Corporate Power and Human Rights

Manette Kaisershot, Nicholas Connolly

• Publisher: Routledge
• Year: 2018
• Print ISBN:
  9781138655027
• eBook ISBN:
  9781317224105
• Topic: Law
• Subtopic: Civil Rights in Law
• Index: Law

There is ample evidence about the negative effects business activity of all types can have on the provision of human rights. Equally, there can be little doubt economic development, usually driven through business activity and trade, is necessary for any state to provide the institutions and infrastructure necessary to secure and provide human rights for their citizens. The United Nations and businesses recognise this tension and are collaborating to effect change in business behaviours through voluntary initiatives such as the Global Compact and John Ruggie's Guiding Principles. Yet voluntary approaches are evidently failing to prevent human rights violations and there are few alternatives in law for affected communities to seek justice. This book seeks to robustly challenge the current status quo of business approaches to human rights in order to develop meaningful alternatives in an attempt to breech the gap between the realities of business and human rights and its discourse. This book was previously published as a special issue of the International Journal of Human Rights.

INTRODUCTION

Corporate power and human rights

Nicholas Connolly and Manette Kaisershot

Human Rights Consortium, School of Advanced Study, University of London, UK

The rise of the modern corporation has brought a concentration of economic power which can compete on equal terms with the modern state – economic power versus political power, each strong in its own field. The state seeks in some aspects to regulate the corporation, while the corporation, steadily becoming more powerful, makes every effort to avoid such regulation. Where its own interests are concerned, it even attempts to dominate the state. The future may see the economic organism, now typified by the corporation, not only on an equal plane with the state, but possibly even superseding it as the dominant form of social organisation. The law of corporations, accordingly, might well be considered as a potential constitutional law for the new economic state, while business practice is increasingly assuming the aspect of economic statesmanship.¹

The pervasive influence of the corporation and its ever-increasing effects on human rights globally ‘is now the two hours’ traffic of our stage’.² Though there are doubtless many ideologies, theories or polemics that may argue that capitalism is inherently flawed in such a way that it will always inhibit the human rights cause (hence the emergence of conflicting ideologies of communism, Marxism, Mao-ism, Leninism, etc.), in this instance (and for the means of this special issue and introduction) the assumption is being held that capitalism is an immutable fact of life that we will not attempt to try and dismantle.³

Following the ‘Great Crash’ and the ensuing ‘Great Depression’, the increasingly dominant role of the corporation as a means of organising production became apparent.⁴ Sensing the zeitgeist, Berle and Means (a lawyer and a historian of economics respectively), sought to reformulate the corporation. By highlighting the effect the publicly owned and traded corporation had on the reality of property rights – the separation of control and passive property rights (or, benefit without effort or responsibility)­ – they justified reconceptualising the corporation or the ‘reorientation of enterprise’ so they embed responsible behaviour and work for the benefit of humanity.

By the 1950s and 1960s, the New Deal of the United States and the welfare state principles of the ‘great’ European powers had shifted the debate to an extent. Galbraith⁵ described a world of giant privately and state-owned corporations that cooperated with the instruments of the nation state and organised labour to create a planned economy, which apparently protected ordinary people from the pernicious greed of shareholders. They collaborated to create a veneer of manufactured economic demand, false consumer choice, administered prices and faux employee power intrinsically linked to grinding obsession with economic growth and efficient productivity, the economic success of which, ultimately, was driven by military expenditure through World War II and into the Cold War.⁶

The ‘good life’, so created, distracted people from a trend that accumulated power in the hands of a few corporations, not the democratically elected representatives of the people.⁷ Berle and Means were correct – the nation state did become dominated by the corporation – but whether these corporations had, or should have been, ‘reoriented’ to benefit communities, is a different matter.⁸ As highlighted by the influential and often quoted economist, Milton Friedman, in his 1962 publication Capitalism and Freedom⁹:

Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible. This is a fundamentally subversive doctrine. If businessmen do have a social responsibility [ … ], how are they to know what it is? Can self-selected private individuals decide what the social interest is? Can they decide how great a burden they are justified in placing on their stockholders to serve that social interest? Is it tolerable that these public functions of taxation, expenditure, and control be exercised by the people who happen at the moment to be in charge of particular enterprises, chosen for these groups by strictly private groups?

While Berle and Means would, no doubt, both disagree with Friedman’s analysis,¹⁰ the reality of corporate behaviour in the globalised era, as illustrated by numerous books and hundreds of articles by investigative journalists and regular human catastrophes reported in the mainstream news, would suggest attempts to ‘socialise’ the corporation have failed. We are no closer to taming the corporation in 2014 than we were in 1933.

The debate

Frequently, discussions regarding corporate behaviour and the state – be that through international trade compromises and agreements, or domestic application of regulations – are reduced to philosophical disagreements which pitch big state socialist-style ideology¹¹ against neoliberal free market principles¹² that are equally ideological. Yet there are no examples of entirely successful planned economies just as there are no examples of governments that permit the unalloyed application of free market principles.¹³

In practice, contemporary human society, through the function of government, treads an uncertain path between serendipity and misfortune, arbitrary foresight and risk-aversion,¹⁴ towards poorly defined objectives with few meaningful comparative measures of success.¹⁵ For many seeking potential solutions to gigantic human problems this false dichotomy¹⁶ undermines the ability of academics and policymakers to address the nub of many key issues.¹⁷

The corporation – in contrast – suffers from no such opacity of purpose. Although Berle and Means argued this should not be the case and adherents to stakeholder theory¹⁸ might object¹⁹ that it is not the case; the weight of evidence is that business leaders and managers believe they are employed by corporations to maximise shareholder value.²⁰ This obligation is rooted in the concept of a fiduciary duty that exists between the business’s employees and its shareholders where success is gauged through decontextualised competition, which occurs on stock exchanges throughout the world.

The negative implications of this myopic focus on reliable maximal shareholder returns are evidenced in various industries through regional, national and transnational activism, investigative journalism and, occasionally, whistle-blowing. They are frequently the cause of substantial public outrage worldwide (as in the case of Rana Plaza, where well over 1000 garment factory workers were killed when a building that was known to be unsafe collapsed in Bangladesh in 2013), but often they are left in relative obscurity. Many of these negative implications are summarised in, for example, The Corporation²¹ or No Logo²², and characterised as a ‘race-to-the-bottom’. Its positive implications, such as the reliable supply of cheap and safe goods and services ranging from food to pensions for public consumption and the mitigation of regional or temporal economic challenges through the global aggregation of risk, are frequently overlooked or taken for granted, but are no less real.²³ In short, this is not a binary debate that can meaningfully argue entirely for or against the corporation.

Purpose and scope

The intent of this special issue is to provide an interdisciplinary approach to identifying potential solutions to the negative impacts, as gauged against international human rights obligations on states, of corporate activity in the globalised era.²⁴ It assumes that no single academic discipline is capable of drawing together a sufficiently broad evidence base or range of theoretical constructs to address a human challenge that unquestionably spans economic, sociological, psychological, human rights, legal and political disciplines. Consequently, one purpose of this introduction is to illustrate the paucity of constructive academic investigation into the reality of corporate activity and decision-making as regards human rights and the resultant need to develop alternative methodologies for harnessing corporate activity for the good of humanity.

It takes as given the assertion that human rights represent the only meaningful attempt at a universally applicable a-religious ‘moral’ code – a blueprint to define reasonable regulation of human life through government – and that the corporation, in the globalised era, is the most influential and dominant form of economic activity.²⁵ Moreover, it takes as proven that corporations, despite their key role in the undoubted positive effects of globalisation did and do inhibit the provision of and on occasion violate human rights.²⁶

In a previous journal article²⁷ it is argued that CSR is currently the dominant response to the tension outlined above, but that CSR is doomed to fail because no matter how thorough and well-intentioned a CSR policy is, from a shareholders perspective, the commercial value of globalisation is cost reduction, while more humane operational practice will, almost universally, increase costs.²⁸ Importantly, individuals employed by the business are socialised to think from a ‘corporate perspective’ which precludes them from making business decisions that ignore business logic which identifies shareholder value as the business’s paramount concern.

There is an enormous quantity and rich history of literature exploring the personality of the corporation and the fiduciary duties of its employees.²⁹ Equally, scores of academics, activists and journalists have written reams surveying and analysing the nature and purpose, the positives and negatives, of industrialisation, the corporation, globalisation, CSR and business ethics, the role of the United Nations and the Bretton-Woods organisations, and the application of national and international law in relation to trade and corporate activity. This journal is not intended to supplement this work.

Neither is this journal intended to contribute to the existing vein of work undertaken by human rights professionals and academics. T...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• Citation Information
• Notes on Contributors
• 1. Introduction: Corporate power and human rights
• 2. Corporate human rights commitments and the psychology of business acceptance of human rights duties: a multi-industry analysis
• 3. Extreme energy, ‘fracking’ and human rights: a new field for human rights impact assessments?
• 4. ‘From naming and shaming to knowing and showing’: human rights and the power of corporate practice
• 5. Global production, CSR and human rights: the courts of public opinion and the social licence to operate
• 6. These are financial times: a human rights perspective on the UK financial services sector
• 7. Company-created remedy mechanisms for serious human rights abuses: a promising new frontier for the right to remedy?
• 8. Beyond the 100 Acre Wood: in which international human rights law finds new ways to tame global corporate power
• 9. CSR is dead: long live Pigouvian taxation
• 10. Defending corporate social responsibility: Myanmar and the lesser evil
• Index