Academic journal article SAM Advanced Management Journal

Global Governance: The Case of Global Nongovernmental Regimes

Academic journal article SAM Advanced Management Journal

Global Governance: The Case of Global Nongovernmental Regimes

Article excerpt

Abstract

As more corporations span the globe, they run into problems of ethics and conduct with the same dimension. How can these problems be addressed when no country has jurisdiction? In many cases, industries are forming self-regulating regimes that adopt operational guidelines, codes of conduct, reporting, and perhaps certification schemes. Among numerous examples, the authors concentrate on two: the Kimberley. Process, a U.N.-mandated program to certify rough diamonds as "conflict-free," and the Equator Principles, involving the social environmental challenges faced by' banks engaged in project financing. These regimes help illustrate the strengths and weakness of various organizational and operational challenges faced by such regimes regarding codes of conduct, ethical values, accountability mechanisms, administrative structures, decisions-making, and governance.

Partly in response to pressure from activist stakeholder groups and perhaps industry recognition of the imperatives of global corporate citizenship, global corporations continue to devise collective governance mechanisms in the form of codes of conduct and industry guidelines for regulating their behavior. Such collective action has been manifested in the formation of voluntary, nongovernmental regulatory associations or regimes constituted by firms seeking to control their collective action or regulate member behavior in specific issue-areas. Industry self-regulation has been defined as a regulatory process whereby an industry-level, as opposed to government- or firm-level, organization sets and enforces rules and standards relating to the conduct of firms in the industry (Gupta and Lad, 1983). Self-regulation can be effected through initiatives such as codes of conduct, reporting activities, and certification schemes (Albadera, 2008). Unlike industry self-regulation by firms in a specific country, global self-regulatory regimes are transnational and involve firms from different countries agreeing to a global code of conduct in all the markets in which they do business.

Compared to global industry regimes, industry self-regulation has a longer history at the national level. In the U.S. for example, there has long been self-regulation in the advertising industry (Neelankavil and Stridsberg, 1980). What has changed in the last decade or so is the extension of industry self-regulation to the global level and the birth of global nongovernmental industry based regimes. For example, the global chemical industry adopted guidelines after the Bhopal chemical disaster in India. Building on the awareness that emerged out of that crisis, the chemical industry's voluntary initiative called Responsible Care has been embraced by chemical associations in 46 countries manufacturing 85% of the world chemicals (ICCA, 2002; King and Lenox, 2000). The Montreal Protocol is another example of corporate response to environmental issues. Its core provisions are aimed at reducing or eliminating chlorofluorocarbons that are said to damage the earth's ozone layer. More recent nongovernmental regulatory regimes include the Equator Principles, a voluntary set of guidelines developed by banks engaged in project financing for managing the social and environmental issues related to development projects they finance internationally (IFC, 2003). In addition, the Kimberley Process, a U.N.-mandated program of collaboration between industry and government aims to create a certification system for rough diamonds to exclude "conflict diamonds" from the legitimate diamond trade. Despite their attractiveness, self-regulatory regimes are notoriously difficult to manage. The normative literature on collective action (Olson, 1965; Ostrom, 1990) predicts that self-organized attempts at collective action are not easy. This paper presents a framework for structuring global self-regulatory regimes to increase their effectiveness.

Collective action at the global level is important because issues such as the environment and sustainability are often linked on a global scale (Brundtland, 1986). …

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