autonomy); and (B) positive law making (rule of law).
--This approach is quite reasonable and necessary. It forms the essence of the expression and construction of the regulatory power of states (as sovereign political entities) and corporations (as sovereign economic entities).
But other regulatory functions—for a long time lurking in the background as incidental or secondary—have surged forward from humble beginnings in revolutionary France and then Russia, to move more center stage from the late 20th century. In a sense, this movement evidences the transformation of those aspects of governance from what might have been seen solely as a means of governance to what now assume its form.
--Among the more important governance functions—affecting both public and private governance systems—is surveillance. By surveillance I mean to invoke the French overtones of the term, to suggest for surveillance a function of “watching over” both as technique and as the normative system itself compliance with which it watches.
--Surveillance, when understood as transparency has two aspects:
--internal (direct stakeholders involved in governance)
--external (all communities that might be affected).
--Surveillance can be said to embrace two principles:
--a passive (openness) and
--an active (disclosure, monitoring assessment) principle.
In some or all of these aspects, surveillance is sometimes characterized as essential to democratic governance:
--it is said to further accountability
--promote solidarity among stakeholders (conflict avoidance/management).
--In a global order organized as a simple state centered system, which is territorially bounded and grounded in purely public lawmaking: this relation between transparency and democratic processes can be essentially correct.
--in a global order moving toward a multi-centered, transnational, public-private governance framework, this relationship may become more complex.
My purpose today, then, is to:
(1) tease out some of the possible complexities of surveillance within the emerging multi-jurisdictional system of global law, and
(2) the emerging relationship between surveillance and democratic governance.
I will then relate both complexity and relationship to emerging public and private governance systems.
I will suggest, as I have already implied, that surveillance in our time is being transformed from a general and undifferentiated technique of governance, to the active embodiment of governance itself. Surveillance is both the repository of governance norms and the discipline of those norms within any regulatory system.
Surveillance in its modern form, represents another step in the perfection of social panopticism, of the creation of systems of social order that are self regulating and internalized among those regulated. It represents a shifting of coercive power from the external—the state, the police, the institution, to the individual and the private. As Michel Foucault famously put it in another context:
Hence the major effect of the Panopticon: to induce in the inmate a state of conscious and permanent visibility that assures the automatic functioning of power. So to arrange things that the surveillance is permanent in its effects, even if it is discontinuous in its action; that the perfection of power should tend to render its actual exercise unnecessary; that this architectural apparatus should be a machine for creating and sustaining a power relation independent of the person who exercises it; in short, that the inmates should be caught up in a power situation of which they are themselves the bearers. MICHEL FOUCAULT, DISCIPLINE AND PUNISH: THE BIRTH OF THE PRISON (Alan Sheridan, trans., 19977, NY: Vintage Books 1995) pp. 195-228.
Surveillance is thus a bundle of assumptions, factors, assessments and actions incarnated on the bodies of the regulated. As technique, surveillance provides the framework for its mutability, representing a complex cluster of sub-operations whose application can substantially affect the character of the relationship between governed and governing. As normative framework, surveillance is the expression of the behavior rules of the community for whose benefit it is applied. It is a Logos made manifest among the community of believers. And there may be as many manifestations of the face of divine order as there are communities in a global system made up of multiple communities.
II. Surveillance Unbundled :
One way to understand surveillance in its governance role is to unbundle the assumptions and actions inherent in the term.
One useful framework might divide surveillance into four (4) components:
I will discuss each in turn. I will then suggest the ways in which changes in the application or construction of each has both substantive and implementary effect. I will then suggest the ways in which surveillance, now conceived as an aggregate of its components, has regulatory effect. The specific nature of those regulatory effects will also be explored. The essay ends with an application of the model in a public and a private context.
III. Normative Context: The Foundations of Surveillance
Surveillance, in its normative context, provides the boundaries within which it nature and role can be comprehended.
The normative aspect of surveillance can be understood as the product of two definitional categories: substantive and surveillance normativity.
--Substantive normativity suggests overarching behavioral constraints. The sources, character and limitations of these constraints are well known. They comprise the morals and ethics of religious, cultural, ethnic, political and economic systems. And they are sometimes recognized by and normalized within legal systems at the local, municipal or international levels.
-- Many behavioral rules and outlooks converge at a high level of generality but tend to diverge in their details.
--Example: Both German and American political systems value human dignity. But the meanings of human dignity, as a theoretical construct and as applied, vary widely between the U.S. and Germany.
--Surveillance that ignore or violate substantive norms lose either legitimacy. Such violations expose the system as alien, and unnatural, subjecting the system, its operator and the agents of surveillance, to discipline in accordance with the rules of the normative community whose behavior codes have been violated.
--While such behavioral frameworks are often universalizing in approach, all tend to be most important within the communities from which they arise. And all tend to be subject to patterns of interpretive engagement in accordance with the values and rules of the communities in which they are effective.
--Surveillance substantive normativity at their most effective must reflect the overarching behavioral constraints of both the communities within which surveillance arises AND within which surveillance is targeted.
--Where the normative constraints differ, surveillance must be adjusted to fit within the common restraints and beliefs of both. Thus, the greater the number of communities affected by systems of surveillance the greater the number of likely normative constraints for uniformly applied systems.
--Alternatively, surveillance must be divided and adjusted to suit the constraints of each. But this raises the costs of surveillance and might increase the variability of information gathered or its utility.
--Surveillance normativity suggests the normative assumptions shaping approaches to surveillance itself. Not just behavioral constraints generally understood, but behavioral assumptions relating to the shape and content of surveillance itself. In addition, surveillance normativity shapes the assumptions about appropriate responses to surveillance by the population monitored as well as by the monitors.
--Thus, the focus in this respect is on the nature, character and scope of appropriate surveillance, and the relationship of the community to monitoring. This implicates what in American jurisprudence is known as “privacy,” “whistle blowing” and “corruption”.
-- The focus is also on the extent of an obligation to be open (transparency) or to affirmatively seek information (monitor) as inherent in the assumptions about the relationship of institutions to their stakeholders (from shareholders, employees, directors, investors, to customers, and others).
--Two movements worth noting in the construction of the boundaries of surveillance normativity, each of which has significantly altered the framework within which surveillance normativity is understood:
(1) Surveillance normativity and organization/communities: Move from a passive to active to obligation to surveillance.
--in the corporate arena this is nicely exemplified by the move from Graham v. Allis Chalmers to In re Caremark as the basis for the legal regulation of surveillance under Delaware corporate law.
--in the criminal arena it is marked from the progressively more intrusive calculus of federal Attorney General Guidelines on prosecution of corporations.
(2) Surveillance normativity and individuals: Rise of a social “duty of loyalty” at every level of the social order (acting for the benefit of the organization rather than for personal benefit) and the consequential focus on “corruption.”
--in the public lending arena this is marked by a move to impose systems of surveillance for government officials.
IV. Surveillance as Informatics: Building Blocks of Power/Knowledge
It is in its aspect as the cluster of behaviors we commonly refer to as “informatics” that most people understand surveillance.
Informatics involves three distinct sets of actions;
(1) data identification (raw information)
(2) the practice of data collection (structure and properties of information gathering—knowledge production)
(3) data uses (drawing conclusions from information—judgment function).
Its principle variables are inscribed in:
(A) data itself (raw information)
(B) systems of processing data collections into information useful to someone
(C) systems of evaluating information
(D) systems of disseminating or communicating information after evaluation.
--Thus, as informatics, surveillance presents a host of variables grounded in data, on the one hand, and systems, on the other.
--But informatics is not concerned with issues either of (1) to whom is information delivered (beyond the entity producing the information) or (2) by whom is it used.
Data issues (recognition):
--The principle variable involves the constitution of data.
--What is raw information, what is judgment or conclusion?
--The example of race: is it raw data or is it a judgment?
--The example of scientific “fact”: Collecting data on planets—is data on Pluto to be collected?
--The constitution of data thus is directly influenced by the normative framework within which data is itself constructed. Even the most basic data can be contested to some extent or reflects the contextual basis in which it s “seen” or understood to constitute “raw data.”
Collection issues (knowledge production): Here the principal focus is on capacity and parameter issues.
--Scope: what sort of data is to be collected
--Focus of gaze (within scope of collection): what sort of data collected is to be emphasized.
--Technology: how can the information be obtained.
--Putting data together: uses of data affect the calculus of capacity.
--It reflects the character of the information to be privileged. That determination affects the way in which monitor and monitored approach a valuation of appropriate behavior.
Uses Issues (judgment):
--The conversion of data into information.
--Conversion suggests two way relationship between data, its aggregate construction and the purposes/principles to be furthered by the surveillance exercise.
-- Grounded in issues of sufficiency, each of which affects capacity in different ways:
--Verification; confirmation, corroboration, confirmation of a condition, effort, or authenticity of assertions.
--Management; assessment, basis for making decisions touching on the organization, staffing and internal operation of the entity.
--Exposure; disclosure, transmission, dissemination, privileging of particular facts going to issues of fundamental importance to the operation or management of the entity
--Confession; affirmation, acknowledgement of a judgment, condition, or action.
--Objective element: Is there enough data, generating quantity.
--Relationship of information put together from data generated related to the judgment to be made.
--Connection to principles/purposes to be furthered
--Legitimacy of methodology (connected to surveillance normativity constraints)
V. Surveillance as Control
Tied to the judgment aspect of knowledge production.
This is surveillance in its aspect as “power applied” to control. It invokes a distribution element as well.
The control aspect of surveillance can be divided into four (4) substantive elements:
--(1) Who may determine what information must be produced and what judgment may be made from the information thus produced?
--(2) Who must produce information?
--(3) Who may make use of the information (who is the beneficiary of the information—direct and indirect) ?
--(4) How can it be used—the heart of the regulatory aspect of this set of surveillance components?
Focus here is on the institutionalized systems (a) through which data is produced and bundled as judgments (conclusions), and (b) used to verify, manage, expose, or confess. The control element thus centers on the system aspects of surveillance. This systems aspect forms the most visible basis of the regulatory function of surveillance. Systems reify control based on the elements of information gathered and judgments privileged on the basis of the values framework through which surveillance is elaborated. Content, technique, and discipline conflate within and find expression through surveillance framework provides the means for enforcing the regulatory ends of surveillance.
This control element has both an upstream and a downstream vector:
--Upstream Element: internal control, self control
--The object is internal discipline.
--The beneficiaries of surveillance:
A. Internal stakeholders (agents). Example: Wal-Mart chain of command, from supervisors to the board of directors.
B. External Stakeholders (principals). Example: Wal-Mart shareholders.
-- The origins of the techniques and normative basis may developed at one or more levels:
A. Internally by the surveillance entity. Example: Wal-Mart
B. By the community of entities for which surveillance is meant to aid in internal governance and to discipline the community of entities into privileging a uniform set of norms reflected in the objects of surveillance and the data sets monitored. Example: Retail Trade Association of which Wal-Mart is a member.
C. By a superior public regulatory community. Example: imposition under the Sarbanes-Oxley Act of a statutory framework for surveillance on all entities subject to federal securities laws.
D. By private regulatory organizations with influence over an important segment of the surveillance entity’s business. Example: Forest Certification NGO program for use of paper products at Wal-Mart.
--The techniques, scope, focus and normative framework of surveillance will differ depending on the origins and control of the surveillance framework.
--Surveillance becomes complicated when an entity internalizes multiple, partial scope, surveillance frameworks.
--Downstream element: external, control by/through others
--Object is external discipline.
--The beneficiaries of surveillance:
A. Political communities: home state, host state, local communities, supra national communities. Control systems originate in statute.
B. Outside stakeholders: labor, lenders, trade creditors. Control systems originate in contract.
C. Affinity groups: civil society, NGOs. Control systems grounded in ad hoc arrangements for mutual benefit sometimes memorialized in contract.
-- The origins of the techniques and normative basis may develope at one or more levels: same as upstream disclosure.
--Generation versus transmission
--Both upstream and downstream surveillance systems distinguish between generation and transmission of information, either as “raw data” or “judgment.”
A. Not all data/information generated is transmitted. Examples: information generated for internal management may not all be made available to government regulators.
B. Not all data/information transmitted is redelivered in the same form or with the same content to different sets of recipients. Example: Internal financial accounting systems may differ from financial reporting under Reg. S-X (SEC).
C. Not all data/information transmitted is generated from the same source. Example: Data generators may be different from data bundlers (analysts).
--Both upstream and downstream surveillance systems distinguish between passive and active elements. Related to who is requiring information (outsiders with coercive power versus insiders; internally between insiders seeking information for the attainment of management goals versus production goals).
VI. Surveillance as Governance
--In this aspect, surveillance is felt as gouvernmentalité, a linking of governance with the techniques of its power. (Foucault, Michel 1997: Security, Territory, and Population, in: Michel Foucault, Ethics: Subjectivity and Truth, ed. by Paul Rabinow, New York: The New Press, p. 67-71).
--Implicates the consequences of adjustment of elements of the normative, informatics, and control aspects of surveillance;
--Serves as a bridge between surveillance as technique and the systemic replication of private desire in collective action.
--In this aspect one focuses on the complicity/consent of the actors in systems of surveillance used to reinforce or articulate normative systems of power and behavior.
--“Governing people, in the broad meaning of the word, governing people is not a way to force people to do what the governor wants; it is always a versatile equilibrium, with complementarity and conflicts between techniques which assure coercion and processes through which the self is constructed or modified by himself” (Foucault, Michel 1993: About the Beginning of the Hermeneutics of the Self (Transcription of two lectures in Darthmouth on Nov. 17 and 24, 1980), ed. by Mark Blasius, in: Political Theory, Vol. 21, No. 2, May, 1993, pp. 198-227 at 204).
--Thomas Lemke, Foucault, Governmentality and Critique, Paper presented at the Rethinking Marxism Conference, University of Amherst (MA), September 21-24, 2000, at 9-10, notes that “the analysis of governmentality does not only take into account “breaks” or “gaps” between program and technology but also inside each of them – viewing them not as signs of their failure but as the very condition of their existence.” Thus, “government refers to a continuum, which extends from political government right through to forms of self-regulation, namely "technologies of the self".” Id., at 12.
--Govermentality can thus also be understood in its Aristotelian sense, as a necessary self replication of normative understanding and techniques from out of the individual to the collective. (Aristotle, Politics).
--In this aspect the full array of issues commonly understood as democratic accountability are also bundled.
--Understood as norms and as procedure
--Touches on issues:
(a) The identity of the person or institution with authpority to compel surveillance.
(b) The object of surveillance (individual or institutional).
(c ) The complications of self surveillance.
(d) The connection between monitor and monitored
(e) Beneficiaries along the stream of conveyance of data/information from construction to broadcast.
(f) Political power and democratic accountability: private recourse to normative framework of public accountability.
--Ultimately surveillance, here in its normative/regulatory guise confronts the issues:
(a) Is there an ideal from which deviations can be judged? and
(b) At what point is deviation severe enough to merit discipline and correction?
--The answer increasingly appears to be – no. . . . and yes!
(a) There is a diminishing likelihood that a single ideal will serve as the basis for constructing the fact set from which deviation ought to be judged.
(b) However, as governance systems fracture and governance power seeps from political to ethnic, economic, religious and affective communities, which together form multi-layered and networked communities, it is likely that the techniques of surveillance will serve as the connection between individual self constitution and the constitution of governance systems in its substantive and disciplinary aspects.
VII. Putting it all together.
--Surveillance, understood as an aggregation of techniques, values, judgments and relationships, thus acquires a complexity belied by the traditional single minded, state centered, democratic value enhancing “model” of surveillance as mere technique, that is as “mere means”.
--But the unbundling of surveillance as these clusters of actions and judgments among multiple overlapping and sometimes conflicting communities provides evidence of the emergence not only of techniques of governance, but of the complicity of self governance and the proliferation of forms of governance beyond both the state and political frameworks previously privileged.
--Governance surveillance thus constitutes both a reproduction of individual governance (Aristotle, Politics) and a technique of power.
--Governance surveillance is thus now structured within both public (law) and private (contract) relationships. The objects of these systems are both states and non-state actors, each of which may be compelled or encouraged for a variety of actors and stakeholders.
--As a consequence, surveillance has become ubiquitous, a mirror on self and social organization, a reflection of the techniques and self constitution of power, and an expression of normative values which bound those communities thus constituted. Surveillance has morphed from an incident of governance to the basis of governance itself. It is both government (apparatus) and Governmentality (its self conception and complicity, the prisoner becomes his own keeper).
--Examples; analysis of surveillance systemics as outlined above:
--Municipal and formal surveillance (Public—downstream—law based—coerced):
--Sarbanes Oxley and Corporate Regulation
--Corporate best practices guides
--Transnational and informal (Private—downstream—contract based—coerced/incentive):
--supplier chain regulation of conditions of operation
--product certification programs
--Transnational and formal (Public/private—upstream—contract based –incentive/coerced):
--World Bank: anti corruption elements of loans and technical assistance programs.
--International Monetary Fund: surveillance programs, conditional lending programs.