ABSTRACT: Transnational corporations are at the center of extraordinary and complex governance systems that are developing outside the state and international public organizations, and beyond the conventionally legitimating framework of the forms of domestic or international hard law. Though these systems are sometimes recognized as autonomous and authoritative among its members, they are neither isolated from each other nor from the states with which they come into contact. Together these systems may begin to suggest a new template for networked governance beyond the state, but one in which public and private actors are integrated stakeholders. This provides the source of the questions explored in this article: Is it possible to detect this new template for transnational governance of economic activity (in general) and corporations (in particular) developing through principles of transnational private governance?; Is Public governance in the twenty-first century taking on the characteristics of transnational corporate governance? The questions suggest three objectives. The first is to examine the organization of communities of states through the normative lens of private transnational governance. A secondary objective is to suggest the importance of communication—structural coupling—between developing private governance systems and emerging transnational public governance systems. That communication suggests the development of the institutional intermeshing of both autonomous systems of governing communities of private actors and communities of states. The third objective is to consider whether emerging governance frameworks, public and private, might be arranged together in a way that credibly suggests a system of coordinated meta-governance. After an introduction, Section I of this article examines the governance constitutions of multinational economic actors. Section II then turns to a consideration of corporate constitutionalism within a meta-governance framework. The focus is the governance framework of the G-20’s Financial Stability Board (FSB). The G20-FSB framework points to the future of governance systems in which the state participates in a collaborative governance structure, but in which states share rule making power with public and private non-state actors. The FSB template points to the organization of governance as a collegial enterprise in which states and traditional law-based systems interact with non-state actors and their norm-based systems to develop integrated governance with global reach. Thus reconstituted, a new set of arrangements might well arise, one in which amalgamations of the most powerful states and private regulatory bodies assert authority once reserved to states alone.
Monday, June 06, 2011
Private Actors and Public Governance Beyond the State: Manuscript Draft
I have been working on a manuscript that may be of interest, to be published in the Indiana Journal of Global Legal Studies: Private Actors and Public Governance Beyond the State: The Multinational Corporation, the Financial Stability Board, and the Global Governance Order. It is part of an ongoing project on the evolution of polycentric governance and its consequences for states and multinational corporations. The context is the ordering of global economic systems, and the rise of governance authority among non-state actors. The specific context is the development of frameworks for communication and at least functional harmonization among these emerging systems as they confront and change the character of law-based governance by states, and perhaps even the nature of law. These frameworks might prevent collisions among these governance actors or they might exacerbate these collisions as hierarchies of legitimate governance are developed and imposed by public and private actors.
(From Fritz Springmeier, S-P-l-N = Segmented Polycentric Integrated Networks (From "Wise as serpents, Gentle as Doves") Pulling Back the Wizard's Curtains, Sept. 26, 2009; "S-P-l-N = Segmented Polycentric Integrated Networks. If one wer to diagram a SPIN organoizaitonal chart it would not be conventional box type configuration such as an army company organization chart. Rather, it would resemble a fish-net with interlocking nodes with groups linked to many other groups and cluster around nodes. There is no center to the network. . . . A network (one of their buzzwords) is many times more greater than the sum of its parts.")
The abstract is set out below, and the manuscript itself can be downloaded in full HERE. I welcome comments, reactions and thoughts.
Private Actors and Public Governance Beyond the State: The Multinational Corporation, the Financial Stability Board, and the Global Governance Order
In the twentieth century, the “color line” bedeviled efforts to constitute political communities in accordance with their aspirational and functional realities. It was grounded in notions of segregation within constructed hierarchies built on the oppositional racial binary: white and others. The color line demarcated borders between those who regulate and those who are regulated; it suggested a hierarchy of governance within which only one group was recognized as a legitimate producer of regulation. The color line found its way into everything from the internal social and political organization of states through law to the construction of notions of sovereignty and the legitimacy of subordination and colonization between states in international law. Though the color line never accurately described the reality of social organization or governance, its ideology proved to be durable.
If the color line was said to be one of the great issues of the twentieth century, the conference organizers have described what can usefully be understood, for this current century, as the rise of an equally perverse construct, which I will call the “governance color line.” On the one side stands the state and with it a mechanics of legitimate governance: law, sovereign will, democratic organization, force, and the like. The state defines the universe of the public sphere. Since 1945, the state has increasingly acted in concert through a vast array of public organizations the governance authority of which is derived from or dependent on the good will of the states supporting those entities through the exercise of their legitimate mechanisms of asserting power. Together, these entities represented the full extent of legitimate public power. It was to this public sphere that the ultimate will of a people constituted as a state could be asserted through law.
Beyond this public sphere all other governance communities and systems, from the most mundane and local to the most elaborate and pervasive, are rounded up in a “private sphere.” This private sphere is understood as subordinate to the state and subject to its regulation. It has no authority to legislate; it governs through moral suasion, contract and the consent of the members of the group that subjects itself to private order rule systems. It includes everything from established churches, civil society organizations, and large multinational corporations to informal associations of like-minded individuals that come together for some purpose or other. These communities could be quite informally structured or organized as elaborately as a state. However organized, they all tend to govern through the development of social norms.
This public-private divide is well known and much maligned. On the one hand it is derided as a basis for organizing the state around separable spheres, one public (political) and the other private (economic/social/religious), that denigrates or subordinates activities consigned to the private sphere. Conversely, it is criticized as an attempt to legitimate principles of governance power beyond the state. In both cases, the emphasis on the power of non-state actors to produce rules that have a binding effect on others is viewed as illegitimate or threatening, in the latter case either to the primacy of law-based systems, or to the organization of the power to govern through states.
But globalization, with its de-emphasis on the integrity of the territorial borders of states, destroyed the old presumption of a substantially complete identity between subjects and objects of regulation. Because such private entities, especially large non-state actors, could avoid regulation in one single state by extending their operations into the territory of other states, it became easier for these entities to avoid political regulation and substitute themselves as new regulators of behavior, each within the scope of its enterprise operations. In some cases, it also permitted a greater degree of freedom from regulation by others, including states.  In other cases, it suggested the ability of groups of non-state actors to come together to create autonomous regulatory communities or to offer regulatory services to communities of other non-state actors—for example by creating a system of rules for sustainable environmental practices, certification of compliance with which could be offered to interested companies. At the dawn of the twenty-first century, then, these entities, and their governance organs, could organize increasingly strong formal and functional attacks on the monopoly of legitimate governance authority asserted through the state. Beyond its functional effect, vesting governance authority in private actors, an object of this movement had the effect of questioning the organizing frameworks on which the conventional global order has been based. Among the most important of these are multinational corporations and transnational institutionalized religions.
Multinational corporations are at the center of this extraordinary and complex metastasis of governance outside the state, hard law, and municipal law regimes. Within this emerging governance environment, it is possible to conceive of corporations that can regulate themselves—by arranging their operations so that they are subject to the state regulatory regimes of their choice. The resulting basket of regulation more closely reflects the preferences of large enterprises with respect to the aggregate regulations to which they wish to be subject than the imposition of popular will through the law of any single nation-state. It is also possible for these entities to intermesh, producing industry-wide regulation. More interestingly, corporations, as private entities, can develop autonomous governance systems for the management of their global supply chain operations; regulating through contract, a large multinational enterprise may more effectively harmonize the rules under which a large group of globally scattered small suppliers operate than would any multilateral public law efforts. Free movement of capital and operations has made it possible for the largest enterprises to satisfy their regulatory preferences and impose their own rules within a regulatory community in which corporations, investors, consumers, nongovernmental organizations, and the media substitute for the state and its organs. These autonomous systems are both institutionalized and regulatory, but exist only within specifically defined and functionally distinct frameworks.
These movements and tensions have provoked strong reactions from the state sector. The sense of the defensive position of the state is illuminated nicely in recent comments of the President of the French Republic, Mr. Nicholas Sarkozy, addressing the fortieth World Economic Forum at Davos, Switzerland. Acknowledging the seismic rearrangement of governance power, which is the central concern of this article, he declared: “We must now invent the State, the company and the city of the 21st century.” He offers a reconstituted state model that rejects the idea of the irrelevance of the state, grounding the state’s renewed relevance in public-private linkages that privilege political authority. Sarkozy mocks the idea of the end of the state and the advent of what he calls “nomadism” and a rediscovery of “nationality.”
If Mr. Sarkozy’s sentiments express the general sense of the highest levels of the public sector, it might appear that an attempt to resurrect a version of the governance “color line” is in the offing. But the reality appears to be more complicated. In the form of an elite intergovernmental construct, the so-called Group of Twenty (G20), and its principal instrumentality, the Financial Stability Board (FSB), a new form of public sector governance appears to be emerging alongside that of private governance systems. It is a governance apparatus that is said to foreshadow planetary governance in this century. To reinvent the state one must look to the governance frameworks for private entities, especially those developed at the supranational level. Public governance in the twenty-first century is taking on the characteristics of transnational corporate governance.
This confrontation of the governance “color line” suggests the thesis of this article: Is it possible to detect a basic template for transnational governance of economic activity (in general) and corporations (in particular) developing through principles of transnational private governance? The objective of this article is to examine the organization of communities of states through the normative lens of private transnational governance. A secondary objective is to suggest the importance of communication between developing private governance systems and emerging transnational public governance systems. But it also suggests the possibility of governance fusion. Thus, the third objective of this exploration is to examine the plausibility of the suggestion that emerging governance frameworks, public and private, might be arranged together in a way that credibly suggests a system of coordinated meta-governance.
This meta-governance system is constituted through frameworks of institutional communication—structural coupling—that link and order a rising set of governance subsystems. These governance subsystems include a host of private governance systems (multinational corporations asserting governance over their supply chains through contractual and other relationships), global governance frameworks for private governance, and autonomous corporate constitutionalism. From out of this cosmos of distinct but intertwined systems, one can see emerging a distinct polycentric system of transnational corporate governance made up of the continuous interactions of dynamic private and soft law systems. The form of this governance is cooperative and public. It is state-centered, but not exclusively so. The FSB governance framework suggests both the contours of polycentric governance and the points of cooperation and tension among such governance communities as functionally distinct regulatory communities seek to preserve their autonomy and cooperate within interlinked regulatory streams. Yet this does not suggest the disappearance of transnational private governance so much as the metamorphosis of the state in the face of the movement of governance power beyond territorial borders.
The analysis produces irony: to save the state, the state itself must adapt to the governance frameworks of private transnational governance bodies. Thus reconstituted, a new set of arrangements might well arise, in which amalgamations of the most powerful states and private regulatory bodies assert authority once reserved to states alone. But it also suggests more: in particular, the weakening of the border between hard and soft law even within public sector governance. The convergence of form suggests a functional convergence of governance—the private corporation with public obligations, and the regulatory state that participates in markets. Public and private corporate bodies, once divided by an insurmountable conceptual barrier, now become mirrors of one another. “No question, now, what had happened to the faces of the pigs. The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which.”
 For the origin of the idea, see W.E.B. Du Bois, The Souls of Black Folks: Essays and Sketches, at vii-viii (1903). For the expression of the same sentiment from the other side of the color line, see Oswald Spengler, The Hour of Decision 204-229 (1934).
 See, e.g., Frank W. Sweet, Legal History of the Color Line: The Rise and Triumph of the One-Drop Rule 117-180, 403-464 (2005). As an apparatus of the Apartheid South African state, see, for example, Jonathan Hyslop, White Working-Class Women and the Invention of Apartheid: “Purified” Afrikaner Nationalist Agitation for Legislation Against “Mixed” Marriages, 1934-9, 36 J. Afr. Hist. 57 (1995).
 See, e.g., Westel W. Willoughby, The Fundamental Concepts of Public Law (1924). For a discussion, see, for example, Antony Anghie, Imperialism, Sovereignty, and the Making of International Law (2005).
 See, note --, supra.
 See, e.g., José E. Alvarez, International Organizations as Law-Makers, 1-57 (Oxford University Press, 2006); on its controversial aspects, see, for example, Cynthia Day Wallace, Legal Control of the Multinational Enterprise 2-5 (1983). See infra pp. 6-7 and note 29.
 For a discusison of the private sphere, see, e.g., Jennifer L. Johnson, Public-Private-Public Convergance: How the Private Actor Can Shape Public International Labor Standards, 24 Brook. J. Int’l L. 291 (1998).
 For a discussion of social norms generally, see, e.g., Cass R. Sunstein, Social Norms and Social Roles, 96 Colum. L. Rev. 903 (1996); As applied to governing private sphere actors, see e.g., Victor B. Flatt, Act Locally, Affect Globally: How Changing Social Norms to Influence the Private Sector Shows a Path to Using Local Government to Control Environmental Harms, 35 B.C. Envt’l. Aff. L. Rev. 455, (2008).
 See, e.g., Jennifer A. Zerk, Multinationals and Corporate Social Responsibility: Limitations and Opportunities in International Law, 61 (Cambridge, England: Cambridge University Press, 2006).
 Feminist literature has made substantial contributions in this area. See, e.g., Shelley Wright, Interdisciplinary Approaches to International Economic Law: Women and the Global Economic Order: A Feminist Perspective, 10 Am. U.J. Int’l L. & Pol’y 861 (1995) “Western liberal theory has constructed the private sphere of home, children and domesticity as the space where women live and work for much of their time. This sphere tends to be hidden—invisible to the public world of law, governments, States, international institutions and transnational corporations—the sphere where men are said to live and work.” Id. at 862.
 See, e.g., Oscar Schachter, The Decline of the Nation State and Its Implications for International Law, 36 Colum. J. Transnat’l L. 7 (1998) (impact of globalization on international law).
 See, e.g., Barbara Emadi-Coffin, Rethinking International Organization: Deregulation and Global Governance 1 (2002) (“The apparently contradictory processes of fragmentation and globalization are not, despite empirical appearances, in opposition, but are instead part of the historical development of the global political economy. Fragmentation, unless extreme, serves to increase the number of states in the system, thus dispersing national power.”) (citing Robin Brown, Globalization and the End of the National Project, in Boundaries in Question: New Directions in International Relations 54 (John Macmillan & Andrew Linklater eds., 1995)).
 See Gralf Peter Calliess, and Peer Zumbansen, Rough Consensus Running Code: A Theory of Transnational Private Law (Oxford: Hart Publishing. 2010); Larry Catá Backer, Multinational Corporations as Objects and Sources of Transnational Regulation, 14 ILSA Journal Of International & Comparative Law 499 (2008).
 See, e.g., Larry Catá Backer, The Autonomous Global Corporation: On the Role of Organizational Law Beyond Asset Partitioning and Legal Personality, 41(4) Tulsa Law Journal 541 (2006)
 Benjamin Cashore, B. Legitimacy and the Privatization of Environmental Governance: How Non State Market-Driven (NSMD) Governance Systems (Eco-labeling Programs) Gain Rule Making Authority. 15 (4) Governance 503-529 (2002).
 For a discussion, see, for example, Tania Voon, Multinational Enterprises and State Sovereignty under International Law, 21 Adel. L. Rev. 219 (1999).
 See, e.g., Larry Catá Backer, Theocratic Constitutionalism: An Introduction to a New Global Legal Ordering, 16 Ind. J. Global Legal Stud. 85 (2009). More ominously, political and economic actors without a state have increasingly institutionalized and bureaucratized their organization, creating governments operated under a constitution and subject to a juridified code of conduct overseen by an administrative structure. See, e.g., Jayshree Bajoria & Greg Bruno, Backgrounder: al-Qaeda, Council Foreign Rel. (Apr. 18, 2008), http://www.cfr.org/terrorist-organizations/al-qaeda-k-al-qaida-al-qaida/p9126. Even more generally, religion has augmented its role in international public sphere and as a consequence has increased its role in governance. See Rosalind I.J. Hackett, Rethinking the Role of Religion in Changing Public Spheres: Some Comparative Perspectives, 2005 BYU L. Rev. 659.
 See Larry Catá Backer, The Autonomous Global Corporation: On the Role of Organizational Law Beyond Asset Partitioning and Legal Personality, 41 Tulsa L. Rev. 541 (2006).
 See, e.g., Dan Danielson, How Corporations Govern: Taking Corporate Power Seriously in Transnational Regulation and Governance, 46 Harv. Int’l. L.J. 411 (2005).
 Wal-Mart’s CEO H. Lee Scott spoke of the need for harmonization to satisfy its stakeholders. Greg Levine, Scott Warns China Wal-Mart Suppliers Re “Standards,” Forbes.com (Oct. 20, 2005), http://www.forbes.com/2005/10/20/wmt-environment-ceos-cx_gl_1020autofacescan08.html (“‘The factories in China are going to end up having to be held up to the same standards as the factories in the U.S.,’ Scott said.”).
 See Larry Catá Backer, Economic Globalization and the Rise of Efficient Systems of Global Private Law Making: Wal-Mart as Global Legislator, 39 Conn. L. Rev. 1739, 1747 (2007).
 See, e.g., Multinationals, Environment and Global Competition (Sarianna M. Lundan ed., 2004) (concluding from empirical evidence that self-regulation seems to work for environmental concerns because of, and to the extent of, the forces in the global markets).
 President Nicolas Sarkozy, Address at the 40th World Economic Forum in Davos, Switzerland (Jan. 27, 2010) [hereinafter Srkozy Speech], available at http://us-cdn.creamermedia.co.za/assets/articles/attachments/25468_sarkozy_en.pdf.
 Id. (“[W]hat remains to be done is to . . . invent a new linkage between public action and private initiative.”).
 “The Group of Twenty (G20) Finance Ministers and Central Bank Governors was established in 1999 to bring together systemically important industrialized and developing economies to discuss key issues in the global economy.”. G-20, About G-20, What is the G-20, available http://www.g20.org/about_what_is_g20.aspx. See also, The Group of Twenty: A History 42-43 (2008), http://www.g20.org/Documents/history_report_dm1.pdf (“The key distinguishing feature of the G-20 has been its membership. No other forum has brought together a regionally representative group of systemically important developed and emerging economies for informal discussion and dialogue. The G-20 filled an important gap in the governance structure of the international economic and financial system.
 See generally Overview, Fin. Stability Board, http://www.financialstabilityboard.org/about/overview.htm (last visited Mar. 7, 2011).
 Sarkozy Speech, supra note 17, at 6.
 See Gralf-Peter Calliess & Peer Zumbansen, Rough Consensus and Running Code: A Theory of Transnational Private Law (Oxford: Hart Publishing, 2010).
 This suggests Gunther Teubner’s framework for the construction of an autonomous constitutional basis for enterprise communities through the hypercyclidity of linked systems of private and public codes of corporate governance. See Gunther Teubner, Self Constitutionalizing TNCs?: On the Linkage of “Private” and “Public” Corporate Codes of Conduct, 18 Ind. J. Global Legal stud. (2011).
 Among the most important current iterations of this approach is the United Nation’s Protect, Respect, Remedy framework. See The Special Representative of the Secretary-General, Business and Human Rights: Towards Operationalising the “Protect, Respect and Remedy” Framework, delivered to the Human Rights Council and the General Assembly U.N. Doc. A/HRC/11/13 (April 22, 2009), available at http://www2.ohchr.org/english/issues/globalization/business/docs/A.HRC.11.13.pd.
 These consist of the following three principal OECD guidelines for the conduct of corporations: OECD, Principles of Corporate Governance (2004), available at http://www.oecd.org/dataoecd/32/18/31557724.pdf; OECD, Guidelines for Multinational Enterprises (2011), available at http://www.oecd.org/dataoecd/43/29/48004323.pdf; OECD, Guidelines on Corporate Governance of State-Owned Enterprises (2005), available at http://www.oecd.org/dataoecd/46/51/34803211.pdf. See also Larry Catá Backer, Transnational Corporate Constitutionalism: The U.N. Global Compact, the OECD Guidelines for Multinational Enterprises and the Emergence of a Constitutional Order for Economic Enterprises, Address at the Copenhagen Business School Conference: The Constitutionalization of the Global Corporate Sphere? (Sept. 17-18, 2009), available at http://lcbackerblog.blogspot.com/2009/09/transnational-corporate.html.
 Compare Gregory T. Euteneier, Towards a Corporate “Law of Nations”: Multinationals Contribution to Customary International Law, 82 Tul. L. Rev. 757 (2007) (holding state and non-state actors to same standard), with Thomas F. McInerney, Putting Regulation Before Responsibility: The Limits of Voluntary Corporate Social Responsibility, 2 Voices Dev. Jurists, no. 3, 2005 (privileging states as enforcement vehicles).
 George Orwell, Animal Farm 113 (1st World Library 2004) (1945).