Global rules and private actors - Scherer, Palazzo, Baumann, 2006

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.

Globalization and CSR - Scherer & Palazzo, 2008

Scherer, A. G. & Palazzo, G. 2008. Globalization and CSR. In: Crane, A. McWilliams, D., Moon J. & Siegel D. (eds), The Oxford Handbook of Corporate Social Responsibility. Oxford: Oxford University Press.

Key issue: Globalization weakens the nation state and causes the rise of global problems. The political solutions are not limited to the traditional institutional actors, but include also non-state actors, such as NGOs and corporations.

The article’s introduction opens with the observation that globalization intensifies the impact of corporation and the consequent call for CSR. But corporations themselves can become a solution to global problems. Globalization poses an additional responsibility to corporations: the need to make a political move to contribute to the development of the fragile and incomplete global governance framework.

The first part reviews the key aspects of globalization, defined as “the process of intensification of cross-area and cross-border social relations between actors from very distant locations, and of growing transnational interdependence of economic and social activities”. One of the main consequences of globalization is the loss of political steering capacity of the nation state (bound to its boarders) to face transnational actors and problems: new forms of governance from below, above and beyond the nation state are born.

Then, the dimensions of globalization are investigated:

• Political: GATT (later WTO), privatizations, collapse of the communist iron curtain;
• Technological: ICT, transports;
• Socio-cultural: new values, migrations, heterogeneity, new social movements, civil society and NGOs;
• Economic: growth in FDI, international trade and intra-firm trade, global supply chains, power of MNEs (huge resources + mobility), pressure for profits from the global financial market;
• Transnational risk (Beck 1992, 1999): environment, diseases, social problems.

In the third part, the traditional CSR paradigm and its limits in the light of globalization are described. The traditional CSR approach is based on a neoclassical assumption of division of labour between state (political sphere) and business (economic sphere). The corporation as a private actor has no license to interfere in political processes and must concentrate on profit seeking (Friedman, 1962). The ongoing debate about the CSR-profitability link is rooted in this view. The only responsibility of corporations is to follow the established framwork of game rules: law and moral customs. In this view, the firm is reactive to external expectations. In the liberal model of democracy, corporations are private and non-political actors: they deal with politics in case of self-interested lobbying or for voluntary and discretioanry acts of philatropy (Carrol, 1979) and they are not held accountable by the polity. On the contrary, the state is accountable for polity and gains legitimacy by maximizing freedom and minizing regulation and by elections. Private actors play in the democratic fields of markets and the “inivisible hand” drives their self-interested behavior towards social welfare.

The global changes lead to the birth of post-national constellations (Habermas, 2001). In the liberal democracy, solidarity (people), power (state) and money (corporations) are the pillars of stability. The weakening of national hard law effectiveness creates are race to the bottom and a regulatory vacuum. International law was developed to be applied between states, not directly to non-state actors. International conventions (UN Human Rights and ILO) cannot be enforced. The US courts started to apply their law outside the national boarders (Foreign Corrupt Act, Alien Tort Claim Act, Sarbanes-Oxley Act), but this weakens other national governments. In this situation, the vacuum left by national governments is partly filled by civli society (“globalization from below”, Beck, 2000: 68). The new CSR paradigm sees corporations to take steps to become political actors too. They contribute to global governance (definition and implementation of standards of behavior with global reach – Habermas, 2001), having an elarged sense of responsibility and cooperating with states and civil society to solve political problems. Moreover, they submit their power to democratic processes of control and legitimacy and they participate to “cosmopolitan” or “high-order” debate (Teegen, Doh, Vachani, 2004: 471).