This article aims to inform the long-standing and unresolved debate between voluntary corporate social responsibility and initiatives to impose binding legal obligations on multinational enterprises. The two approaches share a common feature: neither can fully specify its own scope conditions, that is, how much of the people and planet agenda either can expect to deliver. The reason they share this feature is also the same: neither is based on a foundational political analysis of the multinational enterprise in the context of global governance. Such an analysis is essential for providing background to and perspective on what either approach can hope to achieve, and how. This article begins to bridge the gap by illustrating aspects of the political power, authority, and relative autonomy of the contemporary multinational enterprise. The conclusion spells out some implications for the debate itself, and for further research.
In his recently prepublished article for Regulation and Governance, "Multinationals as Global Institution: Power, Authority, and Relative Autonomy," Professor Ruggie raises the fundamental issue of the role of the multinational corporation in the debates about the scope and framework for managing economic activity, especially that which is effectuated across the political borders of states. He means this refocus as a necessary step away from the now tired (and tiresome) debates about the role and character of "law" (whatever that is coming to mean int his century) and governance (in the form mostly of CSR initiatives, however sourced outside or next to states). The current contours of this debate--and its quite important political ramifications in international law, are nicely framed int he introduction. Yet they are meant to serve as foundation for movement (mercifully) in a quite different direction:
what is missing from that discussion is a current and systematic political analysis of the multinational enterprise in the context of global governance. Such a portrayal seems essential for providing perspective and guidance to what both voluntarism and binding treaty advocates can hope to achieve, and how. (Ruggie, "Multinationals as Global Institution:, supra., p 1)
Lose in Congress when legislation is written, then pressure the agency drafting the regulations, and finally, sue the regulator for issuing regulations that are depicted as being too “intrusive,” too “costly,” or violate some constitutional right that the same Supreme Court has attributed to corporations as legal persons. This, too, can have significant international consequences. (Ruggie, "Multinationals as Global Institution:, supra. p 6).
Discursive power is likely the most subtle but important element of MNE power. Professor Ruggie describes this as "the ability to influence outcomes through promoting ideas, setting social norms and expectations, and even shaping identities. Its exercise involves persuasion and emulation, not coercion." (Ruggie, "Multinationals as Global Institution:, supra. p 9). Here one experiences the ordering power of the MNE at the level of culture, and of the basic principles that guide the tastes and actions of political actors--from individuals to institutions. Professor Ruggie observes that "corporate globalization has benefited from a massive shift in discursive power that favored business even if it was not always directly driven by business itself." (Ibid). Yet the opposite might also be true--that a massive shift in discursive power that flowed from a confluence of factors that produced a "conservative" revolution evidenced by the near simultaneous appearance of Mararget Thatcher, Helmut Kohl, Pope John Paul II, Deng Xiaoping, and Ronald Reagan produced a discourse that at first favored and then was driven to some extent by and for MNEs. The contingency fio the direction and sources of discursive power remains difficult to place with any degree of certainty--though the necessity of asserting it does not (see, e.g., here). And indeed, Professor Ruggie's reference to the efforts of President Clinton and Prime Minister Blair with respect to the political culture of CSR intimates this dynamic.
Professor Ruggie also observes that "certain ideational elements of this broader shift can be closely related to the power of business." (Ruggie, "Multinationals as Global Institution:, supra. p 9). Most powerful, for me at least, was the identification of the power to alter the reality of perception through the creation and acceptance of new fields of study. The reference to the rise of the law and economics field, itself a cultural-political construct with an instrumental objective every bit as rigid as that of the Marxist Leninist conceptual universe which it opposed (implicitly) and mirrored (explicitly in its orthodoxy through organs such as the Federalist Society) is a telling point.
Professor Ruggie's third observation (Ibid pp.10)--of the normalization of the MNE within the framing structures of globalization is perhaps key to the understanding of the reciprocal web of power relations that define and defined by the power of production. Inherent in this observation is the key point that globalization has produced the governmentalization of the enterprise and the privatization of the state (discussed in Transnational Legal Orders and Global Regulatory Networks). In that context Professor Ruggie powerfully notes
The normative dimension comes into play when such consequentialist considerations are supplemented or even yield to the logic of appropriateness – that this, not that, is the appropriate and expected form of conduct. Whatever combination of factors best explains the outcome, it endows the multinational with a reservoir of discursive power that it can draw upon in pursuing its interests. (Ruggie, "Multinationals as Global Institution:, supra. p 10).
Professor Ruggie starts with the important observation that the boundary between power and authority "is blurry" the key difference "lies in the voluntary suspension of individual judgment based on a widely accepted and institutionalized belief that the authoritative entity is entitled or has the right to prescribe." (Ibid p 10). Professor Ruggie notes that MNEs draw on and embody a combination of traditional and legal authority. Traditional sources include the authority resident in property and contract--the basis of much in Western law--that has now been embedded in the fundamental structures of globalization. These traditional sources of authority, of course, are "enshrined in, elaborated by, and enforced through public and private law, including obligations under the WTO and international investment agreements." (Ibid p. 11). Of course, the authority of states and of enterprises are distinct. Professor Ruggie goes to some pains to ensure proper understanding of this distinction--but also of the way that the authority of both are intertwined within the structures of globalization. To that end he provides the example of Disney China (Ibid).
Professor Ruggie then asks: over what or whom do MNEs have authority? The answer is both simple and powerful. MNEs have authority over themselves. (Ibid p 11-12) This simple statement veils a powerful insight about the self constitution of the enterprise and the regulatory authority that flows from this self constitution--both within and beyond the state. And here he emphasizes the point with a reference back to the opening issue--of definition and conceptualization of the MNE itself: "The difference between the multinational as a single economic organization and the group of separate entities recognized under the law is critical to understanding the scope of multinationals’ authority over “themselves.”" (Ibid p 11). And here the ordering power of the production chain again appears embedded in the analysis. MNEs serve as de facto governance units across state boundaries--but the extent of their jurisdiction is limited to their production. And the production chain itself orders economic and legal relations as instruments of production--from the organization of economic structures to the instrumental use of law across states to maximize the value of production to stakeholders. For all that possibility, the institutional structures of production reflected in the organization remains the centering element for Professor Ruggie's cogent analysis. "Their authority is clearest and most direct when it is administered internally within the corporate group. From there it radiates outward across networks and down supply chains via the private law of contracts." (Ibid p 12).
The Relative Autonomy of the MNE.
For Professor Ruggie, MNE authority is connected to MNE autonomy. Having considered the question, over what and to whom do MNEs have authority, discussed above leads inevitably to a second question: "in whose name or on whose behalf MNEs exercise the authority they have." (Ibid pp. 12-13). Professor Ruggie notes the common sense and traditional answer, one grounded in powerful principles of law and politics--their owners.Yet he notes two problems with this traditional answer. The first is the disconnect between owners and enterprise operations. Investors who hold stock are not owners whose interest in the operation of an enterprise are reflected in shares. The second problem touches on the exact meaning of ownership and the problem of the orthodox view of shareholder primacy (in law at least). It is not clear that anyone owns the corporation. Here Professor Ruggie moves from a property to a process notion of share ownership, the way that it might be useful to move from institutional to production process notions of MNEs. "The owners of shares thereby constitute a market force that constrains directors’ and management decisions. Moreover, holders of large blocks of shares, such as institutional investors, can exercise influence through board elections and more informal means. But neither of these situations makes them owners of the firm." (Ibid p. 13).
Where does that leave the question of relative autonomy? Professor Ruggie advances two notions--the first that one one owns them and the second that they own themselves. (Ibid). And he suggests that the two may amount to the same thing. It is interesting to note that beyond the path breaking work of Jean-Philippe Robé, cited by Professor Ruggie, Katsushito Iwai had long suggested that beyond the narrow confines of Western capitalist notions, Asian capitalism had long considered the idea that the largest national enterprises might well effectively own themselves with substantial effects on governance frameworks (e.g., here and here). Either way Professor Ruggie makes an excellent point--the MNE exercises its authority on its own behalf. In sum, the institution of the multinational has come to constitute not only a significant center of global power but with the exception of state-owned enterprises, also a relatively autonomous transnational authority structure." (Ruggie, "Multinationals as Global Institution:, supra. p 13).
The Conclusions that Follow.
The preceding analysis leads Professor Ruggie to some eminently powerful conclusions.
The first is that scholarship and practice should strive to better understand the limits of both CSR and the pursuit of international treaties governing multinational enterprises. As measured against multinationals’ power, authority, and relative autonomy, the former currently underreaches while the latter overreaches. CSR by itself is highly unlikely to take us far enough, and the repeated pursuit of an overarching constitutionalizing treaty is doomed to repeated failure. The second implication is that much greater attention should be paid to the dynamic interplay between the two spheres, and its potential cumulative effects. (Ibid).
But whatever the future, Professor Ruggie underlines the critical insight of the analysis (Ibid p 14--reality has moved far beyond the niceties of the mandatory/voluntary dichotomy that continues to burden and inhibit a more realistic and robust discussion of the MNE and of CSR in globalized space.