Organizational Irrationality and Corporate Human Rights Violations

Harvard Law Review, May 2009 | Go to article overview

Organizational Irrationality and Corporate Human Rights Violations


The problem of how to bring transnational corporations within the reach of international law has grown increasingly urgent for human rights scholars and activists. Today, individual corporations can wield as much power and influence as entire nations. (1) Unfortunately, that influence is not necessarily wielded for good, as corporations have been implicated in a broad range of human rights abuses. Companies that engage in the extraction of natural resources, such as the Shell Group and Unocal, have been accused of supporting abuses such as torture, rape, and forced labor, and pollution resulting from their activities has threatened the health and livelihood of local communities. (2) Labor practices of transnational corporations have also been a central human rights concern, with evidence of unsafe working conditions and physical abuses emerging from major clothing and toy companies. (3)

Because international law has traditionally been limited to state actors, the literature on business and human rights largely focuses on whether transnational corporations can be held responsible under international law. (4) Less attention is paid to the question of what leads corporations to violate human rights in the first place. When they do address that question, most writers assume that violations occur because corporations make rational decisions to pursue profits without regard to potential victims. (5)

This Note aims to provide a more nuanced account of the reason for corporate human rights violations, drawing from social science research on organizational irrationality. It may well be possible to explain many human rights violations as rational profit-maximizing behavior: if detection is unlikely and enforcement is weak, then a company may perceive a violation to be in its self-interest. However, the literature on organizational irrationality suggests that violations that are against a company's self-interest may also take place. If corporations do not always act rationally, then current efforts to change the self-interest calculation by increasing sanctions or inculcating norms will not suffice to achieve full compliance. Thus, a comprehensive human rights agenda should include assistance to corporations in overcoming irrational tendencies.

Part I of this Note provides an introduction to and an initial critique of the rational choice model as applied to business and human rights. Part II explores how concepts from the study of organizational behavior can shed light on the problem of human rights violations by transnational corporations. Part III uses this nuanced understanding of irrational organizational decisionmaking to evaluate existing compliance mechanisms and to suggest ways in which they might be improved.

I. THE RATIONAL CHOICE MODEL

The standard rational choice account for corporate misconduct is that companies facing competitive pressures "will violate the law to attain desired organizational goals unless the anticipated legal penalties ... exceed additional benefits the firm could gain by violation." (6) To the extent that this model explains some proportion of human rights violations, the natural response is to seek increased deterrence by improving monitoring and strengthening sanctions. (7)

Yet scholars have criticized the rational choice model on various levels and across domains. In corporate law, one complexity to consider is that an organization comprises diverse actors with distinct interests, making the ideas of a unified purpose and monolithic decisionmaking seem implausible. (8) Similarly, scholars discuss the role that social norms play in individual and group decisionmaking, suggesting that corporations may act against their narrow, profit-minded interest and in accordance with other values. (9) Finally, even if a corporation has a unified purpose, it, like individuals, can fail to pursue that end in a fully rational manner. (10) It is the last of these issues, irrational organizational decisionmaking, on which this Note focuses. …

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