Corporate Conduct Global Corporations Are Often Difficult Essay

Excerpt from Essay :

Corporate Conduct

Global corporations are often difficult to control because they operate in various countries throughout the world. As such actions that may be illegal in some countries are perfectly legal in others. Furthermore law enforcement officials and governments do not have the power to enforce laws that are outside of their jurisdictions. These issues call into question the effectiveness mechanisms that exist to control global corporate conduct. The purpose of this discussion is to Assess the effectiveness of various mechanisms that exist to control global corporate conduct and recommend a mechanism that I believe is the most effective.

Survey of Mechanisms and their Advantages/Disadvantages

Private Regulation

Private regulations employ civil regulations to compel transnational corporations to operate according to a certain set of standards. According to the "defining feature of civil regulation is that its legitimacy, governance and implementation is not rooted in public authority. Operating beside or around the state rather than through it, civil regulations are based on 'soft law' or private law rather than legally enforceable standards: violators face social or financial penalties rather than legal ones. Civil regulation extends regulatory authority "sideways" beyond the state to global non-state actors. Its recent growth reflects an expanded "public role for the private sector," as well as the growing importance of "private authority in global governance." 5 Global corporate codes constitute part of an "emerging global public domain;" civil regulation does "not replace states, but . . . (rather) embed(s) systems of governance in broader global frameworks of social capacity and agency that did not previously exist (Haufler, 2002; Vogel, 2006)."

This is a form of governance that has taken place amongst the corporations themselves as opposed to outside forces (Haufler, 2003; Haufler, 2002). The purpose of this type of regulation is to allow corporations to have a say in the manner in which firms operate on a global level.

In addition to the use of civil regulations many firms are also governed by Corporate Responsibility Strategies (Pedersen et al., 2006). This is another form of private regulation in which each corporation establishes standards of conduct as it relates to certain issues including community responsibility, environmental responsibility and the treatment of employees. Corporations utilize these strategies to govern their actions and to set companywide standards that are expected to be adhered to. Deregulation and consolidation of corporate structures is one of the main reasons for the development Of CSR in some cases. Jenkins (2005) explains,

"The consolidation of large corporations in the United States in the late nineteenth century led to the anti-trust movement and the regulation of utilities.7 Demands that corporate power be reined in led major U.S. companies to emphasize corporate responsibility as they 'sought to demonstrate that corporations could be good without the coercive push of governments and unions'.8 The Great Depression of the 1930s contributed to a second wave of regulation, exemplified by Roosevelt's New Deal in the United States and the nationalizations and regulations of the postwar Labour government in the United Kingdom. At the international level, the proposed International Trade Organization's draft charter, signed at Havana in 1948, included measures that addressed international investment, employment standards and restrictive business practices; but it was never ratified by the United States (Jenkins, 2005)."

The advantage of private regulation is that it allows corporations to establish standards that address problems while also allowing the company to meet the needs and expectations that it has as it pertains to profitability. This freedom is of particular importance in certain industries that already have certain regulations. For instance corporations within the computer industry can assist greatly with environmental issues by setting standards that encourage the use of earth friendly products and proper disposal methods. If the corporations establish this standard and hold one another accountable, outside organizations including governments do not have to intervene to devise laws.

The major disadvantage associated with private regulation involves the tendency of corporations to devise strategies that do not fully address the problems and issues that need to be addressed. When companies are left responsible for governing themselves their own interests as it relates to profitability can stand in the way of making the proper decisions. In addition accountability is a major issue because some organizations might fail to properly handle the situation. Enforcing the consequences is indeed a major disadvantage of private regulation.

UN Global Compact

Another mechanism for global corporate conduct in the UN Global Impact. With the global economy being in the condition that it is in, many different problems have arisen amongst corporations in OECD countries and corporate conduct that is unbecoming in developing countries in recent years. As a result of these issues the criticism that corporate globalization has brought out the worst in many corporations.

As a result of these concerns non-government organizations attempted to develop standards designed to govern corporate conduct on a global scale. One such mechanism was developed by the United Nations. This initiative is known as the UN Global Compact. The compact was develop in 2000 and " aims at promoting corporate social responsibility (CSR) on a global scale. It also represents the beginning of a new relationship between business and the United Nations, a relationship which during previous decades had been determined by deep-seated mistrust and antagonism. Better UN -- business relationships have also caused rising suspicion among civil society representatives, nurturing fears about a quiet takeover of the United Nations' development, human rights or environmental agendas by business interests. Therefore, the Global Compact's understanding of CSR, costs and benefits of globalisation, its general aims, its implementation and control mechanisms as well as its political legitimacy remain a contested policy subject between companies, NGOs, the United Nations and states (Fritsch, 2008)."

The article explains that corporate social responsibility and development of corporations is transnational in their scope. In addition past intergovernmental efforts have failed to be effective in addressing the concerns of the public and governments throughout the world. As such there is a concerted effort by the UN to develop a global governance approach that will address the CSR and development issues that are present amongst transnational corporations (Fritsch, 2008). The United Nations acknowledges that a global multilevel governance approach necessitates the cooperation of many different factions including nations, Multi-National Corporations and NGOs. This cooperation is difficult to maintain because the interests of thee factions are usually different from one another. For instances the Developing countries' sensitivities to trade-related problems have to be matched with MNCs' interests in expansion and profit. The article also explains that

"On the other side, NGOs want to see their concerns for human, working and social rights as well as environmental protection (sustainability) to be respected, too. According to Robert O'Brien and Marc Williams, this is an "enormously complicated task." 54 It has been a highly controversial task with huge implications for the UN -- business relationships which had experienced up and downs during the previous decades. When Kofi Annan finally assumed the position as UN Secretary-General in 1997, the United Nations -- MNC relationship, which had deteriorated during the 1980s, slowly started to improve again. Annan was quick to encourage the heads of UN agencies to pursue their own openings to business, urging them to establish partnerships with corporations (Fritsch, 2008)."

This revelation is evidence that the United Nations is trying desperately to establish better relations between itself and multinational corporations (Fritsch, 2008). This relationship is important to forge because of the presence of multinational corporations in countries throughout the world. The article explains that

"In a short time, the UN High Commissioner for Refugees (UNHCR), the UN Educational, Scientific and Cultural Organisation (UNESCO), the UN Development Programme (UNDP) and other agencies announced project partnerships of this kind. Such partnerships were soon sponsored by corporate philanthropists such as the Bill and Melinda Gates Foundation, the Turner Foundation and various corporations. Compared to the previously strained UN -- business relationship, the United Nations' business-friendly approach represents a paradigmatic shift (Fritsch, 2008)."

Indeed the United Nations is attempting to reach out to businesses in a manner that it has never attempted before. The reason for attempting to develop a relationship with businesses is due to the desire to assist in regulating and/or controlling the conduct of multinationals through the aforementioned initiative.

The advantage of mechanisms that are governed by NGO's, such as the UN, is that the organization is present in many different countries around the world and the UN has relationships with these governments. These relationships will allow the UN to hold corporations responsible for their actions. There is also a greater ability of the UN to act in ways that are not biased because they can be considered a neutral party in the situation. The primary advantage that this mechanism has is the ability it has to communicate and collaborate with companies throughout the world. The UN also has an advantage in that it is well versed on how to handle certain situations such as human rights violations which many multinational companies have been…

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