Towards a Typology of Corporate Responsibility in Different Governance Contexts: What to Do in the Absence of Responsible Country Governance?

By Cahn, Naomi; Gambino, Anthony | Georgetown Journal of International Law, Summer 2008 | Go to article overview

Towards a Typology of Corporate Responsibility in Different Governance Contexts: What to Do in the Absence of Responsible Country Governance?


Cahn, Naomi, Gambino, Anthony, Georgetown Journal of International Law


I. INTRODUCTION

When confronting the question posed by this symposium of whether international law should provide incentives for multinational corporations ("MNCs") to consider public goals, there are two initial issues. The first issue is foundational: should MNCs have more responsibility for public goals? As this paper shows, and as numerous others have argued, the answer is clearly yes. (1) MNCs must assume more responsibility for achieving goals such as environmental and social accountability because MNCs have a profound impact on local communities. Because MNCs operate within numerous countries, the corporations can push the countries themselves to move towards more public goals. Thus, international law should encourage not just MNCs, but also the countries themselves to undertake public goals. By putting pressure on the MNCs, we put pressure on the countries, and vice versa.

The second critical issue is how international law should influence MNCs, and here, the questions concern the relationship of these corporations to the national contexts in which they operate, and the ability of the host countries to work towards public goals. (2) This paper focuses specifically on the country governance context because the capabilities of the host country are critical in deciding on appropriate strategies to improve corporate responsibility. The country governance system provides the framework for deciding what kinds of controls should be imposed on corporations and the requisite types of monitoring. For example, where the national government is capable of adopting and enforcing its own strict controls, international law may need different inducements than when the national government is dysfunctional and corrupt. Indeed, social responsibility needs are greatest in poor countries, where the governance structures are weak and highly dependent on foreign revenue. (3) Ultimately, international law must strongly encourage MNCs to take responsibility for their actions because many of the countries in which they act will not or are unable to do so. Moreover, despite the short term economic costs, acting responsibly will benefit MNCs and host countries in the long run by fostering stability, Finally, we believe that it benefits many developing countries to encourage additional corporate investment--which, in turn, provides economic benefits to the corporations--but only if these new investors act responsibly.

The paper begins by using stories from African countries to illustrate the impact of country governance systems on corporate responsibility, and identifying the aspects of states and MNCs that impede responsible behaviour. It then moves on to discuss country governance contexts generally, and then sketches strategies to prod MNCs and countries to move towards more public goals. An important theme throughout the paper is that MNCs can and should provide needed investments and, through their presence, improve the foundations of civil society and governance systems.

II. PROBLEMS IN WORKING TOWARDS PUBLIC GOALS.

Earlier this year, the Washington Post had a fascinating article, titled Nigeria's Oil Morass, that touched on numerous issues at the core of international corporate social responsibility ("CSR"): civil society, the economy of developing countries, the short and long-term goals of economic stability, and, most importantly, the need for binding international law. The lead was:

   After insurgents attacked a link to a key oil export terminal on
   the Forcados River in Nigeria's Delta region in Feb. 2006, it took
   a year and a half for Royal Dutch Shell to make repairs and get
   part of it running again. It took just two months for insurgents to
   shut it down again. The result: ... a group of insurgents in the
   West African nation forced oil companies to stop pumping an average
   of 475,000 barrels a day ... Yesterday Royal Dutch Shell, the
   biggest foreign company in the strife-torn Niger River Delta, said
   it would take a $706 million charge against earnings largely
   because of the security situation there . … 

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