International Policy and International Corporations
Sarah Nguyen questions whether an all-encompassing international policy can mitigate the cross-border behaviour and nature of transnational corporations.
Multinational Attempts to Establish Framework
In 2000, United Nations Secretary-General Kofi Annan launched a partnership called the Global Compact, which was designed to regulate the behaviour of transnational corporations (TNCs) and stop the exploitation of the developing world by adopting a global framework of corporate social responsibility. Based on broad principles covering areas such as protection of human rights, freedom of collective bargaining, elimination of forced and child labour, anti-discrimination, environmental responsibility and anti-corruption, the Compact demonstrates the most comprehensive international solution for aligning TNC strategy with universally acceptable principles.
Successes of the First Chapter
The Global Compact has co-ordinated a new global paradigm in which more than 5300 businesses across 130 countries have adhered to a policy platform and practical framework that internalises their principles. But most importantly, these business collaborate in pursuit of broad societal goals. The Global Compact Local Networks have established local grassroots interest and multi-stakeholder enthusiasm, in which Global Compact participants and interested stakeholders come together to facilitate and intensify a company’s commitment to the Global Compact.
Yet after more than 10 years, the effectiveness of the Global Compact must be re-assessed, as the framework focuses on the importance of this initiative only as a voluntary complement to, and substitute for, a regulatory regime. It is clear that transnational corporations, as private organisations, have an obligation to respect the law regarding human rights more so than states and civil servants. But as Teitelbaum argues, there are prominent and definite limits to creating a binding instrument to enforce respect for human rights in the realm of business activity.
Challenges of Market-Driven Mitosis
Nation states are essentially geographically defined. They retain individual cultural, social and economic tenets, which sometimes produce ideological and physical conflicts. Given that most are members of the United Nations, nation states accordingly produce, update and follow the United Nations’ guidelines and mandate in order to reinforce the intentions of their membership. In contrast, transnational corporations, which have the ability to co-ordinate and control processes in production networks in multiple countries, are able to surpass and transcend these traditional geographical labels and principles. It is for this reason that the establishment and application of an international framework makes it difficult to influence the systematic profit-driven behaviour of these firms.
As foreign direct investment and other non-financial entrances have provided Least Developed Countries with the impetus to spur economic activities and the opportunity to improve the quality and standards of life, the inevitable autonomy and affluence of these corporations allows them to transform and manipulate a country’s social, cultural and ecological conditions. Apple’s recent record of its labour relations in China, including reports of the lethal effects of chemicals on workers and a spate of suicides due to poor working conditions, has been overwhelmed by increasing monthly profits from its fusion of music, sleek design and latest wireless technology. This is one of many examples of how a corporation can penetrate various countries and retain the principles of its home-country policy, unaffected by the consequences of culture deviations. Therefore, it points to the appropriate structure and mechanism for targeting not only a two-way home-host relation, but also a more complex corporation having hosts in various countries. An international response fails to address these intricacies, as it instead standardises TNC behaviour according to a common denominator which encourages companies to adopt an unconditional version of corporate ‘shadow’ responsibility.
In the case of the Global Compact, critics believe that the discretionary nature of these voluntary initiatives fails to provide the necessary regulatory and institutional framework to ensure effective and transparent management of TNCs. In lieu of the conditions of United Nations membership, the Compact still permits companies that have previously violated many of its humanitarian and environmental clauses. In addition, a corporation’s participation is not measured against its demonstrated progress, with the Compact containing no binding mechanisms for sanctioning member companies for non-compliance with its principles. The United Nations has therefore been unable to hold corporations accountable, with the establishment of its Programme on Transnational Corporations in 1974 now sidelined through its incorporation into the minor United Nations Conference on Trade and Development’s Division on Investment, Technology and Enterprise Development. Its current capacity now mainly deals with collecting and analysing TNC information on report operations and providing advisory services to developing countries, with no details on specific implementation of the overall operations of TNCs.
Moreover, its normative orientation demonstrates the far more concerning issue of the use of the Compact by companies as a purely speculative marketing advantage for bluewashing and greenwashing, marked with the United Nations’ ‘seal of approval’. The neoliberal trajectory of the Global Compact program is now more akin to a public relations instrument designed to allow companies to “look good without really doing the public good”, as reaffirmed by previous UN Secretary-General principal advisor for the Global Compact, John Ruggie.
The Next Chapter
While the Global Compact, as an ideological concept, provides greater opportunities for private and non-private entities to address the institutional and operating context of global governance, there is still considerable concern that the governments of developing countries, inevitably attracted by the prospect of economic growth, will fall into the clutches of large corporations. As such, the Global Compact can be viewed as a further indication of a corporate-run United Nations, in which corporations are damaging and contradicting the name and long-standing reputation of the United Nations. The next Global Compact Leaders Summit in 2013 will need to ensure that executives retain their corporate citizenship at the highest level, producing strategic recommendations to protect the legitimacy of the program and balancing both their corporate and humanitarian ambitions.
Sarah Nguyen questions whether an all-encompassing international policy can mitigate the cross-border behaviour and nature of transnational corporations.
Multinational Attempts to Establish Framework
In 2000, United Nations Secretary-General Kofi Annan launched a partnership called the Global Compact, which was designed to regulate the behaviour of transnational corporations (TNCs) and stop the exploitation of the developing world by adopting a global framework of corporate social responsibility. Based on broad principles covering areas such as protection of human rights, freedom of collective bargaining, elimination of forced and child labour, anti-discrimination, environmental responsibility and anti-corruption, the Compact demonstrates the most comprehensive international solution for aligning TNC strategy with universally acceptable principles.
Successes of the First Chapter
The Global Compact has co-ordinated a new global paradigm in which more than 5300 businesses across 130 countries have adhered to a policy platform and practical framework that internalises their principles. But most importantly, these business collaborate in pursuit of broad societal goals. The Global Compact Local Networks have established local grassroots interest and multi-stakeholder enthusiasm, in which Global Compact participants and interested stakeholders come together to facilitate and intensify a company’s commitment to the Global Compact.
Yet after more than 10 years, the effectiveness of the Global Compact must be re-assessed, as the framework focuses on the importance of this initiative only as a voluntary complement to, and substitute for, a regulatory regime. It is clear that transnational corporations, as private organisations, have an obligation to respect the law regarding human rights more so than states and civil servants. But as Teitelbaum argues, there are prominent and definite limits to creating a binding instrument to enforce respect for human rights in the realm of business activity.
Challenges of Market-Driven Mitosis
Nation states are essentially geographically defined. They retain individual cultural, social and economic tenets, which sometimes produce ideological and physical conflicts. Given that most are members of the United Nations, nation states accordingly produce, update and follow the United Nations’ guidelines and mandate in order to reinforce the intentions of their membership. In contrast, transnational corporations, which have the ability to co-ordinate and control processes in production networks in multiple countries, are able to surpass and transcend these traditional geographical labels and principles. It is for this reason that the establishment and application of an international framework makes it difficult to influence the systematic profit-driven behaviour of these firms.
As foreign direct investment and other non-financial entrances have provided Least Developed Countries with the impetus to spur economic activities and the opportunity to improve the quality and standards of life, the inevitable autonomy and affluence of these corporations allows them to transform and manipulate a country’s social, cultural and ecological conditions. Apple’s recent record of its labour relations in China, including reports of the lethal effects of chemicals on workers and a spate of suicides due to poor working conditions, has been overwhelmed by increasing monthly profits from its fusion of music, sleek design and latest wireless technology. This is one of many examples of how a corporation can penetrate various countries and retain the principles of its home-country policy, unaffected by the consequences of culture deviations. Therefore, it points to the appropriate structure and mechanism for targeting not only a two-way home-host relation, but also a more complex corporation having hosts in various countries. An international response fails to address these intricacies, as it instead standardises TNC behaviour according to a common denominator which encourages companies to adopt an unconditional version of corporate ‘shadow’ responsibility.
In the case of the Global Compact, critics believe that the discretionary nature of these voluntary initiatives fails to provide the necessary regulatory and institutional framework to ensure effective and transparent management of TNCs. In lieu of the conditions of United Nations membership, the Compact still permits companies that have previously violated many of its humanitarian and environmental clauses. In addition, a corporation’s participation is not measured against its demonstrated progress, with the Compact containing no binding mechanisms for sanctioning member companies for non-compliance with its principles. The United Nations has therefore been unable to hold corporations accountable, with the establishment of its Programme on Transnational Corporations in 1974 now sidelined through its incorporation into the minor United Nations Conference on Trade and Development’s Division on Investment, Technology and Enterprise Development. Its current capacity now mainly deals with collecting and analysing TNC information on report operations and providing advisory services to developing countries, with no details on specific implementation of the overall operations of TNCs.
Moreover, its normative orientation demonstrates the far more concerning issue of the use of the Compact by companies as a purely speculative marketing advantage for bluewashing and greenwashing, marked with the United Nations’ ‘seal of approval’. The neoliberal trajectory of the Global Compact program is now more akin to a public relations instrument designed to allow companies to “look good without really doing the public good”, as reaffirmed by previous UN Secretary-General principal advisor for the Global Compact, John Ruggie.
The Next Chapter
While the Global Compact, as an ideological concept, provides greater opportunities for private and non-private entities to address the institutional and operating context of global governance, there is still considerable concern that the governments of developing countries, inevitably attracted by the prospect of economic growth, will fall into the clutches of large corporations. As such, the Global Compact can be viewed as a further indication of a corporate-run United Nations, in which corporations are damaging and contradicting the name and long-standing reputation of the United Nations. The next Global Compact Leaders Summit in 2013 will need to ensure that executives retain their corporate citizenship at the highest level, producing strategic recommendations to protect the legitimacy of the program and balancing both their corporate and humanitarian ambitions.
