MULTI-NATIONAL CORPORATIONS: RESPONSIBILITY & ACCOUNTABILITY
Updated: Feb 2
“Corporations, in this day and age, exert immense power within the nation-state in which they are based, as well as on a large global scale.”
In an increasingly neoliberal world, we see the opening of free markets and trade between states, as well as between corporations. With consumerism, demands, and brand value and on the rise, corporations are pumping out the supply of products and services at an extraordinarily rapid rate. These corporations are being dominated by those at the top of the economic ladder, or rather the top 1%. The increased competition amongst these stakeholders has increased as well, thus enlarging their desire for more profit. Corporations play a critical role wherein they dictate the policies of their home-based nation, as well as on other nation-states within which they exert influence, arguably violating their sovereignty. This differs between nations and the types of individuals who reside in such locations. Nonetheless, the issue of the treatment of workers inside such corporations, including considerations for the impacts of the environment, are not undertaken appropriately. The ideas of corporate social responsibility and accountability are relatively new concepts, which have not been fully implemented yet. Despite international and national provisions, questions are raised on the effectiveness of policymakers and the extent to which they are influenced by corporations.
In order to understand the concepts of Corporate Social Responsibility, Corporate Social Accountability and Social Entrepreneurship, we need to understand the role played by multinational or transnational corporations. These refer to corporations which operate in two or more nation-states. Essentially, the main aim of these corporations is to maximize their benefit in terms of the profit which they gain. To do so, these corporations assume roles in their home-based, as well as other nation-states, and invest in other nations, or set up branches of their respective corporations, thus providing a nation-state with increased foreign direct investment. However, within the last few decades, we find that several corporations have revenues higher than the Gross Domestic Product (GDP) of a majority of nation-states. Hence, they have begun exerting power beyond the economic basis. These corporations are accountable for 50% of world manufacturing production and 70% of world trade. Moreover, they exert political influence, given that they can transcend territory through the growth of ‘trans-border’ and ‘trans-global’ communications and interactions. Hence, along with corporations having a choice of location and production, as well as investment, they can also search for conditions helpful for profitability. These conditions are usually the following: states with a stable political environment, low levels of taxation, cheap labour, weak trade unions and such. This, hence, creates a relationship of structural dependency between the state and the corporation, where states rely on corporations to provide jobs and capital inflows, all while attracting these corporations by providing them with conditions favourable to their interests. With the aforementioned points, one can conclude that corporations, in this day and age, exert immense power within the nation-state in which they are based, as well as on a large global scale.
There are several theories introduced which highlight the increasing importance provided to the owners of large corporations and businesses such as the “Class Domination” theory, as well as the “Power Elite” theory. According to the “Class Domination” theory of power, the upper class of society holds power in the society, and always will, unless a radical social change takes place. In other words, those who own income-producing land and businesses hold power, and that the upper class controls the economy through the corporate community. Within this theory of power, the “Power Elite”, as termed by sociologist C. Wright Mills, dominate the policy-making of nation-states. These “Power Elite” comprise of a relatively small, closely-knit alliance of corporate officials and owners, high-ranking members of the military, and well-known government officials. Thus, in this increasingly neo-liberal form of the world, wherein trade, security, and cooperation are made transparent (to a great extent), states cannot take several economic and financial decisions without the consultations of several well-established multinational and transnational corporations.
Given this power, corporations play both a positive, as well as a negative role on the global stage. In terms of the positive effects, corporations bring immense economic benefits, high level of efficiency, as well as consumer responsiveness. Efficiency is defined, as well as is a result of, the ability of corporations to receive the benefits of economies of scale, from the development of new production methods and the application of new technologies. The consumer responsiveness is due to the investment in research and development and product innovation as done by said corporations. Nonetheless, corporations have a negative role as well, as they exert excessive economic power and unacceptable levels of political influence. To an extent, it can be seen as a violation of the sovereignty of a nation-state, as several times policies are dictated by corporations, thus infringing on the ability of the state to create its own independent decisions. Moreover, corporations have created a “Brand Culture”, which, through the increase in commercial images and advertisements, manipulates the personal preferences of several individuals, mainly the youth. To manage this “Brand Culture” along with the high demand of consumers, corporations tend to base themselves in developing nation-states, wherein they have a surplus of labour available at low wages and lack of implementation of laws.
Thus, permitting overworking of labourers in low working and unhealthy conditions, and to a large extent, violating their human rights.
However, with increased regulation and monitoring on working conditions and sustainability, corporations undertake corporate social responsibility, corporate social accountability, and social entrepreneurship. Corporate Social Responsibility is used to describe a company’s efforts to improve society in some way. Essentially, it is a management concept where companies integrate social and environmental concern in their business operations and hold concepts of morality, ethics, and rights. In other terms, Corporate Social Responsibility is when companies operate responsibly to address pressing social and environmental issues. Companies and corporations can undertake and practice Corporate Social Responsibility as practised with “economic, legal, ethical, and discretionary responsibilities”. These include but are not limited to the following: environmental efforts, philanthropy, ethical labour practices, volunteering, and so on. Another key concept in Corporate Social Responsibility is sustainability and sustainable development, ensuring that the use of resources by such grand corporations which produce goods on a large scale basis does not jeopardise the availability of resources for future generations. It ensures that their manufacturing and distribution processes do not prove to harm the environment in terms of pollution.
As mentioned above, there are several types of corporate social responsibility; in terms of environmental efforts, corporations involve steps and procedures in order to reduce their carbon footprints, as well level of pollution and contamination, which is considered to both good for the company and society as a whole. With the relation of philanthropy, businesses and corporations have a vast amount of resources and capital which can benefit charities and local community programs, or corporations create their programmes aimed at helping society. Ethical labour practices require the treatment of employees to be in a fair, equal, and ethical manner. Another method by which corporations can undertake this responsibility is by volunteering, or by doing good deeds without expecting anything in return. In this case, companies are able to express their concern for specific issues and support for certain organizations. Corporate Social Responsibility is of immense importance, as with the current standards, it stands as a justification of support provided to corporations, making them legitimate in nature. Furthermore, with this responsibility, the stakeholders involved also understand and value the mission of the company. It justifies the investment of support of the company and identifies key stakeholders who undertake this responsibility, along with creating a sense of enhanced eco-efficiency and the requirement of responsible sourcing.
Corporate accountability, on the other hand, is seen as a more aggressive approach to corporate social responsibility, wherein corporations are influenced by the society or government to take certain decisions and actions benefiting the community. In this context, the roles assumed by the corporations are as follows: To outline the government’s role and the necessary instruments of the government, responsibility for aiding in trade and revenue and savings efforts in underdeveloped countries. In a way, corporations aid countries in making more money by acting, in some ways, as the “middleman” between the original producers and the consumers. Through corporate accountability, labour workers and consumers gain benefits as a good quality of products and healthy working conditions are assured. Moreover, with corporate accountability, multinational and transnational corporations are known for inducing investments in countries, by the following: the first, helping develop a host country by increasing investments, income, and employment in that particular country. Second, by helping transfer goods, in terms of technology or capital. Third, by helping integrate national and international markets.
In order to ensure the existence and enforcement of Corporate Social Responsibility, accountability, and the prevention of violation of human rights, certain legal agreements and frameworks have been placed into existence. The Edinburgh Declaration on Business & Human Rights was the result of the Tenth International Conference of the International Coordinating Committee of National Institutions for the Promotion and Protection of Human Rights, as hosted by the Parliament of Scotland. This Declaration calls for more national and international monitoring of corporate compliance with human rights law. It also calls for human rights bodies to have an important role in supporting companies and corporations, as well as victims of potential violations. The Human Rights Commissions will also aid in advising companies, governments, campaigners, and consumers about corporate responsibility. Moreover, the Office of the UN High Commissioner for Human Rights has expressed responsibility in the UN system for the promotion and protection of human rights. The International Human Rights Law states the obligation for governments to act in certain ways and protect the human rights of those within the territory of that particular nation-state. Within this, they must also monitor the workings of corporations and businesses, and try to prevent any human rights violations, be it by implementing existing laws, or creating new ones.
The United Nations also created the “Protect, Respect, and Remedy” framework, which essentially divides the roles of the State and the corporation, given their coexistence in one particular region. This framework rests on the following three factors: First, the state duty to protect against human rights abuses by third parties, including business, by the creation and enforcement of appropriate policies and laws, regulation and monitoring, and adjudication of conflicts and cases of violation. Second, the corporate responsibility to respect human rights, which means to act with due diligence to avoid infringing on the rights of others. Third, to address the adverse impacts which occur, by providing victims of the violation of rights with greater access to an effective remedy, be it judicial or nonjudicial assistance. Within this framework, the “State Duty to Protect” states that nations have the primary role in preventing and addressing corporate-related human rights abuses. If these states lack the correct implementation of existing laws to prevent such cases of violations and abuse, they must strive to achieve greater policy creation and implementation in these respective fields.
The role of corporations and businesses as outlined in the framework is the following: Corporations must act with due diligence to avoid infringing on the rights of others and must address the cases which occur. Furthermore, corporations must understand that certain rights and conditions are relative, and vary between different nation-states, and thus act with accordance with these conditions, and respect these notions. To showcase the following of these standards, corporations must need a human rights diligence process, through which they are informed and made aware of human rights, and how individuals and the environment must be treated, and the consequences of not doing so, both on people, as well as the planet.
Nonetheless, despite the existence of such international regulations, as well as national laws preserving the human rights of individuals found within nation-states, we find instances of such violations occurring, be it in developing or developed states. The very existence of sweatshops in many South-Asian countries such as Bangladesh and India is one such example. Nike, one of the largest corporations in the world, had several sweatshops in place within Bangladesh. Within these sweatshops, a large number of female workers were compressed into small areas, causing unhygienic conditions, as well as dangerous conditions in terms of proximity of machinery. In 2013, one such factory sweatshop owned by Nike caught on fire, resulting in the death of around 100 people who worked in such conditions, for meagre pay. A more recent example would be the treatment of workers in the Amazon corporation, wherein individuals have to work around 55- hour weeks and get physical injuries attempting to reach the targets of the corporation, for shipping of items.
To fully implement corporate social responsibility and ensure the protection of human rights, the intervention of consumers is necessary. In this era of globalization, information and data can transcend borders within seconds. Given that many corporations extend their influence in several states and the lives of all kinds of individuals, it is necessary for these consumers to fully know the cost behind what they buy. This cost does not only refer to the physical cost or money paid to buy such a product, but also the cost made by their demands, and how it affects the individuals who make such products. Moreover, consumers need to turn to ethical products, made under proper conditions and those of which do not harm the environment to a great extent. Once the consumers recognise their privilege and advocate for the suffering of individuals and the planet, only then can the effective and highly necessary changes in the workings of such corporations be seen.
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Written By: CSR Times . “CSR Times.” Corporate Social Responsibility and the Society, www.csrtimes.com/community-articles/why-india-needs-aggressive-csr-implementation/eFVPkxHMIn.
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