Friday, February 01, 2013

Introduction; The U.S. National Contact Point--Corporate Social Responsibility Between Nationalism, Internationalism and Private Markets Based Globalization

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


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

This post provides the introduction to the series, providing background and setting the context for month long study that follows.



Part 1:  The OECDand Its Corporate Governance Project

Part 2:  The MNE Guidelines

Part 3: Substantive Provisions of the MNE Guidelines:

Part 4:The Transposition of the UN Guiding Principles on Business and Human Rights into the MNE Guidelines:

Part 5:  The MNE Guidelines' remedial architecture
Part 6: The U.S. National Contact Point 
 Part 7:  The Emerging Ideological Framework of the US National Contact Point

 Part 8:  The Context of Specific Instance Statements Among OECD NCPs; a Study in Contrasts.

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

 Part 10:  The U.S. NCP and Specific Instance Claims:  The Early Cases 2000-2004
 Part 11: The U.S. NCP and Specific Instance Claims:  The Cases 2005-2008
 Part 12:  The U.S. NCP and Specific Instance Claims:  The Early Obama Administration Cases 2009-2010 

 Part 13:  The U.S. NCP and Specific Instance Claims:  The Obama Administration NCP Reorganization Cases 2011 

 Part 14:  The U.S. NCP and Specific Instance Claims:  The Obama Administration NCP Reorganization Cases 2012 

 Part 15:  The U.S. NCP and Specific Instance Claims:  The Obama Administration NCP Reorganization Cases 2012 Cont.

 Part 16:  The U.S. NCP and the Scope of its Information and Promotion Functions.



Like others, I started by suggesting that by the early part of the first decade of the 21st century a substantial chasm had opened between corporate law as a project of states to regulate the governance cultures of enterprises, and international law that increasingly focused on the development of a broad architecture for human rights protections. Larry Catá Backer, "Multinational Corporations, Transnational Law: The United Nation’s Norms on the Responsibilities of Transnational Corporations as a Harbinger of Corporate Social Responsibility as International Law," Columbia Human Rights Law Review 37:287 (2006). National law, through its corporate law project, continued to emphasize shareholder welfare maximization as a fundamental principle. Within that paradigm there was a small space permitted for social activity directly benefiting stakeholders or social actors, generally closely tied to culturally accepted notions of philanthropy, and indirectly connected to enterprise welfare enhancement.  International human rights regimes, on the other hand, increasingly turned to the ideal of stakeholder welfare maximizing models as the basis for corporate governance and corporate obligation with respect to its activities. These viewed enterprises as vested with important social obligations and increasingly sought to apply rules restricting public activities, grounded in social, economic and environmental rights and duties to business enterprises. As a result, attempts to bridge national and international approaches focused on the development of mechanisms for the implementation of corporate responsibility systems, based on principles that sought to minimize the adverse social, cultural, environmental or human rights effects of corporate action, through transparency based systems.  Larry Catá Backer, "From Moral Obligation to International Law: Disclosure Systems, Markets and the Regulation of Multinational Corporations," 39 Georgetown Journal of International Law 591 (2008)

This division produced a multi-level nexus of tensions that has animated discourse, policy and action ever since: national versus international law approaches; corporate versus international law as the focus of the governance project; private versus public ordering; shareholder versus stakeholder models; point of contradiction served to focus the debates about corporate social responsibility and the relationship of law, governance, national and international public governance regimes.   Larry Catá Backer, "The Structural Characteristics of Global Law for the 21st Century: Fracture, Fluidity, Permeability, and Polycentricity," 17(2) Tilburg Law Review 177-199 (2012).   But it also produced a space, at the international level, where private enterprises began to recognize and mold governance around their own communities of actors.  The result was the development of a governance space in which the state played at best a secondary and indirect role and in which regulatory contracts began to substitute for national or even international normative frameworks. Larry Catá Backer, Economic Globalization and the Rise of Efficient Systems of Global Private Law Making: Wal-Mart as Global Legislator, 39(4) University of Connecticut Law Review 1739 (2007); and Multinational Corporations as Objects and Sources of Transnational Regulation, 14 ILSA Journal Of International & Comparative Law 14:499 (2008). But it is also one in which the basic tension between state based models of corporate governance, grounded in the protection of the premise of shareholder welfare maximization and the internal ordering of the corporate enterprise, and the internationalist models of corporate governance, grounded in the premise of stakeholder mediation and human rights standards and in the ordering of the external relations of the corporation, remains unresolved.  

Within this multi-polar (polycentric) and incoherent governance space, public international bodies began to try to structure autonomous though networked governance frameworks.  These had as one of their principal objects to develop harmonizing substantive principles to network these distinct governance spaces.  Two are particularly relevant for this study.  The first, of course, was the Organization for Economic Cooperation and Development (OECD).  The OECD is an organization of developed states that provides a forum in which governments can work together to share experiences and seek solutions to common problems. Among its more significant function is the development of principles of conduct for corporate enterprises.  Its Guidelines for Multinational Enterprises (2011) are developed as as set of principles and recommendations for corporate conduct addressed by the Member States to multinational enterprises operating in or from adhering countries.   But these are not merely recommendations of principles; they also contain a fairly well developed mechanism for implementation through governmental units set up for that purpose--National Contact Points.  These National Contact Points in turn oversee a well developed procedure for seeking declarations of violations of the principles and for voluntarily re mediating these violations.  The NCP acts as a nexus point and facilitation, but it has no legal authority.  It provides opinions relating to the violation of the principles in the Guidelines but is unconstrained by the domestic law of the state in which it operates, applying only the "law" of the OECD principles. It seeks to mediate settlement but has no direct authority to coerce conduct. Over the years, the NCP has begun to evolve something like a jurisprudence of the OECD Guidelines. Larry Catá Backer,  Case Note: Rights And Accountability In Development (Raid) V Das Air (21
July 2008) And Global Witness V Afrimex (28 August 2008); Small Steps Toward an Autonomous Transnational Legal System for the Regulation of Multinational Corporations, Melbourne Journal of International Law 10(1):258-307 (2009).

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The second was the United Nations long term efforts to produce a set of substantive principles of business and Human Rights.  To that end the United Nations appointed John Ruggie as a Special Representative for the purpose of developing a substantive framework that would recognize the duties of states to protect human rights, an autonomous responsibility of enterprises to respect human rights and a joint obligation to develop remedial capacity with respect to breaches of these duties and responsibilities. See Larry Catá Backer, "The United Nations’ “Protect, Respect, and Remedy” Human Rights Project: On Operationalizing a Global Framework for the Regulation of Transnational Corporations,"  Santa Clara J. Int’l Law 9:37 (2011). Endorsed by the United Nations Human Rights Commission in 2011, the Guiding Principles of Business and Human Rights provided a comprehensive structuring of national and private obligations toward evolving international standards and expectations relating to the human rights effects of business conduct.  It emphasized the obligations of states to enforce international obligations relating to the human rights effects of business conduct and the obligations of enterprises to avoid human rights harms (grounded in international standards rather than national law) through the device of human rights due diligence.  Larry Catá Backer, "From Institutional Misalignments to Socially Sustainable Governance: The Guiding Principles for the Implementation of the United Nation’s “Protect, Respect and Remedy” and the Construction of Inter-Systemic Global Governance," Pacific McGeorge Global Business & Development Law Journal 25(1):69-171 (2012). These normative standards were then incorporated into the OECD Guidelines for Multinational Enterprises.

Yet the OECD framework itself remains incoherent.  The efforts to develop and implement the Guidelines for Multinational Enterprises picks up and extends the stakeholder model of corporate governance and extend it through an enterprise organization liability framework. But the OECD has also been quite careful to continue to expand the national movement to re-affirm a shareholder welfare maximization mode of corporate governance through its Principles of Corporate Governance and its state owned enterprise extension. These re-affirm the basis of corporate governance as grounded in the produciton of income above all else, and that the measure of corporate performance is structured through profit memorialized in the structures of financial activity reporting.  That reaffirmation is countered by the MNE Guidelines' refocus of corporate governance in the external relations of the enterprise, and in the maximization of stakeholder value measured not only by financial activity reporting but also by the valuation of the social, environmental and human rights impacts of corporate activity. 

While the National Contact Points in European OECD Member States were quite active over the last decade, the US National Contact Point presents a somewhat different story.  This series, then, picks up the story of the development of a substantive framework for corporate social responsibility grounded in international public standards, operated through national governmental organs but constituted as a voluntary system with no legal effects by considering the way the United States National Contact Point has approached  this project.  The object of this study is to better understand the evolving relationship between states (and domestic law) and international standards (including those which relate to treaties or other norms rejected for transposition into the domestic legal order), its effects on the corporations and the construction of a regulatory space that is neither purely legal, nor purely public but collaboratively intermeshed.  See Larry Catá Backer,"Private Actors and Public Governance Beyond the State: The Multinational Corporation, the Financial Stability Board and the Global Governance Order,Indiana Journal of Global Legal Studies 18(2):751 (2011).

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The thesis of this study is this: the United States has managed to resolve the tension between the conventional corporate governance approaches of the OECD's Principles of Corporate Governance  and its internationalist and stakeholder approaches of the MNE Guidelines. That resolution is grounded in bifurcating the OECD's corporate governance project into a domestic and an foreign relations part.  The OECD project is undertaken as an instrument of domestic policy with respect to the Principles of Corporate Governance.  But the stakeholder model of the MNE Guidelines is restricted for use only as an instrument of foreign policy. This bifurcation has significant consequences both for the way in which the United States continues to resist the transposition of the standards of the MNE Guidelines into U.S. domestic law and the way in which the work of the NCP is severely narrowed to avoid even the appearance of lending the MNE Guidelines anything like the character of governance norms.  Good enough for less powerful and less developed states, it has little role to play within the United States.  More an instrument of foreign policy than of changes in customary business practice the United States works hard to ensure that the MNE Guidelines do not develop any character of law, and that it remains undeveloped except as a set of aspirational goals.


Themes from prior years:

2009--The Ruminations Series:

The Ruminations Series in 2009 sought to develop a set of aphoristic (ἀφορισμός) essays, meant to provoke thought rather than explain it. The hope was that, built up on each other, the series would provide a matrix of thoughts that together might lead the reader in new directions. Ruminations continue to be produced form time to time. 

2010--The Business and Human Rights Series:
For 2010, this site introduced a new series--Business and Human Rights. The series took as its starting point the issues and questions raised by John Ruggie, the United Nations Special Representative of the Secretary-General (SRSG) on business and human rights, in a global online forum. Each of the Essays considered one of the topics raised in the online consultation. My hope was to help generate discussion and to encourage further discussion of the issues within the framework of the consultation framework.

2011--Norwegian Sovereign Wealth Fund Jurisprudence Series:
For 2011, this site introduced a new series of integrated essays--Developing a Coherent Transnational Jurisprudence of Ethical Investing: The Norwegian Sovereign Wealth Fund Ethics Council Model. The object of this series to to consider the work of the Ethics Council of the Norwegian Sovereign Wealth Fund. The thesis of this series is this: The Norwegian Sovereign Wealth Fund (NSWF ) investment program is grounded in the application of a set of Ethical Guidelines adopted by the Storting (the Norwegian Legislature) and enforced through an Ethics Council charged with determining whether a company should be excluded from investment by the NSWF. The work of the Ethics Council has produced the beginnings of a coherent jurisprudence of ethics for corporate investment. That jurisprudence may contribute significantly both to the development of transnational social norm standards and affect the way domestic corporate law is understood. 

2012--The Thought of Zhiwei Tong (童之伟) Series:
For 2012, this site introduced the thought of Zhiwei Tong (童之伟), one of the most innovative scholars of constitutional law in China.   Professor Tong has been developing his thought in part in a essay site that was started in 2010.  See, Larry Catá Backer, Introducing a New Essay Site on Chinese Law by Zhiwei Tong, Law at the End of the Day, Oct. 16, 2010.  Professor Tong is on the faculty of law at East China University of Political Science and Law.  He is the Chairman of the Constitution Branch of the Shanghai Law Society and the Vice Chairman of the Constitution Branch of the China Law Society. The  Zhiwei Tong (童之伟) Series focused on translating some of Professor Tong's work on issues of criminal law and justice in China, matters that touch on core constitutional issues.  Each of the posting will include an English translation from the original Chinese, the Chinese original and a link to the original essay site. 

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