The Evolution and Endpoint of Responsibility: The FCPA, SOX, Socialist-Oriented Governments, Gratuitous Promises, and a Novel CSR Code

By Einhorn, Aaron N. | Denver Journal of International Law and Policy, Summer-Fall 2007 | Go to article overview

The Evolution and Endpoint of Responsibility: The FCPA, SOX, Socialist-Oriented Governments, Gratuitous Promises, and a Novel CSR Code


Einhorn, Aaron N., Denver Journal of International Law and Policy


Multinational corporations (MNC) have emerged as engines of global development. Over the past fifty years, the number of multinational corporations, the value of multinationals' investments in foreign countries, and the amount of multinationals' wealth have increased dramatically. (1) MNCs in developed countries have taken advantage of well educated and inexpensive labor in developing countries, allowing them to cut costs and generate higher profit margins. (2) The end of the Cold War ushered previously closed economies across Eastern Europe, the former Soviet Union, and China into the global economy, opening untapped markets. (3) Trade liberalization, engineered by the World Trade Organization (WTO) and its member states, has fostered new business relationships and eased corporate access to markets, goods, and services. Foreign direct investment (FDI), defined as "a lasting interest by a resident entity in one economy ... in an entity resident in an economy other than that of the investor," has grown exponentially. (4) In 1989, global FDI stood just below $200 billion. (5) Seven years later FDI doubled to just below $400 billion, and by the year 2000 reached $1.1 trillion. (6) While only ten countries' FDI totals surpassed $10 billion in 1985, corporations in thirty three countries invested over $10 billion abroad in the year 2000. (7)

The wealth corporations have enjoyed has not existed in isolation. Rather, greater corporate wealth has produced greater corporate power that corporations have exercised in both positive and negative manners.

Greater corporate power has cultivated unprecedented advances in health and education over the past forty years. (8) Corporations have developed new medicines, revolutionized transportation (9), provided employment to millions, and generally have assisted in raising the standard of living worldwide. (10) Corporations also have contributed to rapid technological development, particularly in the area of communications. Fiber optic systems and the internet have revolutionized the speed at which ideas and knowledge can flow within countries and across oceans, (11) forging a synergistic relationship between corporations and technology that has propagated new technologies and fed corporate power. (12)

At the same time, greater corporate power has been associated with a host of problems. The wealth multinationals have brought to some countries has bypassed many other countries. (13) In some cases, the activities of multinational corporations in developing countries have retarded economic growth. (14) Multinationals have been accused of committing various human rights violations, such as carrying out extra-judicial killings and employing child labor. (15) Corporate activities in developing countries have been associated with environmental degradation, dangerous work conditions, and mistreatment of indigenous people. (16) However, in contrast to developed states, developing states have not successfully combated the harms that have flowed from increased corporate power. (17) A number of factors-including weak domestic and international legal institutions, non-responsive heads of state, the "race to the bottom," (18) and developed countries' economic dominance --have prevented developing states from effectively addressing the negative economic and social impacts of corporate activities. (19)

The inability of many developing states to manage these problems has sparked calls for a code of social responsibility that is able to regulate multinational corporations. (20) Countries and corporations have responded to these cries. The United States and member States of the European Union (EU), the Organisation for Economic Co-operation and Development (OECD), the United Nations (UN), and the International Labor Organization (ILO) have developed codes that place non-binding social responsibilities on corporations. (21) In addition, many corporations voluntarily have drafted and adopted their own codes of conduct, though, similar to measures drafted by intergovernmental organizations (IGO), these codes are not legally binding. …

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