Changing Corporate Behavior Through Codes of Conduct--Vanisha Sukdeo on "Transnational Governance Models: Codes of Conduct, and Monitoring Agencies as Tools to Increase Workers' Rights"

Vanisha Sukdeo, Legal Process Instructor and Co-organizer, Fifth CLPE Conference at Osgoode Hall Law School, York University in Toronto, Ontario, Canada, working on a dissertation entitled “Shareholder Proposals: Corporate Social Responsibility and the Intersection of Workers’ Rights”

 (Vanisha Sukdeo PIX, Critical Research Laboratory in Law and Society)

She has recently published an excellent article, Vanisha Sukdeo, "Transnational Governance Models: Codes of Conduct, and Monitoring Agencies as Tools to Increase Workers' Rights," German Law Journal 13:1559-1570 (2012).  The article critically explores how to implement changes to corporate law that would increase the rights of workers through codes of conduct and monitoring systems. This paper draws on my experience in the Queen’s University Students Against Sweatshops (‘QSAS’) and how it fits into private transnational regulation. The monitoring agencies, the Fair Labor Association (‘FLA’) and the Worker Rights Consortium (‘WRC’), will be compared.

This post considers some of the insights I drew from the article.

Sukdeo starts by positioning codes of conduct as a functionally useful tool.  She notes, quite correctly, that though these do not share the special characteristics of law (generally applicable instruments of state power enforced through the state apparatus and reflecting some amalgam of the popular will), they also do not suffer the weakness of law.  In particular, Sukdeo notes that the contractual aspect of these codes--they reflect a potentially enforceable private law among the parties consenting thereto,  provide a more robust basis in consent legitimacy than that offered by the more remote process of law making.

While this may be viewed as rather insubstantial compared to legislation, codes have value in terms of allowing the two (or more) parties that are bound by the code to have direct input in drafting the code. While the inherent imbalance of power involved in the dynamics of the employment relationship between management and workers must be acknowledged and must have an impact on the creation of the code, it does allow for involvement at a level which legislation does not. (Sukdeo supra at 1559).

I have noted the fundamentally powerful relationship of contract as a basis for governance, especially within economic enterprises operating transnationally.  (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). Sukdeo's insights were informed through praxis in part--her involvement with the anti-sweatshop movement at Queen's University. (Sukdeo, supra, 1559-1560). 

Sukdeo considers the weaknesses of corporate social responsibility regimes and workers' rights programs founded principally on the law-state.  

Trying to change legislation is more time consuming and less rewarding. Even if legislation is passed by one government it can be easily removed by the next government as is often the case in regards to labor legislation. Because labor issues are politically isolating the government in power may choose to curtail workers’ rights in their administration that the next party in power may change. (Ibid., 1560).

Her `preference is for hardening soft law (Ibid).  "In the case of codes of conduct there is less chance of codes being changed as key officials may remain in those positions of power. Also, the potential consumer backlash against changing the codes may be anticipated and fought against. Codes do not have the same force that hard law offers but are a good alternative for those who are often left out of the political decision-making process." (Ibid.).

This is neither a popular view nor necessarily the consensus view among civil society actors. Corporate Codes and soft law generally are criticized as undemocratic, as dangerous because of asymmetries in bargaining power and in the difficulty of using the mechanics of state power to enforce.  More importantly, soft law is viewed, like contract, as party specific and thus of little help when attempting to harmonize conduct norms over large groups of enterprises and individuals.   "By using hard law to order their relations, international actors reduce transactions costs, strengthen the credibility of their commitments, expand their available political strategies and resolve problems of incomplete contracting.  Doing so, however,  also entails significant costs: hard law restricts actors’ behavior and even their sovereignty." (Kenneth W. Abbott and Duncan Snidal, "Hard and Soft Law in International Governance,"  International Organization 54(3):421-56 (2000), at p. 422 ("Soft law has been widely criticized and even dismissed as a factor in international affairs." Ibid.).  While Sukdeo echoes some of the insights of Abbott and Snidal (see, esp. Abbott and Snidal, pp. 434-36)she raises an important additional insight that ironically turns the legitimacy basis of law on its head.  Specifically, she suggests that soft law, tot he extent it creates a specific and consent based governance regime among the parties may be more democratic than law as the product of interest group bargaining and strategic consideration that may or may not permit sufficient engagement by those objects of legislation who will have to bear most of its costs. This is not to suggest the odd formalism of Lochner v. New York, 198 U.S. 45 (1905), which itself perversely limited the power of states to intervene in such arrangements.  But rather it is to suggest that the legitimacy of governance built on contract might also be sourced in the same consent based premises as legislation.  The mechanic are different and the possibility of corruption are always present--but then they remain quite present in the context of legislation as well.

Sukdeo is well aware of the difficulties of soft law memorialized in Codes of Conduct. "Allowing labor standards to be strengthened outside of state governance is to allow private actors to set the terms of their own relationships. This may lead to a more interactive and fulfilling model of governance between the parties. However, in the alternative this may allow even floor-level standards to be undercut. What becomes the floor and what becomes the ceiling with respect to labor rights?" (Sukdeo, supra, 1563).  The solution, and one that I have also suggested is essential in any non-state based self-referencing and coherent system of governance (e.g., 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), is to ensure a critical role for consumers and investors.  While power asymmetries between labor and multinational corporate management may be severe, Conduct Codes are directed as much to consumers and investors as they are focused on the working conditions of labor or on product sourcing and quality.  "While codes and certification agencies allow for compliance with a certain level of standards, they also create a corresponding obligation on consumers." (Sukdeo, supra. 1563).  Sukdeo comes to this reluctantly; her sense is that consumers are left to become active members of enterprise demos precisely because governments tend to shirk by delegating these responsibilities to soft law systems, bast practices and the like. (Ibid). The battle over corporate social responsibility thus becomes a battle over the purchasing habits of consumers, rich and poor. (Ibid., 1564-65).

Key to the success of corporate social responsibility and especially the Codes that operaitonalize these responsibilities, are the mechanics of monitoring. Sukdeo focuses on third party monitoring. (Ibid., 1567-70).  Though I remain hopeful that self monitoring has an important place in these coherent enterprise based corporate conduct systems, I am aware of the difficulties and likely need for outside monitors both as legitimating and as broadcast forces (e.g., Backer, Larry Catá, Privatization, the Role of Enterprises and the Implementation of Social and Economic Rights: A Comparison of Rights-Based and Administrative Approaches in India and China (January 1, 2013). Consortium for Peace and Ethics Working Paper No. 4-2013; Penn State Law Research Paper 4-2013). Sukdeo considers the role of external monitors, especially in their role as a check on internal monitoring and compliance.  (Sukdeo, supra, 1568-1570 ("a code without a monitoring agency is rather purposeless." Ibid., 1568)).  To a large extent Sukdeo's instincts are right.  It is not merely a matter of trust or of competence.  Rather, external monitoring is essential especially in soft law systems as a substitute for the more formalized mechanics of accountability built into governmental systems. I note that such accountability remains a flawed affair in both systems--the growing distance between effective government in administrative agencies and voter accountability to elected officials ought to be as much a legitimacy based worry in law-state systems as the uncertain role of external monitors in policing soft governance systems among transnational actors.  "The divide between which monitoring agencies unions and other advocacy groups choose to align with speaks volumes as to which entities are more corporate driven (and perhaps controlled) than others. A lenient monitoring agency will not provide effective services in that its role is to ensure compliance with the code not merely act as a façade." (Ibid., 1569).