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In Lieu of a Sovereignty Shield, Multinational Corporations Should Be Responsible for the Harm They Cause

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Abstract

Some progress has been made in recent decades to articulate corporate social responsibility (CSR) and, more recently, to associate CSR with international enforcement of human rights. This progress continues to be hampered, however, by the ability of a multinational corporation (MNC) that violates human rights not only to shift liability from itself to a nation-state but even to win compensation from that nation-state for loss of profits due to restrictions on its business activities. In the process, the nation-state’s sovereignty is diminishing; and, in effect, though still attributed to nation-states, it is being transferred to the MNC. The main aim of this article is (1) to draw on normative considerations to claim that this MNC proto-sovereignty should be modified and (2) to contend that this can eventually be accomplished by adding to corporate adoption of CSR guidelines a regimen of global human rights enforcement. I base this contention on expectations about the internationalization of corporate criminal law and the globalization of civil society in general and of NGOs in particular. I consider various jurisdictions but I focus on US jurisprudence.

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Notes

  1. See Liptak (2013).

  2. For analyses of problems, this raises see von Moltke (2000).

  3. Its integrity undermined, Arthur Andersen ceased to exist as a company. But its criminal conviction, upheld by an appellate court, was unanimously overturned in Arthur Andersen LLC v. United States, 544 U.S. 696 (2005), 374 F.3rd 281, reversed and remanded.

  4. Rational choice theory involves viewing all social action as self-interested, i.e., aimed at personal gain however irrational or non-rational it may appear. For an analysis and critique, see D. Satz and J. Ferejohn, Rational Choice and Social Theory, Journal of Philosophy 91(2), pp. 71-87.

  5. See also Grant, J. (2013), Singapore hardens attitude toward tax evasion, Financial Times, July 1, p. 3; Schwartz, N. D. (2013), Big Companies Paid a Fraction of Corporate Tax Rate, New York Times, July 2, p. A3; Houlder, V. (2013), Apple avoids corporate tax in UK, Financial Times, July 1, p. 15. The US media conglomerate Tribune created a complex tax-avoidance scheme for itself that failed because the company had to file for bankruptcy and thereby incurred unanticipated debts (Norris, 2013). Regarding the consortium response to corporate tax avoidance, see Kramer, A. E., and Norris, F. (2013), G-20 Backs Plan to Curb Corporate Tax Strategy, New York Times, July 20, pp. B1-2.

  6. This divergence of strategy preferences was in evidence in the year 2000 when the UN Global Compact, supported by such mainstream human rights INGOs as Amnesty International and Human Rights Watch, was resoundingly opposed by more activist-oriented INGOs. (Since then, it has been widely adopted.).

  7. Business Ethics Quarterly 16(2), April 2006, is devoted to a Special Forum: Voluntary Codes of Conduct for Multinational Corporations.

  8. This is exemplified by the complete absence of any reference to corporations in an otherwise insightful book entitled Global Civil Society 2012: Ten Years of Critical Reflection, ed. Kaldor, M., Selchow, S., and Moore, H. L. (2012), New York: Palgrave Macmillan.

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Acknowledgments

Special thanks to Anne Donchin, Ph.D., for her wise editorial and scholarly suggestions.

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  1. Department of Philosophy, Indiana University-Indianapolis, Indianapolis, IN, USA

    Edmund F. Byrne

  2. 5 Riverpointe Road, Hastings-on-Hudson, NY, 10706, USA

    Edmund F. Byrne

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Byrne, E.F. In Lieu of a Sovereignty Shield, Multinational Corporations Should Be Responsible for the Harm They Cause. J Bus Ethics 124, 609–621 (2014). https://doi.org/10.1007/s10551-013-1891-z

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