Towards a More Realistic Vision of Corporate Social Responsibility through the Lens of the Lex Mercatoria
Bellish, Jonathan, Denver Journal of International Law and Policy
Globalization has led to a shift in power away from states and towards the private sector, which has resulted in multinational corporations taking a place among the most powerful international actors. This phenomenon has had many positive consequences, but it has also resulted in human rights, labor, and environmental abuses in developing nations. Such abuses are inconsistent with the way these multinationals behave at home and have led to a subsequent call for increased corporate social responsibility ("CSR") through enforceable norms. Though there is substantial agreement as to the contents of CSR norms, there is little such accord where enforcement is concerned. Some have suggested that binding CSR norms will ultimately emerge from multinational corporations themselves along the lines of the lex mercatoria. This article seeks to counter that argument by suggesting that, even if the traditional narrative of the lex mercatoria is true--an assertion upon which considerable doubt has been cast--modern multinational corporations are not likely to take the lead in developing and enforcing such norms. This is because, while lex mercatoria norms tend to increase profits and reduce liability, CSR norms tend to shrink margins and expose corporations to an additional form of liability. From this assertion, the article concludes that political and macroeconomic developments are likely to overtake legal and normative developments, particularly those emanating from the corporate suite, in leading to corporate responsiveness to a broader community of stakeholders.
When an American court hears a medical malpractice tort claim, it applies the professional standard of care to the doctor's actions to determine liability. (1) This standard requires the court to look into the prevailing practice of doctors who are similarly situated to the defendant to determine whether or not the doctor-defendant was negligent in a particular case. Centuries from now, when legal historians look back at the widespread application of the professional standard of care as applied to doctors in the United States of America, they are unlikely to conclude a multi-state, American lex doctoria created independently binding legal norms governing a doctors' treatment of patients, despite the prevalence of different state courts using the doctor's custom to determine legal liability. Rather, these historians will conclude that twenty-first century courts applied the legal standard of reasonableness, looking into the custom of doctors as factual matter to support their legal argument, as was indeed the case.
Yet the existence of mercantile custom and the explicit insertion of that custom into medieval mercantile disputes have led to the conclusion that there was an international lex mercatoria that created independently binding legal obligations. Some scholars have even gone so far as to use the concept of the lex mercatoria to characterize norms of corporate social responsibility ("CSR"). This paper argues that, even if the prevailing characterization of the lex mercatoria is historically accurate, an extension of this characterization to norms of corporate social responsibility is unfounded. To characterize corporate social responsibility norms as a new lex mercatoria is to ignore the stubbornness of the shareholder primacy model of the corporation as well as the practical effects of CSR norms on a given corporation.
Where actual implementation is concerned, market-driven CSR norms have been the most successful in shaping corporate behavior. This is mainly because multinational corporations find themselves outside the reach of home country laws, (2) host country laws, (3) and international law. These corporate actors generally adhere to the shareholder primacy model of the corporation in which managers' only goal is to maximize shareholder returns. Some scholars view the success of market-driven CSR norms to suggest that the larger world of corporate social responsibility is properly seen as a new lex mercatoria. …