Scherer, A. G., Palazzo, G., Baumann, D. 2006. Global rules and private actors: toward a new role of the transnational corporation in global governance. Business ethics quarterly, vol. 16 (4): 505-532.
Key issue: the role of transational corporations in developing a framework for global governance.
First, the problems arising from globalization are described. The economic activities work within a legal framework defined by the state. The role of the modern state is to define citizenship rights: civil rights, political participation rights and social rights (Matten & Crane, 2005). In a globalized world, global governance (“rule-making and rule-implementation on a global scale) cannot be managed by the state alone. Today, transnational companies and civil society groups participate in setting global governance, indicating a shift from a state-centric model to a multilateral, non-territorial model of regulation participated by private actors (Braithwhaite & Drahos, 2000). NGOs pressure corporations outside national boarders, corporations reacts with soft law and self regulation: they do not subsititute governments, but they do engage in political action.
Then, the limits of the economic and managerial approach to CSR are described. The traditional economic paradigm is based on a division of labour between state and business which does not hold any more. In this view, free trade is the only way to development and democratization and CSR is distracting business from its real aim: create profits. Profit-seeking operates within the legal and ethical customs of society, and its maximization increase the public wealth. The state regulates in case of market failures (externalities, public goods…). The managerial approach, represented by the stakeholder appraoch (Freeman, 1984), the “business and society” field (Berman at al., 1999; Cocharn & Wood, 1984) and the “corporate social responsibility” of Whetten, Rands & Godfrey, 2002:384), aims at linking CSR to its business contribution.
Then, the political activity of the corporation is addressed, looking at the new theories of corporate citizenship, republican business ethics and Habermasian theory of democracy. Matten and Crane (2005) define corporate citizenship as “the role of the corporation in administering citizenship rights for individuals”: the firm has a “catalyst function” for citizenship rights and it is part of the public sphere domain. The corporation assumes a state-like role when the state withdraws, has not yet implemented basic citizenship rights or is unable to do so.
Republican business ethics may help to solve this question: in this view ethics has a “supplementing function” to positive law (Steinmann and Löhr, 1996; Steinmann and Scherer, 2000). According to the republican political model, the citizen has a double role of private citizen (“bourgeois”) and citizen of a state or community (“citoyen”). In this second role, corporate citizens, help desing public rules and keep stability. Public interest is the oucome of a communication process that takes place in a domain of free opinion and will formation defined by citizens. In the liberal conception, politics is based on power.
Finally, the issue of legitimacy is discussed. Corporations are legal persons and have political participation rights. However, if private actors become political actors, the issue of legitimization arises, since they are not subject to democratic elections: who controls them? Friedman (1962:134; 1970:220) noticed that is managers take political decisions for citizens, they should selceted and controlled by citizens. The deliberative model of democracy of Habermas (1996, 1998, 2001) proposes a de-centred concept of democratic governance. The legitimacy of corporations depends on the political embeddedness of CSR (Fung, 2003): their participation in an open discourse, transparency, monitoring, third parties involvement, control. A good example is the Forest Stewardship Council.
The last part describes the role played by corporations in the development of global labour standards.
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