Taking Multinational Corporate Codes of Conduct to the Next Level

Abstract

Over the course of the past thirty years, numerous non-state actor codes of conduct have emerged that seek to promote socially-responsible conduct of multinational corporations (MNCs), especially in the developing world. The objective of such codes is to prevent harm or mistreatment of persons or things caused by MNC operations (e.g., the existence of unhealthy worker conditions in an MNC factory). Such harm or mistreatment need not be a core concern for the corporate actor. Indeed, the MNC - in theory driven to maximize its profits although in practice driven by various factors - may benefit far more by inflicting the harm or mistreatment than by engaging in socially-responsible behavior. Only in reaction to outrage and discontent by other actors (governments, non-governmental organizations, or civil society groups) might the MNC see a value in developing a code of conduct that, if adhered to, would reduce the harm or mistreatment the MNC inflicts on others. This essay briefly summarizes the rise of these codes of conduct, with particular attention to certain highly visible examples. Many criticisms have been levied against such codes suggesting that, over the long term, they may not survive in their present form. Consequently, this essay suggests a new approach to thinking about these codes, one that might enhance their legitimacy, effectiveness, and credibility. Greater thought should be given by all stakeholders to an increased role for governments in the development and implementation of such codes. While transforming the codes wholesale into binding law is not politically feasible at this time, and may never be economically desirable, other means of governmental involvement should be considered. For instance, governments can play a better role in bringing stakeholders together to form such codes and do better at identifying what types of codes are effective and which are not. Governments might do better at using national laws and regulations to make adherence to such codes more attractive, such as by using the codes to help reduce regulatory uncertainty and as safe harbors for MNCs against criminal or civil penalties. At the same time, governments might use national laws to regulate better MNC use of the codes, such as by compelling disclosure of information about MNC adherence to the code. The role of governments would not be one of state control of corporate activity but, rather, one of helping empower the individual autonomy of corporations within certain bounds of justice, fairness, and equity.

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