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The Constitutionalization of the Global

Corporate Sphere?

The Constitutionalization
of the Global Corporate
Sphere?
Grahame F. Thompson AQ1
1
3
Great Clarendon Street, Oxford, OX2 6DP,
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For: Merija Ritta Kristina Thompson

Preface
In this book, I venture into an area with which I am not too familiar.
I can claim some long-standing expertise in economics and inter-
national politics but hardly in respect to the law and constitutional
matters. So I have had to learn a great deal about these over the four
years this book has been in the making. This task was made a good deal
easier by the conducive academic environment I found myself in at the
Open University and at the Copenhagen Business School. My member-
ship of the Department of Politics and International Studies (POLIS) at
the Open University provided me with an unusually conducive atmos-
phere for the kind of cross-disciplinary work necessary to undertake the
research for this book. This was aided by my close association with the
Centre for Citizenship, Identities, and Governance (CCIG) at the Open
University and the Centre for Research in Economic Sociology and
Culture (CRESC), an ESRC-funded centre jointly administered by Man-
chester University and the Open University. I spent six months directly
attached to CRESC during 2007. These overtly cross-disciplinary
research centres have focussed on many of the issues confronted in
the book, as a consequence of which they provided a welcoming envir-
onment for the kinds of activities I was engaged in and a rich seam of
critical engagement with its themes.
During the whole of 2008 and for several months each year since,
I have had the privilege of being a visiting scholar attached to the
Department of Business and Politics (DBP) at the Copenhagen Business
School (CBS). The CBS is a most unusual institution amongst business
schools—really something more like a liberal arts college than a trad-
itional business school. And this DBP environment allowed me to
develop any skills I might have in respect to the politics of international
business matters. The director of that Department for much of my time
there, Lars Bo Kaspersen, not only became a close friend over this period AQ2
but also a writing college. I wish to thank him personally for his con-
tinued support for the project. Subsequently, Susana Boras as the new
director continued to provide an encouraging atmosphere and support
within the Department which allowed me to finish the book.
vi
Preface
This book develops several themes of my research over many years. In

particular, concerns with corporate citizenship date back to a two-month
sabbatical at the Irish Institute for International Studies, Trinity College
Dublin in late 2007. The then co-director, Robert Horton, proved a most
welcoming host for which I remain hugely indebted. I also spent
six months sabbatical leave at the Centre for Globalization and Region-
alization at Warwick University where Jan Art Scholte and Richard
Higgot provided intellectual stimulation and friendly encouragement.
In the context of DBP in Copenhagen, other than those already
mentioned, the staff and students there heard many variants of several
chapters presented as Work in Progress seminars and in lectures. I would
like to thank them all. And these thanks extend to several very good
friends I have made at the Danish Institute for International Studies,
particularly Pete Gibbon, Stefano Ponte, and Jacob Vestegaard. In add-
ition, I would like to acknowledge conversation over a long period of
time with Glenn Morgan (Cardiff Business School) and Ciaran Driver
(SOAS Business School), who challenged me to formulate my thoughts
more clearly.
Finally, I must express my appreciation to Gary Wickham from Mur-
doch University in Western Australia for his unfailing friendship and
immense critical support extended to me over the many years of writing
this book. Gary represents everything that is excellent in an academic
colleague and friend: full of enthusiasm, always ready with a suggestion
for clarification, providing new reading material that had come his way
but not mine, perceiving ingenious connections, and a constant
respondent to chapter drafts and e-mailed messages. Nothing better
could be expected.
Grahame F. Thompson
December 2011
vii
Acknowledgements (to follow) AQ3

Table of Contents
List of Figures x
List of Tables xi
List of Acronyms xii
1. Setting the Scene 1

2. The Contours of Constitutionalization 18
3. Global Corporate Citizenship Examined 53
4. The Politics of the ‘Citizenly Company’ and Global Corporate

Governance Reform 99
5. Global Administrative Law, the OECD, and International

Investment 135
6. Consequences of Quasi-Constitutionalization for the Global
Regulatory Agenda and the Fate of the Rule of Law 160
References 191
Index 213
ix
List of Figures
1.1 Net equity issues, US non-financial corporations,

and US banks and insurance companies, 1980–2011 5
1.2 Capital ratios of US and UK banks 6
1.3 The field of quasi-constitutionalization 14
2.1 The dimensions of legalization 34
3.1 Global ‘social responsibility’ reports per year (1992–2011) 66
3.2 Global reporting output by ‘type’ (1992–2011) 67
3.3 Alternative models of corporate citizenship 71
3.4 Corporate governance regimes 76
3.5 Company attitudes towards GCC 82
3.6 Relative importance of ‘good’ and ‘bad’ global
corporate citizens 83
4.1 Lafarge CO2 emissions 105
5.1 Total number of active bilateral investment treaties,
1980–2007 147
5.2 Number of bilateral investment treaties signed and
claims made in respect to them, 1958–2009 147
5.3 Number of bilateral investment treaties signed by advanced
countries, as of 2007 148
5.4 US Free Trade Agreements: progress, 2000–9 150
5.5 ISCID cases administered by the Secretariat, 2003–11
(each fiscal year, FY) 153
6.1 Governance regimes for global legal order 180
x
List of Tables
3.1 Industrial distribution and country weightings for

FTSE4Good and Dow Jones Sustainability Indexes (end of 2010) 69
3.2 Activities associated with GCC 70
3.3 Corporations claims on formal ‘legal citizenship’
(the United States) 73
3.4 Characteristics of two types of citizenship 73
5.1 Total number of US BITs concluded by 1 June 2009 149
xi
List of Acronyms
AB appellate body
ANT actor-network theory
APEC Association of Petroleum Exporting Countries
ASEAN The Association of Southeast Asian Nations
ATCA Alien Tort Claims Act
ATS Alien Tort Statute
BIT bilateral investment treaty
BP British Petroleum
CA Christian Aid
CBI Confederation of British Industry
CEO chief executive officer
CSR corporate social responsibility
D2P duty to protect
ERM exchange rate mechanism
EU European Union
FDI foreign direct investment
FSA Financial Services Authority
FTA free trade agreement
G8 Group of Eight countries
G10 Group of Ten counties
G20 Group of Twenty Countries
GAL global administrative law
GATS General Agreement on Trade in Services
GATT General Agreement on Trade and Tariffs
GCC global corporate citizenship
GRI global reporting initiative
IBLF International Business Leaders Forum
ICC International Criminal Court
xii
List of Acronyms
ICGN International Corporate Governance Network

ICHR International Council of Human Rights
ICSDI International Centre for the Settlement of Investment Disputes
ICT information and communication technologies
IFC International Finance Corporation
ILO International Labour Organization
IMF International Monetary Fund
INGO international non-governmental organization
ISDS investor-State dispute settlement system
ISEAL International Social and Environmental Accreditation and
Labelling
ISO International Standards Office
LDC less developed country
L-L limited liability
L-P legal personality
Mercosur Mercado Común del Sur (Southern Common Market)
MIA multilateral investment agreement
MNC multinational corporation
MNE multinational enterprise
MNF most favoured nation
NAFTA North American Free Trade Agreement
NCP National Contact Point
NGO non-governmental organization
OECD Organization for Economic Cooperation and Development
OFR Operating and Financial Review
QCL quality of corporate law
R&D Research and Development
RbL rule by law
RoL rule of law
SRC socially responsible company
TNC transnational corporation
TRIPS trade-related aspects of intellectual property rights
UN United Nations
UNCITRAL United Nations Commission on International Trade Law
UNCTAD United National Commission on Trade and Development
VoC varieties of capitalism
xiii
List of Acronyms
WB World Bank
WBCSD World Business Council for Sustainable Development
WEF World Economic Forum
WTO World Trade Organization
WWF World Wildlife Fund (for nature)
Author Queries:
AQ1. Please check the inserted “half-title”, “full-title”, and “author”
fields in the Prelims section.
AQ2. Please check this sentence.
AQ3. “Acknowledgements (to follow)” is not provided. Please check
whether this part is okay here.
xiv
Setting the Scene
1.1 Corporate Disquiet and Uncertainty
In the wake of the 2007/8 financial crisis, productive corporations and

financial institutions have come under increased official and public scru-
tiny. Whether this scrutiny will, in the end, make much difference to how
they operate or are regulated remains, of course, another matter. ‘Business
as usual’ is likely to be a strong post-crisis sentiment for corporations,
particularly as ‘normality’ returns with the stabilization of market senti-
ment and the improvement in growth prospects—though this might take
some time to settle down. But perhaps non-financial corporations in
particular will have to adapt differently, especially in the longer term
(see Porter and Kramer, 2011). Non-financial corporations are uniquely
vulnerable under the circumstances of the early twenty-first century. Not
only do they face the usual pressures arising from the ‘market for corpor-
ate control’—takeover and merger activity continues to abound and looks
likely to increase in the wake of the crisis—but the acceleration of tech-
nological change means that even the best-laid and seemingly robust
business model can be quickly swept aside by a cleaver invention which
undermines the possibility of corporate ‘business as usual’.
And even the largest global firms can be stalked by activist investors—
hunted by private equity or sovereign wealth funds seeking added
shareholder value extraction. We have come to think of large global
firms as powerful and arrogant, but actually—under present condi-
tions—they are rather weak and vulnerable. Few companies—however
large or internationalized—are immune from the threat of takeover.
And although this used to be largely confined to an Anglo-American
business world, such pressures are now spreading beyond this to other
commercial environments. A major part of the story to be told in this
book is what large corporations are doing to try to shore up and bolster
their prospects under these circumstances: how they are positioning
1
The Constitutionalization of the Global Corporate Sphere?
themselves ‘politically’ to combat the potential plundering of their

assets and unwelcome attacks on their business model as they would
view it. But, of course, whilst individual companies may be weak, the
commercial system as a whole looks to be as strong as ever. This is one of
the apparent paradoxes to be explored in the chapters that follow.
All in all, however, the business world confronts a very uncertain and
complex future. It remains on the defensive: apprehensive, insecure,
and anxious about what challenges await it in the post-crisis world. For
some time to come, for instance, it will have to learn to cope with a
humiliated and disenchanted regulatory elite possibly out for revenge,
with an uncertain and cowered political class unclear of what exactly to
do, and finally with a somewhat angry, disaffected, and resentful public.
Set alongside its own broadly bewildered and chastened immediate
post-crisis reaction, all this presents a volatile and unstable mix (indeed
perhaps a ‘toxic’ one that matches the toxic assets many businesses
continue to hide away in their books—see below). The question this
poses is what will happen—and indeed is happening—in terms of the
regulation and governance of this rapidly evolving environment? How
might this translate into both internal corporate governance moves and
external governance of the overall commercial sphere? This, we will
examine at great length in the chapters that follow.
1.2 Sources of Corporate Vulnerabilities and Nervousness
Of course, this uncertainty and nervousness on the part of the business

sector is not a novel phenomenon. It has been developing over many
years, though with a renewed intensity since the 2007/8 crisis. And the
general loss of confidence by the business sector arises from several
sources. Some of this insecurity is of its own making, some beyond its
immediate control.
A first and rather obvious point concerns the long-term shift in the
centre of economic gravity from the West to the East, broadly speaking.
This is having a significant impact on business confidence in the Anglo-
American and European context, which is probably in relative decline as
the economic powerhouse of the global economy. There is a general
scramble to engage with China and India in particular as business
partners, some of which strikes a somewhat panicky note. This is a
major issue of course, but it is not a central one from the point of view
of this book. These large-scale shifts in geoeconomic global power pro-
vide an important backdrop to the issues considered here, but these
are more closely tied to the immediate problems that business is
2
Setting the Scene
encountering in its day-to-day operations and the responses to it that

are amenable to strategy and policy in the near to medium term.
Secondly, we could point to the extended supply chains that com-
panies have constructed for themselves as they have internationalized
their operations in various respects (Gibbon and Ponte, 2008). These
supply chains are vulnerable from at least two sources. Firstly, it is as a
matter of their sheer complexity and locational extension. Supply
chains not only involve ‘in-house’ exchanges between geographically
dispersed parts of the same organization but also purchases from
autonomous companies and agencies over which the parent company
has no direct control, and that stretch far and wide into often remote
locations. This means they are fragile, subject to unexpected interrup-
tions, and easily fractured. And, in addition, it makes them vulnerable to
the scrutiny by specialist interest groups, (I)NGO’s, and campaigning
organizations which monitor companies’ business practices in relation
to all sorts of issues and along the entire supply chain, benchmarking
and measuring them against best practice corporate social responsibility
(CSR) objectives, for instance. Business practices are under constant
external scrutiny as a result, and ‘managing the supply chain’ has
become a major task for any company, one subject of intense interest
from the point of view of a watchful press or sceptical campaigning
groups. These supply chain issues add significantly to corporate uncer-
tainty, but they are largely of companies’ own making.
Then there is the vulnerability from the pace of product and process
innovation mentioned above. Of course, technical change is not new or
uniform, and it affects industries and sectors in different ways. Some
have argued that technical innovation has slowed over recent decades
and this lies behind—at least in part—the slow-down in the productiv-
ity growth record over the past decade or so (Gordon, 2000). But there
still remains enough competitive pressure on companies to innovate—
and learn to cope with the subsequent rapid change that it demands—if
they are to survive in business in the longer term.
Unlike supply chain management just referred to, a lot of this innov-
ation is beyond the direct control by corporations—and indeed beyond
‘governance’ more generally. It is often driven by ‘spontaneous’ innov-
ation arising from small-scale and hidden activities tucked away from
the public gaze—ones based upon a model of innovative advance where
cleaver individuals come up with a revolutionary invention that com-
pletely undermines the existing competition. As already suggested, this
can quickly shatter even the best-laid business plans. Understandable,
this makes individual companies highly nervous, but there is little they
can immediately do about it.
3
Fourthly, we have issues of finance, ownership, and control about

which there will be much to say in the chapters to come. As suggested
above, this now goes way beyond the traditional market for corporate
control; it has become an intensified process of rapacious ‘value hunting’
driven by several novel institutional forms with access to truly enormous
financial resources. Hedge funds, for instance, manage vast quantities of
investment capital, itself increasingly provided by (ultra-)high net worth
individuals who have been the product of the large-scale shift in personal
income distribution towards the super-rich over the neo-liberal period
(Lysandrou, 2011a, 2011b). On the other hand, private equity funds have
thrived in the period of low interest rates and loose regulatory frame-
works. They take companies out of public listing, effectively ‘privatizing’
the public limited liability company—at least for a time—to generate
added shareholder value by striping them of ‘excess fat’: hollowing out
organizational competences and downsizing their operations, selling
non-core assets, etc., to leave the husk of a supposedly ‘leaner and fitter’
company to be refloated after their private equity experience (Morris,
2010, but see also BVCA, 2010 for a defence of private equity). And as
stock markets are notoriously inept at assessing real asset values, these
refloated companies are eagerly reabsorbed (and there is a strong
demand for any equity issue because of trends examined in relationship
to Figures 1.1 and 1.2). What is more, during their time as privately
owned companies, even the most minimal of corporate governance
requirements demanded by public listing and stock market rules can
be suspended. Finally, sovereign wealth funds, as the relatively new
institutions in this field, command truly gigantic financial resources pro-
vided by public authorities originating from countries that are mostly
completely non-transparent in their investment strategies or accountabil-
ity procedures.1 These particular funds speak of a renewed nationally AQ1
based and focussed investment strategy, operating globally, about which
it would be totally naive to believe that they were not ultimately subject to
political influence and control (Curzio and Miceli, 2010). All these insti- AQ2
tutional innovations operating in the market for additional shareholder
value pose added instability conditions and threats to existing companies.
Finally—as an addendum to points made in the last paragraph—we
have the actual empirical trends in corporate finance that emerged over
the period of the ‘long moderation’ (roughly 1995–2007). The context
for this is illustrated by the data plotted in Figures 1.1 and 1.2.
1
The Financial Times estimated SWF investments under management of between US
$3,000 billion and US$4,000 billion in 2010 (FT, 19 October, p. 12)—the uncertainty about
numbers is because of the opaqueness of these funds.
4
Setting the Scene
Figure 1.1 shows that in the case of the United States’ non-financial
corporations, there was an almost continuous net consumption
of equity between 1980 and 2008, while for banks and insurance com-
panies net consumption of their equity base began in the early 1990s
(Lazonick, 2008; Mitchell, 2009). For both business sectors, however,
post the 2007/8 crash, there was an increase in equity issue.2 And
a similar position was observable in the United Kingdom for the
1990–2005 period (Froud et al., 2006: chs 3 and 4) with net equity
issue hovering at just above zero.3
400
200
0
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
$millions
–200
–400
–600
–800
–1000
Non-financial business corporations
Banks and insurance companies
Figure 1.1 Net equity issues, US non-financial corporations, and US banks and
insurance companies, 1980–2011
Source: Updated from Lazonick (2009: figure 2). With kind permission of the author.
2
This was part of a re-active process of ‘rebuilding balance sheets’—though the more
recent figures indicate to a slowing of new equity issue for both sets of companies in the
United States—see Figure 1.1 and Flow of Funds Accounts of the United States: Annual Flows and
Outstandings, FRB, June 2011.
3
For an analysis of buy-backs in the UK case between 1998 and 2000, see Hill and Taylor
(2001). For a general account of possible consequences of these trends in the case of the G7
countries, see Bank of France (2006).
5
30
25 United States
20
Percentage (%)
15
United
10
Kingdom
0
1880
1890
1900
1910
1920
1930
1940
1950
1960
1970
1980
1990
2000
Year
Figure 1.2 Capital ratios of US and UK banks

Source: Alessandri and Haldane (2009: chart 2), with permission of the Bank of England. Data
source: US: Berger, A., Herring, R., and Szegö, G. (1995), ‘The Role of Capital in Financial
Institutions’, Journal of Banking and Finance 19; UK: Sheppard, D.K. (1971), The Growth and
Role of U.K. Financial Institutions 1880–1962, Methuen, BBA, published accounts and Bank of
England calculations.
In the case of US and UK banks only, Figure 1.2 shows the long-term
decline in their capital (mostly equity) base since 1890, so that in the early
2000s, it was down to well below 10 per cent in each case (Alessandri and
Haldane, 2009). The position of UK banks deteriorated (or escalated,
perhaps) somewhat in the run up to the crisis. According to Lapavitsas
(2010: figure 3), UK commercial bank equity as a percentage of assets
was only 2 per cent in 2007. The United States remained steady at about
10 per cent, but German and Japanese banks were also low at 5 per cent.
Clearly, these trends have both long-term and shorter term determin-
ants (and consequences). But in the most recent period of the ‘great
moderation’, they were a consequence of complex relationships to
‘shareholder value’ and regulation, something alluded to above. The
two main ways investment resources have traditionally been generated
by US and UK companies—through equity issue and retained earn-
ings—collapsed under the onslaught of the ‘originate and distribute’
model for extracting and distributing ‘shareholder value’. These
have been replaced by debt financing on the one hand, and obscure
6
Setting the Scene
‘off-balance sheet’ items on the other—both of which, in a period of

very low interest rates, proved a cheaper short-term option than finan-
cing via equity issue. This latter trend was a particular characteristic of
the banks as they resorted to financing themselves in the credit markets
with short-term collateralized debt obligations and other ‘exotic’ (‘toxic’
as it turned out) financial instruments. In the case of the commercial
banks, international regulatory requirements put added pressure on
banks to reduce their equity base as this attracted a ‘financial penalty’
in the form of the capital adequacy ratios attached to such capital kept
on the balance sheet.
But it is important to note two things. First, non-financial companies
have also heavily adopted this trend. Commercial companies are liter-
ally ‘eating themselves’ in this respect. They had become net-lenders to
the rest of the economy (Bank of France, 2006). The hundreds of billions
of dollars—trillions even—collectively spent on buy-backs eliminated
an equivalent value that could have been ploughed into innovation,
R&D, job creation, or lower product prices. And second, in the case of
the banks in particular and as Figure 1.2 shows clearly, the move away
from equity capital is a long-term secular trend, so it cannot just be
attributed to recent shareholder-value extraction pressures and Basel II
regulatory requirements.4
However, the paradoxical feature of these trends is that just as the
equity base of all companies was shrinking rapidly in these respects, and
shareholders became less and less important as providers of capital
(indeed, quite unimportant), the ideology of shareholder control
increased. More and more emphasis was placed upon the importance
of shareholder control just as their actual contribution to financing
companies was being rapidly eroded. Quite how and why this situation
arose are complex issues and ones that has not yet been completely
4
In the international arena, the gradual replacement of the Basel II regulatory require-
ments by a new Basel III system represents a change in emphasis away from considering
independent organization risk to considering systemic risk. The Basel II system concentrated
on prudential capital requirement for individual banks, which were left more or less to
themselves to assess the extent of this as they were charged with implementing their own
internal risk assessment models, providing them with an incentive to minimize prudential
equity capital held in their account books, so as to maximize the profitable use of thereby
freed resources. As a result, systemic banking risks escalated. The new Basel III system is
designed to address this by concentrating on the interrelationship between bank risks (‘stress
testing’ at the systemic level) and by beefing up necessary capital adequacy ratios accordingly
(Fender and McGuire 2010). Whether this initiative is enough to prevent further systemic
banking collapse remains suspect (Orléan 2010): the capital requirements still look to be
minimal (7–9 per cent) and the system is not to be fully implemented until 2019. Commen-
tators such as Martin Wolf of the Financial Times have suggested these needs to be as much as
20–25 per cent to provide adequate cover against another unexpected crisis. See also
Chapter 6 where the Basel III criteria are further discussed.
7
settled (Boyer, 2006; Ireland, 2010). However, this is closely associated

with an important issue pursued in this book, which has to do with the
precise legal constitution of companies, the nature of their corporate
personality, and ownership. Where do corporate governance matters
stand in the (predominantly) Anglo-American corporate type and par-
ticularly what is the role of shareholders vis-a-vis mangers and other
stakeholders (Thompson, 2009a)? This issue is addressed head on in
Chapter 3.
1.3 Responses
Thus, we have a highly novel mixture of features that in the aggregate, it

is suggested, are providing a uniquely complex and vulnerable situation
for companies, most of which, of course, have been of their own
making. What then are they doing to address these problems? Clearly,
there are short-term responses and longer term ones. In the short term,
companies need to refinance themselves and repair their balance sheets,
and one suspects they are moving hesitantly towards this. But in this
book, we are concerned to trace out the rather longer term issues and the
deeper trends, though ones that still face firms immediately in an oper-
ational sense.
The argument of this book is that these responses are being shaped by
two main possible routes. The first of these is outlined here for compre-
hensiveness of coverage but is one not extensively examined as such in
the chapters that follows since it has been the subject of work published
elsewhere (e.g. Hirst et al., 2009: esp. ch. 6; Thompson, 2012; Thompson
and Kaspersen, 2012). It involves examining the consequences of the
development of the supranational regionalization of business activity as
the main axis along which business operations are developing, one
based upon extensive empirical examination of where exactly large
commercial companies conduct their operations in an international
context. They have not so much been ‘globalizing’ in this respect as
continuing to centre their activities on their home territories and within
supranational regional configurations.
This is contentious, of course, and goes against the commonsense of
popular political, journalistic, and even academic sentiment which
remains thoroughly attached to the idea and rhetoric of globalization.
Nevertheless, based upon extensive empirical evidence (discussed in
Thompson and Kaspersen, 2012), there is just as much—or more—
justification for thinking about the internationalization of business
activity set within a supranational regional organizational framework
8
Setting the Scene
as there is for a truly global one. So there may be a further retreat into, or
behind, supranational regional configurations in terms of governance
mechanisms of a de jure type. Seeking protection form the vagaries of
the unstable world outlined above within these regional geopolitical
mechanisms could quite easily increase (e.g. Thompson, 2005b; Hirst
et al., 2009). Thus, far from seeking new global initiatives in respect to
corporate governance and regulation—successful examples of which
have been difficult to find in the recent past: witness the failure of the
WTO Doha Round of trade negotiations, the failure to initiate a ‘Global
Competition Authority’, and (something elaborated extensively in
Chapter 3) the difficulty of forging the space for a global corporate
existence in international law—an alternative course is open. The Bret-
ton Woods system—seen as the premier post-Second World War frame-
work for considering international governance within which the
development of corporate activity takes place—may be giving way to a
reconfiguration based upon supranational regional systems of govern-
ance, but ones themselves still heavily inflected with national regula-
tory considerations (see Chapters 3 and 6).
This is one of the scenarios pursued later, but largely considered in the
context of the second possible route outlined here, and the one that
occupies the bulk of the analysis appearing in the chapters that follow.
This second shaping move is to consider the increased subjection of
business activity to formal and informal legal or quasi-legal mechanisms
of regulation (despite the difficulty so far of forging a precise legal char-
acter for the MNC just referred to above). As we will see, this involves
complex relationship to self-regulation and the self-responsibilization
on the part of corporate governance (both internal and external). It raises
the issue of more formal or quasi-formal mechanisms of accountability
and transparency arising than we have seen over the recent past.
The high tide of voluntarism and self-responsibilization on the part of
corporate governance may have passed (Chapter 6). This book is mainly
about the shaping of the terrain of corporate regulation and governance
through the further forging of juridical and constitutional frameworks
for that activity to take place. And crucially, it is about the possible
consequences of these trends as they evolve. This is put in the form of
further forging and the maturing of trends because these processes are
already well advanced, if not as well recognized as they should be. But the
emphasis placed upon legal means of regulation and governance does
not just mean a focus on public or civil law, or indeed conventional
international law, but also on private, customary, and administrative
law. Thus, the argument examined here is why and how the law is
increasingly intervening to shape and foster corporate behaviours, or
9
trying to do so, and what the consequences of this might be for corporate
activities in an international context and for international relations
more generally.
1.4 The Book in Outline
As the title of this book indicates, the key concept at work is that of
‘constitutionalization’. This is a concept with a double character. Trad-
itionally, constitutions do two basic things: they allocate powers and
they determine rights and responsibilities. Comprehensive written con-
stitutions are relatively modern instruments of rule and are, of course,
closely associated with the formation of nation states from the eight-
eenth century onwards. Of course, there were ‘ancient’ constitutions
organizing political life in pre-national, city-state, and republican polit-
ical formations, but what we are referring to here are, broadly speaking,
‘liberal’ constitutions, founded in the context of an international
system of nation states constituting a defined territorial polity, exercis-
ing a jurisdictional competency over a relatively homogenized and
national ‘citizenly people’.
So what is such a term doing in respect to global business practices
and corporate affairs? This question is the one the book sets out to
address. The argument is to critically assess the view that with the
advent of ‘globalization’—where corporate organizations and the com-
mercial relations that accompany them are argued to be becoming
increasingly transnational—the locus of powers, authorities, and
responsibilities has shifted to the global level. The nation-state arena
is losing its capacity to regulate and control commercial processes and
practices as a transformational logic kicks-in, associated with new forms
of global rule making and governance, or so it is suggested. And it is this
new arena of global rule making that is argued can be considered as
a surrogate form of global constitutionalization, or ‘quasi-constitutiona-
lization’. But as might be expected, this surrogate process of constitutio-
nalization is not a coherent ‘programme’ or set of rounded outcomes but
full of contradictory half-finished currents and projects: an ‘assemblage’
of many disparate advances and often directionless moves—almost an
accidental coming together of elements (Ong and Collier, 2005; Latour,
2007). So international quasi-constitutionalization does not amount to
a ‘system’ in any conventional sense. Rather, it is more of a ramshackled
and cumbersome series or chain of loose networked connections
imagined and fostered between heterogeneous forms of law, norms of
conduct, best practice benchmarks, and rules, etc., constructed by a
10
Setting the Scene
multiplicity of nationally and internationally based individuals, groups,

and institutions of governance whose conduct may be only temporarily
aligned.5 But it is a process nonetheless: it is building norms of conduct,
rule making, and a distribution of powers in a ‘global polity’ that is itself
in the making by this very process. Or so it might at first seem because
this assemblage is both what is to be investigated and to be critically
unbundled by the analysis that follows in the chapters.
In turn, this connects to various senses of the juridicalization of
international affairs, where new or revitalized types of law are increas-
ingly being brought into play as the mechanisms for resolving disputes
or organizing governance. This involves new forms of public law, private
law, customary law, regulatory and administrative law, all of which are
rapidly evolving in the international arena alongside traditional inter-
national law (Zifcak, 2005; Le Goff, 2007; Graz and Nolke, 2008; Hanson
and Salskov-Iversen, 2008).6 The relationships between these types of
law and ‘quasi-constitutionalization’ form a significant part of the
analysis of the book. While some see jurdification on the one hand
and constitutionalization on the other as the alternative prospects for
international governance (e.g. Koskenniemi, 2007), others see adminis-
trative law and constitutionalism as the key alternatives (e.g. Krisch,
2009). And there are many additional positions and approaches to
these relationships involving other types of law. The position taken in
the book is that these two—juridicalization and constitutionalization—
are complementary processes rather than alternative ones, and the
reasons for this will be elaborated in Chapters 3–6.
One important element in this process is the fate of the rule of
law (RoL) at the international level. This is a complex issue the contours
of which get a thorough examination in the text (particularly in
Chapter 6). And a further aspect that is central to the investigation is
the notion of ‘global corporate citizenship’ considered at length in
Chapters 3 and 4. On the basis of an empirically driven enquiry, the
5
This means it marshals together a bricolage of resources: material techniques and devises
like models, documents, court decisions, legal statutes, and treaties; institutional orders like
legal apparatuses, bodies, and governance organizations; and discursive expertise, theoretical
knowledges, and instruments.
6
For the purposes of this book, international law is defined as that public law (sometimes
also described as civil law) governing relations between governments or state entities; private
law concerns commercial activity, contracts, and resolution of arbitration disputes (some-
times this is designated commercial law or lex mercatoria); customary law is the more informal
law of rule by norms, standards, conventions, and habitual custom; regulatory law is that
which deals with regulatory institutions, which is closely related to; administrative law, which
governs the activities of administrative agencies of governments. In addition to these forms
of law, there is a possible ‘global public law’, the emergence of which is discussed in
Chapter 6.
11
extent and forms of this category are elaborated and its meanings and
consequences investigated. The close connections between the notions
of citizenship, the RoL, constitutionalization, and governance provide
the motivation for the interrelationships explored in the book. Com-
panies are claiming to be ‘good corporate citizens’ in an attempt to
legitimate their positions as being equivalently responsible and civicly
minded as are ordinary citizens—hence due the legal rights afforded to
such a citizenship. This in itself constitutes part of the assemblage
referred to above. But companies are claiming powers and rights, and
being afforded them, rather on an ad hoc basis, without there being any
competent global authority to endorse or adjudicate such develop-
ments. This is an instance of the quasi-constitutionalization of the
commercial world in action.
And although there is a close relationship between the notion (and
practice) of corporate citizenship and CSR, this is not another book
about CSR. Indeed, one of the major features of this book is to carefully
differentiate CSR and corporate citizenship (see Chapter 4 in particular).
It argues that these two features of corporate activity have been wrongly
fused together and treated as closely similar. But the argument con-
ducted here is that CSR and corporate citizenship in an international
context—whilst linked—are quite distinct processes with their own
objects of application and evolutionary dynamic. Corporate citizenship
signals a much wider and deeper claim made by companies than just
them adhering to CSR protocols and objectives (and this extends to
corporate philanthropy as well, discussed in Chapter 4). The use of the
term citizenship invokes a harder claim on civic virtue than does the
amelioratory characteristics of companies claiming to account for their
externalities in a CSR environment.
The issue of constitutionalization and new forms of transnational
governance is a very current one, as testified by the number of books
that have appeared recently with aspects of this as their concerns. But
the chapters in this book provide a quite distinct treatment of these
matters. First, the book takes corporate citizenship as a central aspect of
constitutionalization, examining its distinct modalities and challenging
whether this is an appropriate status category for companies to claim.
Thus, situating corporate citizenship in the context of the constitutio-
nalization process is a novel feature of the analysis conducted here.
Secondly, it carefully categorizes companies in respect to corporate
citizenship, pointing out that relatively few companies claim this
status directly, though these tend to be the very large and important
companies operating in the international arena. What is more, corpor-
ate citizenship has a wider currency in the business world extending
12
Setting the Scene
beyond those companies that explicitly name it in their company

accounts and other pronouncements. Thirdly, it links together corpor-
ate citizenship, the law, and constitutionalization in a new and distinct-
ive manner. It treats the fate of RoL in an international context as a very
serious aspect of the whole quasi-constitutionalization process, one
with potentially troubling and disquieting consequences for both
internal corporate governance and external authoritative public govern-
ance (see Chapter 6). Finally, it extends the sceptical, pragmatic, and
realistic attitude towards globalization (and towards networks) that has
characterized other recent works by the author (e.g. Thompson, 2003;
Hirst et al., 2009).7 This attitude provides a fresh and non-wishful think-
ing approach to these matters, one grounded in a particularly hard-
headed assessment of the possibilities and prospect for global govern-
ance. Thus, whilst constitutionalization does indicate new forms of
governance that are emergent in the international commercial arena,
whether these are either effective or normatively welcome remains at
dispute; so these issues feature centrally in the analysis.
A strong current voice in the debate about global constitutionalization
more generally is that of ‘cosmopolitanism’ (what I would term a form of
‘constitutional pluralism’—of which there are several variants as dis-
cussed below, see Chapters 3 and 4). The analysis here will broach this
issue but up to now cosmopolitanism has not impacted on the corporate
world so much as it has in respect to universalistic calls for a new
democratic global governing order beyond the remit of the national
arena. While this is an important development—one discussed in respect
to Habermas in Chapters 3 and 4 in particular—its grand and totalizing
claims to represent an epochal change in the nature of global governance
chimes uneasily with the more focused discussion to be conducted in
this book, which takes the limited commercial and business world as its
object of analysis. The analysis of this book emerges from the twin
concerns of the author’s other two main book projects over recent
years: a critique of globalization (Hirst et al., 2009) and an engagement
with networks (Thompson, 2003). Both these themes appear and are
developed in the book chapters, and outlined in the next section.
Finally, we can sum up the key notion of quasi-constitutionalism
deployed in this book with reference to Figure 1.3. It exists within a
7
None of this is directly or necessarily connected to either philosophical scepticism, the
American philosophical pragmatism of Dewey, philosophical realism, or the realist school of
international relations. I am sympathetic to some of these (though hostile towards philo-
sophical realism) but the terms used here are to indicate more prosaic encounters with
immanent practices and concrete mechanisms.
13
Territorial
Jurisdiction
Type of
Law
Form of
Constitutionalism
Figure 1.3 The field of quasi-constitutionalization
three-dimensional space marked out by territorial jurisdiction, the

types of law, and the forms that constitutionalization takes. Quasi-
constitutionalism occupies a position inscribed within these three
dimensions, the characteristics of which are examined as the chapters
unfold.8
1.5 Chapter Titles and Brief Descriptions of Their Contents
The next chapter—The Contours of Constitutionalization—sets out the

framework for the rest of the book. It details the characteristics of con-
stitutionalization and its relationships to both a global context and that
of the commercial world. It shows the links between the three key
8
Readers will notice two slightly different terms being used here: constitutionalism and
constitutionalization (or the process of constitutionalization). This distinction is discussed in
the next chapter but, broadly speaking, constitutionalism is a discursive category—about
theoretical distinctions and normative elaborations—while constitutionalization is a descrip-
tion of the actual processes by which constitutions are inscribed. In addition, sometimes the
term constitutionality is used as a convenient shorthand description of both of these
processes.
14
Setting the Scene
categories of constitutionalization, juridification, and citizenship as

exemplified by major theoretical figures in these debates. Given consti-
tutionalization is not a settled category, there are several disputed
aspects to its characterization, and several forms that it could take.
These are analysed in turn.
The chapter then proceeds to investigate why there is a move in many
areas of international activity towards the resort to juridical methods of
regulation and governance. What is particular about the current con-
juncture that has encouraged this move? Here, the broad transition
from a period of embedded liberalism to one of advanced neo-liberalism
is sketched in the context of international commercial relations, and the
implications of this move pursued. Several emblematic instances of this
are analysed: the WTO system and regional standard setting, and arbi-
tration bodies of various kinds. The appendix to this chapter pursues
two key general notions that impinge upon constitution building,
namely the ideas of the multitude and of the people. This is related to
corporate constitutionalization via analogies of unruly companies (a
multitude) and the civilizing tendencies wrought by their progressive
constitutionalization (a people).
With Chapter 3—Global Corporate Citizenship Examined—the analysis
moves on to consider what global corporate citizenship (GCC) means,
and how it is related to constitutionalization. It looks at what type of
companies claim corporate citizenship and from where they emanate. It
provides a matrix system for classifying companies in terms of their
attitudes towards GCC. It investigates the arenas and institutions that
are promoting and monitoring GCC (the UN Global Compact, WEF, the
US Chamber of Commerce, etc.). It deals with the current conceptions
of GCC (e.g. as offered by Crane et al., 2008) and differentiates the
approach adopted in the book from these. It then discusses the idea of
the persona of the corporate citizen and how this is constructed. This
chapter contains empirical detail as well as conceptual clarification. The
long appendix to this chapter examines the nature of the corporation in
law at a general level, which provides a context for the discussion of its
citizenship claims.
Chapter 4—The Politics of the ‘Citizenly Company’ and Global Corporate
Governance Reform—takes up many of the political issues posed by the
previous two chapters. Corporate social responsibility in its various
guises is examined and the difference between tradition ‘corporate
social responsibility’ and the ‘socially responsible enterprise’ explored.
In the context of this distinction, how a legally driven reform of corpor-
ate responsibility and accountability might be organized in an inter-
national context, and the limitations of this, is explored. This chapter
15
also deals with the revival of interest in the UN’s corporate human rights
mechanism consequent upon John Ruggie’s important report to the UN
in 2008.
In Chapter 5—Global Administrative Law, the OECD, and International
Investment—we take up the question of the growth of international
administrative law, seen as part of the process of quasi-constitutionaliza-
tion. The context for this is international investment matters, the first
aspect of which concentrates on a case study of the OECD’s Guidelines for
Multilateral Enterprises, which has resulted in the setting up of National
Contact Points (NCP) in all OECD countries to ‘promote’ the Guidelines.
Based on some fieldwork on the NCP process, this chapter analyses this
rather neglected instrument for promoting ‘corporate citizenship’. It sets
these NCPs in the context of global administrative law. The second
aspect concerns the international investment regime that is developing
in the shadow of bilateral investment treaties (BITs). These have prolifer-
ated in the wake of demise of the attempt by the OECD to establish a
multilateral investment agreement under its auspices.
The following Chapter 6—Consequences of Quasi-Constitutionalization
for the Global Regulatory Agenda and the Fate of the Rule of Law—turns to
the overall global governance and regulatory consequences of the ana-
lyses conducted in the previous chapters. Such governance implications
are pursued mainly in the context of external regulatory governance by
public authorities. It takes a line derived very much from the previous
discussions and arguments: the surrogate and rather unnoticed consti-
tutional construction that is going on somewhat surreptitiously without
it being fully recognized as such. A matrix of possible forms of ‘legal
global order’ (public and private based) are outlined and their strengths
and weaknesses assessed. It asks some normative questions about the
appropriateness and efficacy of commercial ‘quasi-constitutionaliza-
tion’. Does this mean that market-based relations are finally displacing
publicly promoted ones? Where does this leave the RoL at the inter-
national level? How seriously should we take these trends? The
disquiet and unease with which one might view these developments is
considered.
Finally, a word about theoretical and analytical matters and how these
are handled in the chapters. The strategy has been not to confine theor-
etical elaboration to a particular single chapter or to cluster it all into
clearly defined sections. Rather, issues of a theoretical nature—particu-
larly exposition and commentary offered on particular constitutional or
legal theorists—have been deliberately distributed throughout the text.
Where it seems convenient to do so, theoretical matters pertinent to the
discussion under consideration at that point are elaborated and
16
Setting the Scene
developed. Thus, analytical materials—sometimes involving connected

analytical explorations—are to be found in several places. Arguments
begun in one place are often taken up and developed in another. As far
as possible this avoids repetition, but it means not everything that there
is to say about an issue—or that I want to say about it—is to be found in
a single place. But clear signals are given at each stage as to where things
are further located or followed through. My anticipation is that this will
carry the discussion forward without getting too tied up with long and
overtly abstract expositions.
Author Query
[AQ1] Please provide the year.
[AQ2] Please check whether the sentence has retained the intended
meaning.
17
The Contours of Constitutionalization
2.1 Introduction
When operating under normal conditions, companies face a problem of

their reproduction. Traditionally, this has been considered in respect to
three headings, each of which involves a major constitutive element of
their operations: at a minimum, they must reproduce themselves organ-
izationally, financially, and legally if they are not to go out of business
(Thompson, 1982). Organizational reproduction involves such activities as
production planning and execution, organizing the routines of work
tasks and remuneration systems, the implementation of cost control
systems, initiating and managing R&D, the allocation and monitoring
of divisional responsibilities, operationalizing accounting procedures
and internal reporting, and the like. Financial reproduction invokes issues
in respect to markets, sales, and prices, which address revenue gener-
ation; cost control; strategies in respect to investment and the capital
markets, to mergers and acquisitions; and finally strategies towards
governments in respect to marketing privileges, seeking subsidies, and
financial regulation and reporting. It is important to note that financial
reproduction does not just involve ‘profit maximization’ as usually
understood—companies can financially reproduce themselves through
attracting subsidies, for instance. Finally, legal reproduction concerns the
preservation of the boundaries around the firm as an entity: issues
associated with contracting, health and safety regulations, statutory
working conditions, ownership structures, conforming to binding obli-
gations in terms of statutory and stock market governance procedures,
responses to regulation, and so on.1
1
In an international context, it is increasingly the case that MNCs are incorporating,
financing, and operating in different legal and territorial jurisdictions, or in multiple juris-
dictions. But on the other hand, most MNC still have a clear ‘home base’ to their
18
Of course, these dimensions are not independent of one another.

Rather they exist as overlapping but semi-autonomous dimensions of
company existence. But each presents its own unique problems for
companies, and demonstrates its own typical operational modality,
mechanisms of performance, and evolutionary dynamic and rhythmic
cycle. Together they constitute an ‘assemblage’; so with this conception
the company represents a definite entity, though not necessarily a unity
in the sense that everything neatly ‘fits together’. Companies can be
loose configurations; they are a dispersed locus of organizational fea-
tures, competences, information flows, functions, and practices. And
there are several ways in which this has been characterized in the
literature: as a ‘nexus of contracts’ (Jensen and Meckling, 1976; Aoki
et al., 1990), as a ‘moebius-strip’ organization (Sabel, 1991). I would
suggest, however, that the company still needs to be considered as a
definite entity despite the looseness of its configuration in these respects
(see Chapter 4 where enterprise entity analysis is discussed).
But this terminology of reproduction might appear controversial
since it does not—in the first instance at least—invoke the problem of
accumulation. Companies are compelled to expand, it is often argued,
driven by the forces of competition, based upon market exchange and
surplus extraction, which does not just involve the issue of their repro-
duction—rather it is one of their ‘expanded reproduction’. However,
reproduction is a base category, a default position. Companies can
reproduce themselves much as they are without necessarily accumulat-
ing in the sense of expanding and growing. This depends crucially on
market position, the circumstances of the competition they face, indus-
try characteristics and technological advance, exactly how they play the
reproduction game in connection to the three dimensions mentioned
above, and so on. From this perspective, reproduction does not rule out
accumulation but it sees accumulation as one possible strategy involved
in such a reproduction.
Given this, however, it is argued that firms are facing a newly emer-
gent (semi-autonomous) dimensional problem, one additional to the
three classic reproductive dimensions just outlined. This is a problem of
their political reproduction. Companies are having to face the issue of
legitimizing themselves politically, which means they must become
political players in an overt sense (Scherer et al., 2009). Companies
have, of course, always played a very important role as political actors:
they are adept at political lobbying, manoeuvring for advantage,
operations—they remain identified with a particular country or territory (Thompson and

Kaspersen, 2012).
19
contributing to political campaigns, and sometimes even directly inter-

vening in politics to secure their advantage or neutralize an opposition
(see Macher et al., 2011). Nevertheless, this has traditionally been done
informally, behind the scenes, sometimes reluctantly, and without an
overt public mandate. Things are changing in the current era where
communications technology and an explosion of campaigning and
lobby organizations require companies to adopt a different style and
approach. And companies are themselves somewhat ‘willing partners’
in this process since they want to shore up their position in relationship
to the vulnerabilities and uncertainties discussed in the previous chap-
ter. So they are being forced—and forcing themselves—to play the
political game as part of their day-to-day business activity. In this situ-
ation, amongst other things, they are under pressure to become con-
tinuously and publically transparent and accountable.
Of course this is a dangerous game for companies. It exposes them to
new and unfamiliar pressures and scrutiny as they become more openly
political actors. Thus, they are proceeding along this path cautiously—
not all at the same speed or with the same enthusiasm (and many are
trying to quietly—or noisily—avoid it—see Chapter 3). So they are
exploring this hesitantly, feeling their way into a relatively unfamiliar
territory with its own new potential pitfalls and setbacks, which will be
discussed in the following text.
Nevertheless, there is a two pronged political process going on,
whether companies fully appreciate it or like it or not. The first of
these concerns the ‘external’ pressures to take a more overtly political
stance: to become an open, responsible, and transparent political player
with concomitant rights and obligations. The second arises from
‘internal’ pressures for companies to demand political protections,
react to external pressures, and so on. The vulnerabilities associated
with the modern business world sum up this configurative environ-
ment. And it is within the framework of these trends that the issue of
‘corporate constitutionalization’ arises explicitly.
The constitutionalization of the global corporate space represents
a process that is increasingly subjecting the corporate world to forms
of regulation and governance that display what is termed a quasi-
constitutional formation. There are several aspects to this quasi-constitu-
tional process which will be outlined in the rest of this chapter. Initially,
this requires some discussion of the meaning of ‘a constitutional process’
more generally—conducted somewhat independently of the global cor-
porate sphere in the first instance—so that the terms at play in the rest of
the analysis become clearer. This is because the terminology involved
may not be that familiar in a corporate environment or business context.
20
In addition, this involves several other conceptual clarifications, ones

associated with the ideas of juridicalization and citizenship in particular.
Traditionally, constitutionalization and juridicalization have been
closely connected, and they invoke the nature of citizenship as a central
associated category. We leave a thorough treatment of corporate citizen-
ship for the following chapter, and focus on constitutionalization and
juridicalization here. While these twin developments, it will be argued,
are operating more to frame the ‘external’ field to which companies are
increasingly being subject, corporate citizenship is a category more
closely associate with the ‘internal’ responses of companies to the devel-
opments discussed earlier and in the previous chapter. Together, how-
ever, these external and internal terminological frameworks and
operational reactions provide the contours around which the problem
of corporate political reproduction in being cast, it will be argued.
2.2 Constitutionality
As mentioned in Chapter 1, modern comprehensive constitutions are

relatively recent instruments of rule, and are closely associated with the
formation of national states from the eighteenth century onwards. But
there has been a proliferation of these as written documents since the
Second Word War as decolonization gathered pace. Traditionally, consti-
tutions do two basic things: they allocate powers and they determine
rights and responsibilities. One of the issues associated with the writing of
constitutions is where exactly to place these two aspects. The first aspect
has to do with ‘order’, broadly speaking: it constitutes the institutions of
the state and governance and their respective powers and relationships,
distributing powers between these and—very importantly—limiting
them in various ways. The second aspect has to do with the establishment
of the civil rights, duties, obligations, and responsibilities of the parties to
the constitution, not just of citizens but also of the other institutions of
rule. Broadly speaking, the evolution of constitution making has seen the
move of issues associated with ‘order/powers’ from the front of these
documents, with the question of ‘rights/duties’ being tucked away at
the back (in a special appendix, or as a supplementary Bill of Rights), to
the reverse; rights and responsibilities now occupy the bulk of the docu-
ments at the front while questions of institutions and powers appear at
the back (a classic example can be seen in the case of the moves between
the 1871, 1919, and 1949 German constitutional documents). Most
modern, post-Second World War constitutions now follow this latter
pattern (Dodd, 1909; Blaustein and Flanz, 1971 onwards).
21
As a slight aside, this is not unconnected to the way Liberalism has

itself been recast over this period. The original issue for Liberalism in the
wake of the seventeenth century European religious wars was one of
establishing a certain ‘liberal order’ (both domestically and internation-
ally), from which it was expected rights, justices, and fairness would
follow. Modern—particularly post-Rawlsian—Liberalism reverses this
direction of expectations: justices, fairnesses, and rights come first,
which will in turn secure the order necessary for social cohesion (see
also below and the Appendix to this chapter where Rawls is discussed).2
And this pattern of expectations is mirrored in a whole host of other
institutional contexts that deal with societal governance: witness the
UN system as a conspicuous example—human rights are paramount.
Behind such a foregrounding of ethical rights is, of course, a Kantian
universal idealism, something exemplified in Rawls’s commitment to
the ‘veil of ignorance’ in his A Theory of Justice (Rawls, 1971). This device
presents a decontextualized and abstract occasion for deliberation on
the choice of principles for justice, one depriving individuals of particu-
lar beliefs and interests, which are historically contingent and which
actually allow them to make meaningful decisions based upon specific
contingent social and political arrangements (Geuss, 2008).
2.3 Constitutionalism and Constitutionalization
In a recent useful clarificatory move, Martin Loughlin draws a sharp

distinction between ‘constitutionalism’ and ‘constitutionalization’
(Loughlin, 2010). For Loughlin, constitutionalism is above all a theoretic-
ally driven exercise directed at framing the contours of limited govern-
ment, involving a discussion of principles, norms, and rules designed to
limit the exercise of public power, which are to be embodied in a
modern constitutional form. This is largely predicated on a liberal gov-
ernmental agenda and has involved, he suggests, two characteristic
modalities: the quintessentially liberal Madisonian constitutional agenda
of limited government, separation of powers, the plural bargaining and
balancing of interests, individual rights, independence of the judiciary,
etc.; and the characteristic republican Hamiltonian version involving
above all judicial oversight and a strongly political role in constitutional
maintenance, authoritatively guiding and regulating constitutional
power and governmental action. Here, it is forensic judicial review and
2
For Rawls, justice both assigns rights and duties and determines the proper distribution
of benefits and burdens (Rawls, 1971: 5–6).
22
the enforcements of interpretations that are foregrounded. Loughlin

further suggests that the Madison liberal–legal variant has discursively
won out over the Hamilton republican–political version in terms of
theoretical reflection, reinforcing the turn to a rights-based discursive
agenda mentioned above. As we will see, a similar turn towards a rights-
based discursive agenda also typifies the corporate world.
On the other hand, there is the notion of constitutionalization, con-
ceived as a process of the gradual extension of the language and prac-
tices of the Madisonian liberal–legal variant to all forms of
governmental action. This is precisely illustrated by the progressive
introduction and triumph of ‘human rights’ discourses and legal prac-
tices into constitutional deliberations and governmental actions as
referred to the above (cf. Campbell et al., 2001 for a critique of this
trend). This Madisonian version of constitutionalization is itself a gov-
ernmental project organized through the instrumentalization of public
law. For Loughlin, this process of constitutionalization can also be
clearly seen operating in respect to supranational governmental bodies
on the one hand and transnational networks of extra-state governance
on the other—something he calls ‘multi-level constitutionalization’. In
these bodies and arenas, rights issues dominate and rights fights prolifer-
ate. John Ruggie’s mission to extend human rights directly into the
business world is a conspicuous contemporary case in point (Ruggie,
2007). This is discussed further in Chapter 4.
The challenge this poses—which is slightly prefigured by the points
Loughlin makes in respect to the apparent triumph of the Madisonian
liberal–legal variant of constitutionalization—is to elevate this discus-
sion firmly into the international arena. By and large, constitutional
debates have traditionally been conducted with the domestic arena in
focus, not the international one. But has the objective now become to
maintain order via laying out the rights and duties of commercial
citizens, or partners, in a newly constitutionalized international domain
(e.g. Thompson, 2009a; Hansen, 2010)?
A further central element in these debates is that they invoke the
defining moment of constitutionalization itself—if you like, the ‘pri-
mary scene’ of liberal politics, its birth. And rather like the ‘primary
scream’ which it mirrors, this issue returns to haunt us. It is re-enacted
again and again both historically and rhetorically as one moves from the
domestic to the international arena. To put it succinctly, it presents the
problem of how ‘the unruly multitude’ are rendered into ‘the sociable
people’; how the subjects of the constitution are constituted, and out of
what? Two preliminary points are worth making here. First, the relation-
ships between constitutive power and constituent and constituted power
23
are fraught ones. And although controversial and difficult, one is

tempted to opt for a form or reflexivity to express these relation-
ships—invoking, in one form or another a social convention, contract,
or pact (Lindhal, 2007—though see the discussion of Habermas below
for a different imagery). The problem is that we begin from a situation
in which there is no competent authority yet constituted that can claim
the capacity to restrain power. What is first needed therefore is
some method of constituting that power, not constraining it. This is a
reflexive moment Lindhal suggests, one of a number of variants of the
‘co-constitutive’ approach to the founding of constitutions—the Haber-
massian solution to which will be discussed in the following text.
2.4 Forms of Constitutionalization
At this stage, it will be worth taking cognizance of the different types of

constitutionalization around which it is possible to discuss the particu-
larities of its internationalization. The traditional form is that of ‘public
law constitutionalism’. In this, I would include the quest for an inter-
national cosmopolitan order as a variant of the public law approach,
though one not directly linked to the public law tradition of Loughlin.3
This can be supplemented by political constitutionalism (Bellamy, 2007;
Wiener, 2008—see also Dyzenhaus, 2004) and economic constitutional-
ism (law and economics), and finally by societal constitutionalism, of
which the most prominent contemporary exponent is Gunter Teubner
(e.g. Teubner, 2010). Each of these positions offers a ‘style for reasoning’
about constitutional matters at the international level, though they
often fuse together or overlap in the actual conduct of debates—that
is, in the terms of constitutionalism.
2.4.1 The Public or Civil Law Approach

The public law approach is very much concerned with formal arrange-
ments of constitutional governance and power, particularly those asso-
ciated with the rule of law (RoL) and judicial review. It stresses the
3
Cosmopolitan sovereignty ‘conceives international law as a system of public law which
properly circumscribes not just political power but all forms of social power. Cosmopolitan
sovereignty is the law of peoples because it places at its centre the primacy of individual
human beings as political agents, and the accountability of power’ (Held, 2002: 1—emphasis
added GFT). Note the similarity of this formulation to that of Rawls discussed in the
Appendix. A more explicit discussion of Kantian cosmopolitanism can be found in
Chapter 4.
24
vigilant respect for the higher constitutional arrangements embodied in

a legally binding ‘contract’ guiding and legitimizing governmental
powers, with a particular attention to limiting those powers in various
ways. It also demonstrates a certain hesitancy in respect to ‘popular
democracy’, particularly in its deliberative and participatory modes.
Popular democracy stresses the procedural dimensions to democracy:
norms such as transparency, due process, and the representativeness of
participants. But these are seen as neglecting the formal conditions
necessary for democratic governance: substantive dimensions such as
an independent judiciary and the genuine RoL,4 a separation of powers,
contestation and compromise over political outcomes, and a free media.
This position would stress the Hamiltonian republican tradition as
discussed above.
2.4.2 The Political Constitutionalization Approach

Political constitutionalization, by contrast, is much more sympathetic to
popular democracy. Indeed, it stresses the absolutely essential compon-
ent of ‘democratic control’ over constitutional matters—involving ‘self-
government’, the balancing of powers and interests, judicious com-
promise, etc. From this perspective, in many ways, the democratic
political system is seen as the constitution—there is no ‘higher author-
ity’ to which appeal can be made. All the constitution offers is a frame-
work for resolving disagreements and solving disputes (Bellamy, 2007).
It is ‘republican’ in a Madisonian sense (as discussed above), though it is
very much against the foregrounding of a rights discourse—embodied
in the law—if that trumps the sovereignty of parliamentary processes of
decision-making.
2.4.3 The Law and Economics Approach

The law and economics (or neo-liberal) approach to constitutional analy-
sis very much welcomes the idea of a ‘globalized’ constitutional forma-
tion, which it sees as a form of economic constitutionalization without
politics at the international level: the final vindication of the ‘law and
economics’ school’s long quest for such an outcome at the domestic
level (Danoff and Trachtman, 1999). From this perspective, constitu-
tions are viewed as a decision-making tool, based upon rational calcula-
tion and an organicsist invisible hand. It is highly critical of the ‘naı̈ve
4
As discussed at length in Chapter 6, the Rule of Law is decidedly not the same as the Rule
by Laws.
25
liberalism’ of classical laissez-faire liberals. By contrast, it celebrates

ordo-liberalism, emphasizing ‘the essential positive role that govern-
ment has to play in creating and maintaining an appropriate framework
of rules and institutions that allows market competition to work effect-
ively’ (Vanberg, 2004: 10). Ordo-liberalism, while acknowledging the
need for government intervention, aims to deploy it in a neutralized
manner, by making competition the sole principle according to which
the government can intervene and implement economic and social
policy, by making ‘the market economy itself [ . . . ] the principle, not
of the state’s limitation, but of its internal regulation from start to finish
of its existence and action’ (Foucault, 2008: 116). The history of the
present celebration of this position can be traced to the German Order-
liberal tradition closely associated with Freiberg School theorists such as
Böhn and Euken in the 1940s (and also closely associated with von
Hayek—see immediately below), who fought so hard to have this pos-
ition embodied in the German constitution of 1949 (in which they were
partially successful—see Gerber, 1994; Grosskettler, 1996; Nörr, 1996).
But on a more general note, there is a deep ambiguity in this position
on the precise relationship between the economy, the law, and the
constitution, which can be illustrated with reference to Hayek’s analysis
of the law. Although for Hayek the RoL constitutes the foundation of
liberalisms political and legal practice—in its general and abstract form
it protects individual freedom from the exercise of prerogative and
arbitrariness (Hayek, 1973)—as far as the economy is concerned this is
rather a spontaneous realm that should be left to itself. Thus, the econ-
omy is somewhat ambiguously placed in the Hayekian schema: is it
subject to the RoL or not? Hayek’s conception of the order underlying
the possibility of the RoL is the result of an abstract form of reasoning
that contemplates the unfolding of a spontaneous, natural order which
results in an evolutionary process—the spontaneous outcome of custom
and established practice, not of human design. Here again, we see the
role of reasoning—if in an abstract and contemplative form—in deter-
mining all of this, not of force or will for instance.
The difficulty this presents for Hayek is how concrete decisions can be
made and their role in establishing the RoL or, indeed, that nature of
economic exchange, that is, how the intuitions of government and the
market are configured. As always for Hayek, these concrete matters are
hidden behind abstract general rules to which all are subject. At the level
of the concrete, however, natural ranks and privileges prevail, but this is
the result of accident—those who are more able to adapt to and adopt
the rules conducive to an effective order of action will tend to prevail
over groups operating within a less effective approach (Cristi, 1984;
26
Scheuerman, 1997), and there is not much democratic decision-making AQ1

can do—or, indeed, should do—about this.
But where does this leave the economy? Should the concrete econ-
omy be subject to the abstract RoL in the same way as the rest of civil
society? If it is a spontaneous ordered realm that resists intervention,
can it also be ruled by the Law and by concrete laws? There is no easy
answer to these questions, but if the answer is in the negative to the
above—and this follows from a reasonable reading of the ambiguity
over the place of the economy in Hayek’s constitutional schema—
then the economy becomes an arena of the ‘exception’ (in Schmittian
terms)—a place where decisions cannot be made.5 It is somehow
‘beyond’ the RoL as this is conceived by Hayek—more a place where
commerce happens and where exchanges may take place but not a place
where basic individual freedoms and liberties are necessarily secured or
exercised.
This argument has important implications for the issues discussed in
this and other chapters. Neo-liberalism—in its Hayekian image at least—
suffers from a deeply ambiguous relationship to the economy. The law
and economics approach to constitutionalism is thus deeply comprom-
ised as a result since there are no sound theoretical underpinnings to its
strictures. This allows it a certain ‘free reign’ in terms of how it deals with
the RoL and concrete laws in international commercial matters; it can
happily treat this as ‘global constitutionalism beyond politics’ without
this seeming contradictory. The (international) economy has a certain
autonomy from the law—derived from its spontaneous character—that
licences a relaxed attitude towards all the current legal moves being
inaugurated around its governance.
2.4.4 The Societal Constitutionalist Approach

The societal view is typified by Gunter Teubner’s use of a Luhmannesque
framework of system and subsystem communicative action to charac-
terize the constitutionalization of the international sphere (despite the
well-known differences between Teubner and Luhmann).6 Teubner is an
inventive and prolific writer and exponent of this position, which views
the current international commercial system as a vindication of the
5
I owe much of this discussion to Mitchell Dean (2011).
6
Luhmann’s theory of law conceives it as highly abstract autopoietic system, an account
of law as a kind of self-referential network, which has its own logic that resists its complete
instrumentalization. On Teubner’s account of his difference to Luhmann, see Teubner
(2005).
27
basic intellectual architecture of Luhmann’s approach (e.g. Teubner,

1997a, 1997b, 2002, 2004a, 2010). For Teubner, these developments
are a key indicator of a wider radical transformation of the international
system wrought by the forces of ‘globalization’. In Teubner’s brave new
world, globalization finally breaks the link connecting the law to demo-
cratically constituted political discourses and practices (i.e. with political
constitutionalism). It produces a double fragmentation: cultural poly-
centrism and functional differentiation. New ‘linkage institutions’
create a new law directly by transjurisdictional operations without
being translated into formal political issues. They escape and evade
regulatory claims of both national and international law and practice,
and form a societal legal sovereignty of their own (for instance, a new
Lex Mercatoria and Lex Informatica).
One consequence of this societal approach is to cast the net of con-
stitutionalization very much wider than the usual emphasis on high-
level ‘political’ constitution making. It sees constitutions everywhere.
All organization or institutions are made up of constitutions, or have
constitutions, so constitutionalization is a genuine societal process, one
happening almost everywhere. The task is to uncover these and trace
their systemic connections in the new global or any other order, and
assess their consequences.7
A final issue in the context of constitutional matters is a more meth-
odological one. The idea of these forms of constitutionalism/ization is
that they provide a kind of loose backdrop against which analysts con-
duct their investigations: styles for reasoning as suggested above. But they
should not be viewed as each necessarily providing definite or precon-
ceived ‘models’ of a constitution, or of an emergent order, though this is
more the case for the specificities of Rawls, Teubner, or the Freiberg
School’s approaches. But conceived more generously as styles of
reasoning, they can be viewed as providing a ‘pragmatic’ stance from
the start—accepting that much of the debate is functional in character,
and taking a relational analytical approach, discussing the evolutionary
dynamic of international constitution making (or, indeed, its unmak-
ing).8 That is certainly how they are interpreted here and in later chapters.
7
From the point of view of the analysis in this book, such an approach casts the net too
widely. To see constitutions everywhere means that they are nowhere. Constitutionalism/
ization needs a narrower brief. In this book, these are confined to a rather more traditional
focus on just ‘political’ constitution making, where the continuation of the rule of law is a
key problematic element (see Chapter 6).
8
So a style of reasoning is understood as an amalgam of a number of forces which are
constantly being developed and are likely to exhibit internal tensions. Nevertheless, they
constitute identifiable wholes.
28
2.5 The Law and Juridicalization
Several preliminary points can be made about the kinds of approach to

the law that inform and frame the debates about global corporate
constitutionalism.
First, taking the law as such seriously in connection to constitutional
matters requires at least a preliminary definition of what the law is in
terms of the rules about how societal business is conducted. Clearly,
there is a complex relationship between law, legislation, and the courts
in respect to what the law is. But it is important not to reduce ‘law’ to
either legislation or court activity, though they are clearly closely related
in various ways. Legislation produces laws and the courts adjudicate on
them (producing judgements in respect to them and determining sen-
tences) but neither of these are the law as such. Rather the law operates
‘between these’ as it were; it is the forms of administrative procedures
that are initiated and legitimated by legislation, and which are adjudi-
cated on by the courts.9 The law as an institution is a central place where
a particular kind of truth is produced or claimed. But the law is also a
body of rules for the resolution of conflicts where other means of
resolution have failed. Clearly, this conception of the role of law—as
one of authoritatively sanctioned procedural rules for the resolution of
conflicts—effectively defines law as an administrative apparatus which
guides conduct. Indeed, at one level—given this definition—all law is
simply authoritatively sanctioned administrative rules and procedures
of one kind or another. Explicit consideration of ‘administrative law’ in
the context of international corporate matters is given in Chapter 5,
where administrative law is viewed as a particular form of legal enact-
ment. Thus, there we could say that the matter is one of the modality of
the administration of international administrative law.
And this implies another important feature of how the law is viewed
in respect to the issues discussed here. If the law is to be taken seriously
as such—as a domain very much of its own making and with its own
characteristic modalities and dynamic—then the law should not be
continuously reduced to something else. It must avoid being necessarily
subject to some domain other than its own. This does not mean, how-
ever, that law is a completely autonomous domain, only that it is
historically and specifically articulated to the other social domains on
a contingent basis.
9
And I would argue this remains the case even in ‘common law’ contexts where it is courts
and judgements that are often thought to also create law: but here the law as such is still
authoritative rules and procedures even if it is created by courts and judgements.
29
But here two temptations arise acutely, both of which have proved
very difficult to resist in the analysis of law, so they need to be continu-
ously attended to in that context. The two temptations are: first, to
subject the law to a higher moral authority and/or, second, to subject it
to a deeper structural truth.
2.5.1 A Higher Moral Authority

The first of these temptations is the route taken by ‘philosophies of the
law’, broadly speaking. An exceptional contemporary example of this is
Jürgen Habermas. Harbermasian theories of law wish to subject the law
to their own particular moral precepts and aspirations. In Habermas’s
case, this amounts to him asserting that juridification and adjudication
should be conducted according to the persona of the reasonable/
rational man—a man like himself in fact. He writes ‘. . . on the basis of
this freedom of choice citizens are accorded autonomy in the sense of a
reasonable will formation, even if this autonomy can only be enjoyed and
not legally required of them. They should bind their wills to just those
laws they give themselves after achieving a common will through dis-
course’ (Habermas, 2001: 767—emphasis added), that is, they should act
like a liberal philosopher. Habermas confronts the same problem as
identified above in connection to constitutive and constituted power:
‘what comes first: the individual liberties of the members of modern
market society or the rights of democratic citizens to political participa-
tion?’ (ibid.: 767). His solution is to suggest that both principles AQ2
‘co-originate’. That one is not possible without the other. So, in his
terms, public and private autonomy require each other. As just men-
tioned, it is an autonomous freedom of choice granted to individuals,
exercising reasoned will formation to constitute self-legislation that
provides the base point for the law and the constitution. But this intern-
alization of the tension between will and reason is itself an ongoing
project—not a single act like a founding contract (contra Rawls—see the
Appendix to this chapter). What is needed is discursive reasoning oper-
ating across historical time—‘a rational constitutional discourse traced
through the centuries’ (ibid.: 768)—that provides a self-correcting pro-
cess for the reconciliation of will and reason, the public and the private,
constitutive power and constituted power, reason (facts) and rhetorical
force (norms) (Habermas, 1997), rule of law, and popular sovereignty.
But it is The Divided West (Habermas, 2006: part IV) that Habermas
provides an elaborated blueprint for how the international sphere
should be directly constitutionalized. In this book, he suggests the
creation of ‘a supranational power above competing states that would
30
equip the international community with executive and sanctioning

powers required to enforce its rules and decisions’ (ibid.: 132). And
although this is not a global Reichstat, it would embody the worldwide
RoL: ‘a weakly constituted community of states . . . supplemented at the
supranational level by legislative and adjudicative bodies and . . . by
sanctioning powers’ (ibid.: 133). He argues for the creation of ‘an inclu-
sive world organization that . . . is restricted to a few carefully circum-
scribed functions—(i.e.) international security and human rights’ (ibid.:
134–5). In Chapter 4, the links of this conception to the attempt by John
Ruggie to introduce human rights directly into corporate matters via his
‘duty to protect’ principle will be more extensively discussed. But
Habermas believes the UN system has already acquired the authority
to intervene in the internal affairs of criminal governments and falling
states (ibid.: 135). This UN system of interstate regulation should be
supplemented by a system of what Habermas calls ‘global domestic
politics’, the norms and regulations of which should be negotiated by
the ‘major powers’, notably the United States and Europe. The objects of
this ‘global domestic politics’ according to Habermas are global eco-
nomic and ecological issues (ibid.: 136). Moreover, Habermas also legit-
imizes the role of the UN, the Security Council, the World Trade
Organization (WTO), and the EU as sources of ‘legal orders without a
state’ (ibid.: 138). As is clear, much of this parallels Teubner’s conception
of ‘societal legal sovereignty’ discussed earlier in this chapter. The demo-
cratic credentials of Habermas’s conception are discussed in Chapter 4’s
treatment of human rights and corporate practices.
Whilst Habermas provides a masterful account of this constitution
making as an ongoing historical and discursive process, even in its own
terms it remains shot through with contradictory currents and loose
ends (see in particular Ashenden, 1998, 2010; Ferrara, 2001). But the
point being made here is that his theory of the law and constitution
making is thoroughly morally rationalistic. It is a modern variant of
Kantianism (just as, at this level, is Rawls). Kantian justice depends upon
the capacity for critical thought, and not upon strict adherence to
positive law. Legal reasoning should proceed according to non-legal
norms grounded in Kantian practical moral judgement, seen as in itself
a critical exercise of reasoned thought akin to how an enlightened
philosopher would operate.
And whilst at first sight this might seem quite different to how overtly
religious approaches to law are conceived, in fact these share a structural
similarity. In the religious case, it is God that provides the moral author-
ity to judge the legal domain. In fact, it might be claimed that all
philosophical approaches to the law are at heart ridden with religiosity
31
in their attempts to situate the law within a higher extra-moral/ethical

universe. Moral authority is sort through an appeal to salvation.
2.5.2 A Deeper Structural Truth

The second temptation is to reduce the law to an effect of social relations
in one way or another: this is the route taken by sociological approaches
to the law. For this position, the rule-based aspect of law is, admittedly,
important, but provides an inadequate basis for the purposes of the
understanding of law in its societal context. Thus, legal sociology
regards law as a set of institutional practices which have evolved over
time and develop in relation to, and through interaction with, cultural,
economic, and sociopolitical structures and institutions. As a modern
societal system, law strives to gain and retain its autonomy in order to
function independently of other social institutions and systems such as
religion, polity, and economy (cf. Teubner). But it remains historically
and functionally linked to these other institutions. Thus, one of the
objectives of the sociology of law remains to devise empirical methods
capable of describing and explaining modern law’s interdependence
from other social institutions, but subservient to them. The sociological
question of law’s recognition of private governance, for instance, is
indissolubly connected to its normative commitment to democratic
theory: can law recognize legal validity and democratic legitimacy out-
side the constitution, without constitutional political institutions and
beyond the nation state? It analyses the ways in which legal systems can
and do recognize private norms, for instance, as ‘law’.
A classic example of this is provided by Pierre Bourdieu in ‘The Force of
Law’ (1987).10 Perhaps the most sophisticated and critical sociological
theory of law and lawyers, Bourdieu sees law as a social field in which
actors struggle for cultural, symbolic, and economic capital and in so
doing develop the reproductive professional habitus of the lawyer. In his
particular formulation, social actors are related in these fields but do not
act there in mass terms. And these locations in social space are not given
ex ante—by functions or by some rule system—but are rather enacted in
the process of social life and in particular in the process of relating to
other actors. These are units or collections of social locations that are
usefully considered as macrostructures—the fields—where processes of
conflict and competition are crucial to understanding the internal
10
I leave aside a consideration of Derrida’s formulations around the ‘force of law’, a title he
shares with Bourdieu. In Derrida’s case, law and force are tied up through his notion of
violence.
32
evolution of these collections of social locations. Given this emphasis

then, for Bourdieu, the law could be not more than what those actors in
these situations—in the habitus and the field—actually do: the law is
what lawyers do.
Within these fields—and crucially between them—Bourdieu empha-
sizes relationships of domination and subordination: his social order is
very much a hierarchical one. The structure of fields is derived from
oppositions which in turn always have a dominant and a subordinate
pole. Bourdieu does complexify this model by sometimes nesting oppos-
itions—so that, for example, the legal field is subordinate to the field of
power though it still has its own internal dominants and subordinants.
So this nesting simply re-emphasizes the importance of dominance and
subordination. For all its appearance of dynamism, Bourdieu’s concept
of field is largely static. Its dynamism is purely oppositional, a sort of
mechanized dialectic in which one leading element replaces another,
and so on. But change is always refracted through the problems of
dominance and superordination. So this is a strict structural topology
rather than a kind of assemblage, where accidental and contingent
events act to initiate a re-assemblage and dynamic change. This involves
a classical sociological imagination, one in which the law, for instance,
can only be understood as a subordinated field within the power rela-
tions that structure the overall social topology.
On the other hand, we have the characteristic Marxist approach to
law: here the law is nothing more than the reflection of social tensions
as written into all social structures under capitalism. The field of law is a
superstructural domain, linked in tenuous but nevertheless determinant
ways to the substructure of production relations and exploitation. It is
an apparatus of state power subservient to the interests of the ruling
class, and one out to suppress the proletariat and smother its aspir-
ational political objectives. Here is an almost textbook example of sub-
jecting the law to a deeper structural truth. Thus, whilst radically
different in form, this shares an analytical affinity with Bourdieu’s
position just outlined. They both want to reduce the law to ‘something
else’—a deeper structural truth.
The history of reasoning about legal matters (rather than legal
reasoning as such) is littered with examples of these two responses.
But outlining these strictures against the reduction of the law to some-
thing else does not mean that the law exists in an entirely self-contained
world—in a vacuum of its own making. Rather, as suggested above, it
implies that the law only exists under specific and particular historical
articulations—articulations with other social terrains and elements.
These articulations are the necessary assemblages that are examined in
33
Obligation Expressly Binding rule

non-legal norm (jus cogens)
Precision Vague Prccisc, highly

principle elaborated rule
Delegation Diplomacy International court,

organization;
domestic application
Figure 2.1 The dimensions of legalization

Source: Abbott et al. (2000: 404, figure 1). # 2000 by the IO Foundation and the Massachu-
setts Institute of Technology.
the context of the internationalization of the law and the constitutio-

nalization of the international commercial world in the chapters that
follow.
Finally, however, it is worth relating this preliminary discussion to the
idea of ‘legalization’ to that advanced by Abbott et al. (2000) in an
overtly international context. They consider legalization as an ‘institu-
tionalized’ form of law involving three dimensions or aspects: obliga-
tion, precision, and delegation—as illustrated in Figure 2.1.
Obligation invokes the idea of actors being bound by rules and com-
mitments; precision means such rules are unambiguously and consist-
ently defined; and delegation means third parties may be granted the
authority to implement, interpret, and apply the rules, resolve disputes,
and sometimes make further rules. These dimensions of legalization are
a matter of degree and gradation arrayed along a ‘more or less’ horizon
of soft law and hard law manifestations as set out in Figure 2.1. For the
most part in Abbott et al.—and in particular in respect to obligation and
precision—this schema relates to treaties and protocols of international
state law proper. Only in respect to delegation is there a systematic
departure from this as many actors are granted implementation or
interpretative functions, involving private individuals, groups, and
organizations which are heavily involved in dispute resolution for
instance. This relates to the role of private law and private authority in
the context of quasi-constitutionalization as discussed later in this book.
For the most part, this schema is perfectly consistent with the discus-
sion above about analysing the law, particularly in the terms of obliga-
tion and precision—the nature of law as a rule bound and authoritative
set of administrative procedures and actions. But, as we will see, it is in
terms of ‘delegation’ that substantive differences emerge. An argument
34
of this book is that the law in international commercial matters has not
just been delegated to private agents by competent public authorities to
interpret, clarify, and adjudicate but has often just been completely
devolved to them, or abandoned to them, or seized by them. The classic
case of international mercantile law that fits the Abbott et al. schema—
and which they discuss at some length—is the WTO. This nicely meets
all the ‘strong’ (hard) law protocols arrayed along each illustrative
dimension. But this may be an exceptional institutionalization rather
than the rule, particularly in the case of delegation.
Delegation implies a temporary relaxation of the capacity govern,
which can always be revoked. Devolution does something more: it
permanently ‘devolves’ such power to another body. There is no
retained capacity to revoke such a move, though it is a considered
move nonetheless. Abandonment, on the other hand, implies just
that: a complete abjuration and withdrawal from any capacity to exer-
cise public governance, and a deliberate willingness to let some other
authority ‘fill the vacuum’ instead. Finally, seizure implies a complete
incapacity to prevent something happening, despite perhaps a desire for
some other outcome. All these moves can be seen in the case of the way
the international commercial world has been reorganized in various
ways in the neo-liberal period. But there is a possible upside to this
range of moves to reorganize governance between the private and the
public realm. As is examined in Chapters 4 and particularly 6, the
development of ‘private governance’ might actually enhance the public
realm, providing it with added resources and capacities to generate
effective societal governance for the common good.
2.6 Why Global Corporate Constitutionalization Now?
The question the analysis just outlined raises is why the pressures for a
global constitutionalization process has emerged in the recent decades.
What are the determinant sources for such a movement? In large part,
this discussion arises in the wake of the widely perceived process of
‘globalization’ of international economic and political relations (Zifcak,
2005).11 The point, is however, that as international trade interdepend-
ency and investment integration seems to have gathered pace since the
11
This is not the place to debate the adequacy of such a characterization of the new
international order as embodying an era of ‘globalization’, but such a designation has such
widespread currency that we adopt it here for convenience (see Hirst et al., 2009 and
Thompson, 2010a for a thoroughly sceptical view on such a designation).
35
early 1980s, and as states have either deliberately divested some of their
powers to regulate these activities—temporarily delegating their capaci-
ties on the one hand or more permanently devolving them on the other,
or, indeed, having seen these simply seized from them—new agents and
institutions have emerged around which those management tasks now
coalesce. And the particular focus here is on the role of various forms of
legal regulation, involving new forms of international administrative,
customary, regulatory, public, and above all private law that are now
current at the international level, and the possible ‘constitutionaliza-
tion’ of the institutions of global corporate governance that these jur-
idicalized innovations have posed. Some of these institutional
developments are rather obvious ones to consider in a constitutional
context, like the WTO (e.g. Cass, 2005; Dunoff, 2006), but others are
much more obscure and hidden from popular view and public discus-
sion, like various privately organized regulatory and arbitration bodies
(on international investment treaty arbitration, for instance, see Frank,
2004/5, 2007/8—analysed in greater detail in Chapter 5). It is towards
an investigation of the forms and consequences of this emergent global
regulatory governance order that the constitutionalization terminology
and debate is focussed.
2.6.1 From ‘Embedded Liberalism’ to ‘Neo-Liberalism’

This section argues that a key moment for the emergence of inter-
national constitutionlization as possibly the characteristic modality of
contemporary international economic governance was the move from
embedded liberalism (Ruggie, 1982) to neo-liberalism. And this itself
was a further consequence of the emergence of ‘competitiveness’ as
almost the defining moment of the current ‘globalized era’. We examine
these moves here in an attempt to demonstrate how it impacted directly
on the constitutionalization argument.
Embedded liberalism—something argued to have characterized much
of the post-Second World War period in the twentieth century—was
essentially seen as a political compromise between countries, where they
gave up the worst excesses of protectionism in exchange for the possi-
bility of some autonomy in the conduct of domestic economic policy-
making, particularly in the area of macroeconomic management. It
involved diplomatic bargaining between countries to establish comprom-
ises on trade policy, as exemplified by the GATT (General Agreement on
Tariffs and Trade) mechanism. The key criterion in international trade
talks was that of non-discrimination between partners as embodied in
the ‘most favoured nation’ (MFN) clauses of the successive GATT
36
negotiating rounds and treaties (trading terms negotiated with a

favoured trading partner should be extended to all other trading part-
ners, i.e. there should be no discrimination between them).12 Difficult
to uphold and police—and therefore often compromised as it was in
practice—this regime lasted roughly from the early 1950s until the late
1970s when one of its crucial supports—the semi-fixed exchange rates
and a de facto dollar standard—was abandoned in favour of a flexible
exchange rate regime.
This ushered in the period of neo-liberalism as market and competi-
tive solutions were sought for economic problems. The key criterion for
negotiations also changed as obstacles gradually displaced non-discrim-
ination as the object of policy. This in turn opened up to international
scrutiny the domestic economic characteristics of trading countries in the
context of their internal regulatory practices and the conditions for market
access. Along with this, the emphasis on the market was accompanied
by moves away from political bargaining towards the resort to inter-
national public and private law as the means to settle disputes. In its
wake, the GATT (an ‘agreement’) was replaced by the establishment of
the WTO (an ‘institution’) to oversee trade matters. The WTO mechan-
ism is one recognized in international law, and its practices are those
that have led to charges that trade law is being ‘constitutionalized’
particularly as its Appellate Body (AB) delivers judgements on appeals
over Panel Rulings on trade matters (Weiler, 2000; Cass, 2001, 2005).
The differences between the GATT and the WTO tend to revolve
around the consequences of dispute resolution mechanisms in each
case (Howse, 2000). Under the GATT, a consensus of member states
was required in order for dispute rulings to become binding. This
involved the creation of a ‘positive consensus’—including the agree-
ment of the defendant country. Dispute rulings were drafted with a
‘diplomatic vagueness’ often expressing an intuitive kind of law, one
based on shared experiences and unspoken assumptions. It was driven
by a rather cosy bureaucratic and technocratic ‘club’ culture, based upon
shared values and a consensus that supported economic liberalism on
essentially pragmatic grounds, and it met in closed session. One feature
was that compliance was rather high.
With the WTO, however, dispute rulings are accepted as binding
unless all the members—including the complaining and winning
parties—vote against its adoption (requiring a more difficult to achieve
‘negative consensus’ to prevent a move). In addition, determinations of
12
This MFN principle was also embodied in the international investment treaty activity
analysed in Chapter 5.
37
when and how the losing party must act to implement a ruling are
subject to arbitration, and should the losing party not implement a
ruling in accordance with the findings of the arbitrator, retaliation
(involving the withdrawal of trade concessions to the losing party by
the winning party) is automatically authorized. Moreover, as noted
above, the legal adjudications and judgements of any Panel (known as
a ‘tribunal of first instance’) may be appealed to the AB (which is a
standing tribunal of seven jurists, three of whom sit in each case). The
establishment of the AB, then, meant that the relatively ‘informal’
nature of the previous GATT disputes mechanism was undermined. As
an adjudicative institution, separated from the bureaucratic and tech-
nical culture, the AB is open to review and scrutiny and embodies
contestable legal interpretations where values can no longer be pre-
sumed to be shared. In this context, economic liberalism became
much more of a dogmatic insistence (in a sharper laissez-faire style)
rather than accepted as a shared pragmatic compromise.
The results of the AB decisions then become precedents and have
force of international law, though they were not formally part of the
original treaty agreement, and nor are they mandated by any clear
political process other than that initiated by the general WTO Treaty
signed in 1995 (Broude, 2004). A key change is thus with this new liberal
technology of rule embodied in the WTO disputes mechanism and the
AB, which involves a novel way to adjudicate and enforce obligations in
an international economic context (though it tends to mirror the adver-
sarial practices of Anglo-American adjudication—see below and
Chapter 5).
2.6.2 Cooperation and Competition

Two other elements in this transformation are also worth noting. The
first of these involves the shift from what is often termed ‘cooperative-
competition’ between states towards ‘competitive-cooperation’. The key
change is the move of competition to the forefront of the relationships
between states in the economic field. Whereas before, states found it
efficient and convenient to cooperate between themselves to foster
‘limited’ and ‘managed’ competition, or at least to ‘accommodate’ com-
petition, now the issue is the perceived centrality of competition in the
relationships between states, where cooperation between them—such
that it is—is afforded a secondary status and seen as a complement of, or
support for, competitive relationships. This means that an ‘inter-
national common law’ becomes necessary to adjudicate disputes
between what are now considered to be competing parties: diffuse
38
reciprocity has given way to competition between policy norms. Inter-

governmental cooperation in setting up a body like the WTO only goes
to further the mechanisms of competitive relationships that it is
designed to support, where ‘common values’ cannot any longer neces-
sarily be presumed or shared.
2.6.3 From Interdependency to Integration

Whilst the WTO does not involve companies directly—it is an intergov-
ernmental organization settling trade disputes only between govern-
ments—it involves them indirectly in that these lobby governments to
take up grievances and are often instrumental in pressing for changes in
WTO rules (mostly in their favour).13 But a further development is more
directly associated with multinational corporation (MNC) activity. The AQ3
shift from embedded liberalism to neo-liberalism arises because the
integration of the international economy may itself have moved from
a position of ‘shallow interdependency’ to one of ‘deep integration’. Shallow
interdependency involved rather straightforward trade exchanges
between otherwise relatively ‘closed’ economies. With the growth of
foreign direct investment (FDI) and the operation of MNCs however,
deeper integration has occurred. FDI and MNCs ‘open-up’ domestic
economies to international economic pressures in a novel way, so that
issues of domestic ‘obstacles’ to access and the domestic regulatory
practices designed to support this become an impediment to trade
openness and an object of scrutiny and policy.
2.6.4 Extensions and Generalizations

These formal procedures have since been generalized to embrace trade
and investment agreements like NAFTA (1994) Chapter 11 on invest-
ment and services rules and the WTO’s (1995) General Agreement on
Trade in Services (GATS). These both restrict government actions since
any such action can be considered to have cross-border trade and invest-
ment consequences. They have to do with ‘behind-the-border-meas-
ures’ which have become so important with deep integration.
The GATS for the first time applied a multilateral and universal agree-
ment to the supply of public services, subjecting those services to a
13
In fact, companies are absolutely central to the way the WTO functions and has
evolved. See, for instance, Sell (2003) for a fascinating account of how the WTO was influ-
enced by American companies in particular over the TRIPS Agreement and the copyrighting
of intellectual property. This is taken up in the following text.
39
legally binding dispute settlement mechanism if ‘market access is

denied’. It effectively restricts public services to strict boundaries,
opening them up to commercialization and locking in future formal
and informal privatization. Violations are subject to trade sanctions and
monetary penalties as compensation awards.
The NAFTA Chapter 11 has similar consequences. It effectively means
foreign commercial interest must be compensated when new public
service provision is inaugurated or existing ones expanded. Whilst for-
mally governments have control over public service provision,
Chapter 11 (and the GATS) makes these more expensive to implement.
There are contingent but tenuous protections built into these agree-
ments but provision must be negotiated or face sanctions: public ser-
vices are exceptions to be justified rather than a norm to be emulated. In
this way, effectively the state must ‘pay to govern’.
Since the mid-1990s, two things have happened. First, the emphasis
has shifted from global to regional and bilateral trade and investment
agreements. The WTO Doha global round of negotiations has been
abandoned. But the regional and bilateral agreements have continued
to include investment protection chapters and fully fledged dispute
settlement mechanisms. These bilateral investment treaties are exam-
ined in more detail in Chapter 5. Second, many of these treaties and the
more global ones were unilaterally suspended during the 2008–9 finan-
cial crisis, particularly by the advanced nations. This goes to demon-
strate the relative power relations that still inhabit this ‘constitutional
regime’, since these actions were not negotiated with less powerful
‘southern’ parties. But nor have the southern parties been completely
inactive: several Latin American countries, for instance, have reneged
on the treaties and rejected further incorporation (e.g. Bolivia and Ecua-
dor). Whether these developments will lead to a move for more ‘just’
investment regimes remains to be seen and is explicitly analysed in
Chapter 5.
Finally, there is a further determinant to the rise of what is being
termed quasi-constitutionalization that is of a slightly different order
to those so far discussed. This concerns how property rights have
increasingly been linked directly with the promotion of economic
development. This is not a new feature of the development landscape,
but it has gained renewed traction as global governance has increasingly
become private governance—as regulation and management of eco-
nomic affairs has passed from public entities into the hands of private
individuals, corporations, and markets. One of the reasons advanced for
the lack of progress in development is the fact that full property rights
do not exist in the LDCs, it is claimed (De Soto, 2000, for instance; also AQ4
40
see in particular Riles, 2011). Whilst those in the LDCs may occupy
houses they have no deeds to them, while they produce crops they
have no formal title to the ownership of their land, and while they
operate businesses there are no statutes of incorporation. Thus, there is
a lot of ‘ownership’ but a dearth of ‘property’ (see Chapter 3), and it is
only as property is generated that capital can be built up, collateral
exchanged, and credit advanced. Thus, there is a direct link forged
between private governance (via codifying law) and the incentives for
development—at both the domestic and global levels. In part, of course,
this is a further ideational consequence of the ‘law and economics’
approach to constitutionalization discussed above. But it confirms the
way the law and constitutionalization expand into the discourse of
development, but also subtly changes that discourse to be one where
the language of law and legal knowledge begins to replace that of
economics itself as offering the structuring principles necessary for
developmental advance. This we take up in the following chapter.
Appendix
A.I: Further Reflections on the Multitude and the People
In the main chapter, the point is made that any process of constitutio-
nalization, however formulated, involves the construction of a polity of
a sort, which itself invokes the way the ‘unruly multitude’ is rendered
into the ‘sociable people’ both able and willing to be ruled by that
constitution. Thus, the constitutionalizing process secures governable
persons at two levels: it both subjects them to governance and also
engenders their acceptance to be governed. It makes them suitable to
become governable subjects as well as establishes the capacity to exer-
cise that governance, either in the form of a self-governance or to
acquiesce to be ‘ruled’ by the institutions established by the constitu-
tion. Clearly, in respect to the international corporate arena, this process
is complicated by various features of both corporations and what can or
cannot be done in a domain that is beyond an immediate national state
context. As will be discussed in the next chapter, whilst companies are
‘persons in law’, they are not exactly equivalent to natural persons who
can deliberate as such. But can we pursue the issue in an analogous
manner in respect to a possible constitutionalization process of that
corporate sphere? The analogy would be that ‘corporate entities’ (not
necessarily restricting these just to companies) are the ‘unruly multi-
tude’ and what the process of their constitutionalization or quasi-con-
stitutionalization is doing—as a project—is to render these into a
41
governable form: it is ‘governmentalizing’ them. The next chapter dis-

cusses the operation of corporate citizenship in an international context
which could be considered part of such a process of constitutionaliza-
tion. Subsequent chapters move on to show how various instruments of
international economic governance and institutionalized regimes of
rule may also all fall into the category of the-subjects-in-the-process-
of-being-constitutionalized. Both corporate entities and these mechan-
isms are thereby being transformed into the ‘sociable subjects’ of the
international corporate sphere.
As a prelude to that analysis, however—and as a footnote to the
formal presentation of what constitutionalization means conducted
above—this appendix examines debates about multitudes and peoples
that have been conducted in the literature associated with internation-
alization and possible constitution making. The anticipation is that this
will serve to illuminate further the concerns and intellectual terrain on
which the subsequent investigation—dealing with corporate institu-
tional forms—is being built. But first we need to deal with this in a
slightly more abstract and wide-ranging manner.
A.I.1: THE MULTITUDE

We begin with the idea of the multitude, which is a highly controver-
sial—but also a highly fashionable—category. The multitude is both a
pre-constitutionalized category—that which exists before the advent of
liberal politics, with the latter’s emphasis on the people of a definite
polity, ones largely confined to a territorially and jurisdictionally dis-
tinct nation state—and a currently disembedded potential social force,
wrought from the constraints of the nation state by the forces of global-
ization and new communication technologies. In the radical literature,
this ‘emergent category’ is there to be mobilized for a new global libera-
tory project, acting as a substitute for the working class and its organiza-
tions, which are now fatally discredited and which, anyway, remain
nostalgically attached to the nation state (Hardt and Negri, 2000;
Virno, 2004, 2008; Marazzi, 2008).14 Theses authors stress the concept
of the multitude as something that brings into being a particular kind of
new public operating in a new public space. The precursor of this
position is to be found in Hardt and Negri’s 2000 book Empire. Such an
empire has a fairly conventional lineage: ‘globalization’ is undermining
14
So, in this analysis, the working class can no longer rise to fulfil its historic destiny—
that task is now handed to the multitude. The authors developing this line of radical
argument were closely associated with the Italian quasi-situationalist movement of the
1960s and 1970s known as ‘Autonomist’ theory and ‘Operaism’ (Workerism).
42
the salience of the ‘nation state’ as a relevant category for analysis or

subject allegiances. Borders are being eroded, made porous by trans-
national forces ‘beyond the state’ that are emerging to challenge a
traditional Westphalian system. So far, so conventional one might
add. But the authors go on to outline an elaborate system of concepts
that they see as necessary to understand the reconfiguration of a post-
Fordist world order and its particular public space.15
The multitude is a plurality which persists as such in the public
sphere. It is a form of collective action for the handling of communal
affairs but it does not converge into a single entity (the ‘One’). It is a
form of social and political existence of the many, seen as being many,
which/who persists as such. Thus, it is made up of heterogeneous indi-
viduals that are not reducible to a single collective actor, as in the case of
a ‘class for itself ’, a ‘general will’ say, or as a result of the ‘social contract’.
Virno traces this concept to Spinoza (il multitudo), and it has several
affiliatory conceptual associations. It both constitutes and thrives in or
on ‘common places’ (topi koinoi). These are discursive spaces where every
individual expression can be performed and heard. They are shared places
for communal discursive enactment. They are not ‘homely’ inside or
private places but outside, public spaces involving and concerning the
many. This capacity of ‘not feeling at home’ is important for the
common places because it gives them a certain edginess for social and
political practice, though it also raises feelings of anxiety and requires
reassurance, acquired from the fact of it is the place of the many. In
addition, the multitude enacts the ‘general intellect’ in these public
spaces. Intelligence is shared here—of necessity at one level not only
because of the primacy afforded to language and debate in the analysis
but also because in a post-Fordist world ICTs and the Internet/World
Wide Web become a primary instrument for the forging of common
places through communicative and discursive means. Thus, primary
sites for a new general intelligence are the common places where the
multitude ‘meet’ and communicate. In many ways, while this idea of
the multitude was developed in respect to individuals, it has resonances
in respect to how companies are increasingly thought to be homeless
footloose players on the global stage, operating in the global commons,
15
This has several affinities with other postcolonial discursive constructions, for instance,
the ‘Planetarity’ of Spivak (2003: ch. 3). For her, this is a new public space ‘above’ the North–
South divide, ‘beyond’ the colonial and the Other; ‘outside’ of the national and the global.
On this and several other avant-garde formulations, see Hirst et al. (2009: ch. 1) for
elaborations.
43
sharing intra- and inter-company intelligence along the supply chain

via ICTs and the web. This is their particular commonplace.
The notion of the multitude is pitched very much against the idea of
‘the people’ and ‘the citizenry’. Indeed, it is absolutely opposed to these
categories. The people and the citizenry refer to a nation state, which is
being undermined in the manner pointed to above; they hark back to a
hierarchical monopoly of decision-making within the boundaries of a
state. The enemy here is Hobbes. By contrast, the new public spaces of
the multitude are decidedly transnational, as well as transformational.
The multitude are made up not only of migrants, the ‘homeless’, etc. but
also everyone else (but particularly workers) who experience the disem-
bodiment and disembeddedness associated with ‘globalization’ and
non-state public spheres. Disembbeded global companies parallel
these experiences.
Several points can be made about these formulations, in part as elab-
oration and in part as criticism.
First, this is really another move in that long history of emancipatory
politics that looks for an agent of liberation to propel us into a new era of
(in this case global) freedom. For the political Left, this used to be the
organized working class, but for the Autonomistas this is exactly what
they are pitching the multitude against. Now unity will not be found in
the realm of production but in the common spaces of the general
intellect. This Left has moved on from any continuing faith in the
organized working class and its institutions (unions, mutual societies,
political parties); indeed, these are now, if not quite the enemy, then a
discredited and spent force.
A second point is that a lot rests on the way the ‘model of language’
(or ‘linguistic turn’) is deployed and mobilized into this particular intel-
lectual terrain of post-Fordism (cf. Virno: The ‘Grammar’ of the Multitude;
Marazzi: Capital and ‘Language’). Language becomes the primary articu-
lator for the emergence of the multitude and its public spaces and
general intellect. It provides for the central role of an individual speaker
in these places of the many, and it provides a crucial link to the idea of its
performativity, since language and a speaker always presumes an audi-
ence to which it performs and this performance is a necessarily ‘public
event’ as a result. So we have a central role for the speaking subject,
always a feature of deliberative and participatory forms of politics and
the public spaces they invoke (see also the discussion in the main text
where a certain hesitancy in respect to the celebration of deliberative
and participatory democracy is announced, and also the discussion of
Rawls there, who is further considered below).
44
Marazzi sees financial markets as products of the social powers of this

general intellect, made manifest in linguistic performance, which is akin
to the price level being determined by shared hunches of market partici-
pants. Thus, financial market processes have little to do with the ‘real’
economic value of assets but instead rest upon what people have com-
municated about the assets through such phenomenon as ‘momentum
trading’. Any financial market crisis is, then, a product of this overpro-
duction of self-referentiality, directly analogous to the way that lan-
guage is always threatening to overspill meaning and sense making in
its own productive exuberance.16
But this emphasis on ‘the model of language’ goes relatively unre-
flected in these works. It continues to smack of what Derrida has termed
‘logocentrism’ (Derrida, 1978): the centrality of a speaking subject to the
idea of the discursive. By contrast, of course, Derrida (who wants to
radically disrupt the centrality of the logos to Western discourse) pitches
his notion of ‘writing’ against the speaking (and listening) subject.
Writing distances the speaker from the logos of the subject. But even
this idea of writing has its own limitations for freeing ourselves from the
‘tyranny of logocentrism’ (see Thompson, 2006 for how this might work
in the case of ‘globalization’). Its logic could (and should) be extended to
‘printing’ for instance (Thompson, 1992, 1998), which provides an
alternative distanciation mechanism, propelling an impersonal tech-
nique to the forefront of discursive construction. So perhaps we should
take the ‘model of the printerly’ as an alternative metaphor for the way
new public spaces could be conceived which, it could be argued, would
suggest a somewhat different space than one occupied by many ‘per-
forming subjects’. The printerly invokes a more internal, contemplative,
reflective, and ‘silent’ public space or world.
And it is with this idea of performance as a necessary formative elem-
ent for the multitude to emerge that another set of critical reflections can
be posed. Performance, performativity, and enactment have become
almost ubiquitous terms for a particular kind of ‘non-representational’
theoretical approach to social analysis associated with a post-ANT
16
The idea of the general intellect comes from Marx in the Grundrisse (Marx, 1973:
690–707), where it designates the social powers of science and knowledge. For Marx, this is
crystallized in machines (nurtured by living labour)—a component part of constant capital,
namely fixed capital. What Marazzi does with his use of the term is to lift it out of this
context and make it part of circulating capital. Moreover, it becomes an ephemeral conse-
quence of the convention of language as a social mechanism of relational connectivity. It is
no longer connected to waged labour, however, something central to Marx’s notion of the
general intellect. This also breaks the necessary link between wage labour and value, reinfor-
cing the replacement of collective labour by the multitude as the key driver of social
transformation (Virno, 2008).
45
conceptual terrain that emphasizes ‘assemblages’ amongst other things

(e.g. Latour, 2005; Thrift, 2007), which can have significant conse-
quences for the idea of new public spaces. One potential issue would be
whether performance implies a certain functionalism, despite its propon-
ents’ protests against this. For instance, Talcott Parsons also argues that
money and power are ‘performative’ in that they help secure social
cohesion: they perform a ‘function’ for social cohesion, both being
(positive) significatory systems—rather than (negative) coercive ones
(Parsons, 1963; Giddens, 1968). Thus, are all significatory systems neces-
sarily performative? If so then, in as much that the performance of the
speaking many is also a significatory practice, there may be some neces-
sarily functionalist overtones to the Autonomistas project (which may
be no bad thing, of course). Is it a performance that functions to secure
the multitude?
The Italian Autonomistas are also highly critical of the concept of
representation, so they fit neatly into this wider critical position
(though a sharp distinction should be drawn between significatory
practices and representational ones, of course, though they do not
make this distinction). Their particular critique is in respect to repre-
sentative democracy—which they see as necessarily associated with
the now discredited national arena. In the following text, we come
to Rawls’ defence of representational activity and the sociable people,
but before that a final comment about the idea of the multitude is
worth making.
Odysseus in the Odyssey is on a long journey (ten years). He longs to be
back ‘home’ with his wife and family on Ithaca. So he is always homesick
as he struggles to get back to the safety of his homeland. Whilst outside of
this comfort zone, in the realm of the Other, insecurity and anguish
prevail. Virno plays on the idea of threat and insecurity of the deprived
multitude, where this is seen as almost a condition of their existence.
Though he does not mention the story of Odysseus, the suggestion is this
plays a central part in the analysis, as it does for all those who either
celebrate or condemn the plight of the Other. Indeed, the motif of the
journey ‘overseas’ and its perils plays a large part in many Greek myths
and epic poems (e.g. the Iliad), and has been passed down to us in this
form as part of our (often unrecognized) cultural heritage: the safety of
‘home’ (or homeland, leading to a homesickness) is contrasted to the
dangerous Outside/Other.
But to contrast just the safety of the home with the danger of the
Outside/Other should not exhaust the categories in play. What is often
missing from both the Greek myths and commentary upon them is that
the ‘city state’ was a crucial component of Greek political and domestic
46
life (indeed, probably the most crucial aspect). It adds an institutional

dimension to the safety of the ‘home’ and the insecurity of the ‘Outside/
Other’. For Skinner (1993), for instance, the obligation of the citizen to
come to the aid of the state when it is threatened is the supreme public
virtue—it is a civic duty (so civic duty and civic virtue does not involve
just doing ‘good works’ or fully engaging in deliberative activity). And
whilst several authors have drawn attention to the way ‘terror’ and
‘territory’ have a similar entomological root (territory: a place where
people are frightened away from—Hindess, 2006; Elden, 2009), the
continued advantages of jurisdictional territories as places of refuge AQ5
should not be underestimated. To dismiss these advantages as exhausted
legacies of a now transformed post-Fordist world public space could be a
dangerous move. And this resonates, or should resonate, in the case of
globalization and the corporate sphere. As will be argued later, one of
the problems with a quasi-constitutionalization of the corporate sphere
under contemporary conditions is that it does not easily lend itself to
the operational and governmental advantages of a clear sovereign
presence.
A.I.2: THE PEOPLE

As just mentioned, the category of the ‘people’ is a problematic one in
the context of all conceptions of ‘transformational internationalism’—
which (Balibar, 2004) sums up as a ‘post-national complex of the polit-
ical’. Balibar sets his particular take on this as a dialectical reflexive
interplay between constitution and insurrection. These two poles provide
the contours for the necessarily incompleteness of the body politic and
its binding together in the form of a reciprocity of the people and the
political community (the constituent power and the constituted power).
There is no complete ‘political community’ as a result—it is never quite
finished or completely established but always in a dialectical ferment
caught between the forces of order and their insurrectionary negation.
From this perspective, then, any stable political community—
whether domestic or global—can never quite exist: the people, the
nation, and the state as political categories expressing a notion of a
‘community’ are never accomplished facts. There are always some exclu-
sions (e.g. ‘elites’ who refuse incorporation, or the ‘underclass’ who are
refused it). This makes citizenship at best an ambiguous category—there
is always a void in the space of community and citizenship. Under these
circumstances, there are only two possible alternatives: either to find
another principle of citizenship not based upon community or to cele-
brate a necessarily insurrectionary mode of citizenship, one based upon
continual resistance and critique (Balibar’s favoured route).
47
Putting aside the possibility of an insurrectionary mode of citizenship

in the context of commercial activity (a decidedly uncomfortable pro-
spect one suspects), the question of a foundation of corporate citizen-
ship beyond the community (of state or nation) is at least a possible one.
Indeed, it is just the one implicitly promoted by those who would
celebrate ‘global corporate citizenship’ which is the subject for the
analysis of the following chapter. The issue becomes, however, of what
is the principle of such a different foundation? In the traditional litera-
ture, this is shared between jus sanguinis (‘right of blood’) and jus solis
(‘right of soil). A jus sanguinis policy grants citizenship based on ances-
try. A jus soli policy grants citizenship to anyone born on the territory of
the state.17 Whether some other principle could be found, like ‘brother-
hood’ (sawn of its blood ties—and, similarly, with sisterhood) or a
universal benevolent friendship, remains at issue, though both of
these—if examined closely—are quite inadequate to the task or fall to
the default position as natural features of humanity.
Clearly, none of these is readily available to corporations. But, it is
suggested, nor are they able to bridge the gap between people and
community other than as the latter is conceptualized as a clear state AQ6
form: citizenship is a category of the community of the state and no
other adequate foundational principle has yet been found.
If we now turn to a further reflection of the notion of the ‘people’ in
contemporary discussion of global constitutional matters, the role of
John Rawls’s The Law of Peoples (1999) can serve as an exemplary illus-
tration. In this book, he is concerned to extend his reflections on the
form of the social contract that inaugurates ‘constitutional principles for
a just society’ based upon ‘original position’ reasoning, to the inter-
national sphere. What Rawls wants is to show is how a liberal consti-
tutional order can be organized internationally. This requires a new
social contract to be made between ‘reasonable liberal peoples’ on the
one hand—those to be found in well-ordered liberal societies—and
‘decent peoples’ elsewhere—to be found in decent hierarchical societies,
for instance. Decent hierarchical societies are those where—although
politics is sometimes personalistic and authoritarian—there is at least a
modicum of consultation between rulers and subjects, where voices of
opposition can be raised (even if not always legitimately), and which are
not aggressive towards other states or peoples. These decent societies are
17
Many countries have a hybrid birthright requirement of local nativity and citizenship
of at least one parent. Citizenship can also commonly be obtained through marriage to a
person holding the citizenship (jure matrimoinii) or through naturalization, but these are
clearly dependent upon an already existent community of the nation.
48
in distinction to several other categories which are not to be included in

the ‘new decent international order’ being craved out by this experi-
ment: ‘outlaw states’, ‘societies burdened by unfavourable conditions’
(‘failed states’ perhaps?), and ‘benevolent absolutisms’, as he puts it.
The experiment Rawls proposes and sets up is termed ‘the search for a
realistic utopia’: realistic because he thinks in principle this could be
actually negotiated internationally, but utopian because he thinks it will
not be (or cannot be) to its full potential—though strong elements of its
contours already exist. The procedure would be a two-stage one; first,
original position reasoning at the domestic level, and then once again at
the international level. This is not the place to go into the intricacies of
the original position; just to reiterate, it requires a ‘veil of ignorance’ and
deliberative reasoning in that light to produce a fair and just outcome
based upon certain principles of natural justice. The eight new prin-
ciples to guide the search for the realistic utopia at the international
level are outlined. These are:
1. Peoples are free and independent, and their freedom and inde-
pendence are to be respected by other peoples.
2. Peoples are to observe treaties and undertakings.
3. Peoples are equal and are parties to the agreements that bind them.
4. Peoples are to observe a treaty of non-intervention.
5. Peoples have the right of self-defence but no right to instigate war
for reasons other than self-defence.
6. Peoples are to honour human rights.
7. Peoples are to observe certain specified restrictions in the conduct
of war.
8. Peoples have a duty to assist other peoples living under unfavour-
able conditions that prevent their having a just or decent political
and social regime.
This list of principles and the whole exercise follows closely Kant’s
Perpetual Peace (1977). It is a quintessential ‘liberal’ project based upon
the presumed equality of individual people, non-intervention (except,
of course, in the case of all those outside of the coalition of decent
peoples—see principle 8), respect for human rights, etc. On the basis
of these principles, peoples, or their representatives (which is an import-
ant terminological move), would deliberate and negotiate to secure a
just and decent international order which would give content to the
Laws of Peoples. This would make room for various cooperative associ-
ations and federations: the UN, a cooperative international bank, and an
49
organization designed to ensure fair trade (like the WTO possibly)

(Rawls, 1999: 42).
But these institutions would fall well short of a world state. Indeed,
the laws so enacted by theses bodies and forums—or brought into being
through their actions—are not instruments of state law. These are delib-
erately laws of peoples not laws of states—or international law. In classic
liberal fashion, Rawls consigned the state to a very secondary position
and status, in a way just like the Autonomistas discussed above who also
celebrate the rights of ‘individuals’ to speak and be heard—Rawls also
celebrates deliberative forums in his analysis (ibid.: 51). But the Auton-
omistas radically parts company with Rawls’s liberal position in that
they deny the pertinence of the social contract(s) that underpin the
realistic utopia, and the continued deployment of the category of the
‘people’. Thus, ‘individuals’ are not the same category for each of these
positions, though both speak approvingly of their role. For the Auton-
omistas, individuals are heterogeneous bearers of the multitude; for
Rawls, they are singular embodiments of the liberal order. Their notions
of deliberation and public spaces would thus be quite different as a
consequence.
For Rawls, the roles for state are to provide a mechanism for reason-
able deliberation by peoples on the form of their governance, to help
protect their territories and populations, preserve their freedoms and
civil society, and act as the representative medium though which they
negotiate the Laws of Peoples with other international parties in the
light of the eight principles mentioned above, so as to create the Society
of Reasonable Peoples. ‘Citizens’ deliberate in the context of the state,
‘Peoples’ in the context of the international Society of Reasonable
Peoples. States are too tied up with considerations of their own ‘sover-
eignty’—expressing state interests above those of their peoples—to be
left to negotiate between themselves over matters of global order.18
The driving force behind Rawlsian analysis is, of course, ‘public
reason’, which is a ‘reasonable’ and ‘tolerant’ reason. It requires ‘rational
thinking’ on the part of people, particularly in the context of negotiat-
ing the inaugural social contacts—the primary scenes for this politics? It
involves a public space and presumably an informed public that can
effectively deliberate. This kind of liberalism has traditionally been
totally committed to the notions of discussion and dialogue as a way
of both reconciling differences and of propelling social advance. But
18
Having said this, however, there is perhaps a surprisingly rich role for the state if it is to
successfully fulfil all the tasks set for it by Rawls, despite his generally accepted scepticism
and hostility towards the state.
50
dialogue is ‘idealized’ here under a principle of free expression and open

discussion.19 This idealization of free expression takes three forms:
First, by making the ultimate purpose of a free and open exchange of views the
attainment of truth and justice, through a process of rational persuasion;
second (the paradigmatically political-romantic option) by idealizing polit-
ical discourse itself as an ‘endless conversation’, a never-finalised process of
problematisation and dialogical mutuality; and third, by indexing it to the
virtue of democracy as the ideal way of running a society. (Minson, 1993: 172)
With this emphasis on discussion, politics itself becomes idealized as a

perpetual conversation. Indeed, this was the main basis for one of the most
trenchant critiques of liberal democracy—Schmitt’s attack on parliamen-
tarianism (1985) as being an endless ‘game’ of talk without action or
decision, akin to the seminar in the senior common room of a liberal arts
college; the disinterested meeting of minds as an occasion for self-display.
And this idealized notion of liberal politics as endless open discussion
involves the idea of language as a system of signification that implicitly
invokes the ‘Other’ as a constitutive moment in its operation. It is
common to the ‘post-modernist’ sentiment to always seek to involve
‘the other’ in a reciprocal, dialogically imaginative discourse, or to see
knowledge as just the result of an effective rhetorical strategy to argue and
persuade (which informs the centrality given to notions of performativity
and enactment). But herein emerges a potential problem indicated by
drawing attention to the differences between ‘deliberative democracy’
and ‘participatory democracy’ (Cohen, 1993; Mutz, 2006). These may
not always be compatible. The emotional states and passionate commit-
ments likely to sustain participation can conflict with the more skeptical
distancing and reflective tone needed for deliberation. Whilst it is part of
the liberal project to hope that the engagement with opinions not of their
own by those involved in the messy, enthusiastic, and sometimes angry
politics of participation will develop and encourage civility through delib-
eration (‘cool skepticism’), this is absolutely not necessarily the case.20
19
This strong invocation of ‘public reason’ puts Rawls very close to Habermass discussed
in the main chapter and in Chapter 4.
20
Associated with this conception is the conventional liberal wisdom that integration
and multiculturalism are the ultimate virtues of such a liberal tolerant society of reasonable
peoples. Indeed, Julia Kristeva has strongly argued for this to constitute the key approach to
the establishment of a genuine tolerant national and international order: the abandonment
of a commitment to national borders and the radical embrace of ‘Otherness’ (Kristeva, 1991,
1993). Whilst these clearly remain worthy sentiments, they will probably remain just that—
pure sentiments. The idea that groups will quickly and quietly give up national aspirations
seems unlikely. In addition, this approach suffers from the ‘post-modernist’ conceptual
weaknesses just mentioned when discussing liberalism as an endless conversation.
51
As an alternative to these ‘romanticized’ views of language and dis-

cussion, Minson (1993) proposes the notion of an ‘art of negotiation’.
This is not an idealized truth-oriented dialogue but a process of truce-
seeking, looking for common ground, culminating in a binding decision
that is attentive to the capacities of agents in the process to muster their
arguments and to preserve their positions. It can be seen as an attempt
to square the circle of participation and deliberation. It becomes pro-
moted as a modus vivendi for a particular type of governmental activity
committed to the negotiation of differences. This art of negotiation
requires the cultivation of a particular type of persona (not the assump-
tion of an already reasonable civic person). And it is towards an analysis
of that form of corporate persona necessary and adequate to the task of
becoming a ‘global corporate citizen’ in an international constitutional-
izing domain that the next chapter discusses.
Author Query
[AQ1] The year “1987” in Scheuerman (1987) has been changed to
“1997” as per reference list. Please confirm.
[AQ2] Please check whether insertion of “ibid.” is correct here and
subsequent places.
[AQ3] Please check whether the expansion of MNC is correct
[AQ4] Please provide the expansion of LDC.
[AQ5] The year “2007” in Hindess (2007) has been changed to “2006”
as per reference list. Please confirm.
[AQ6] Please check this sentence.
52
Global Corporate Citizenship Examined
Rarely have businesses found such a complex and challenging set of eco-
nomic pressures, political uncertainties and societal expectations. Regardless
of their industry sector, country of origin, or corporate ownership structure,
they are under growing pressure to demonstrate outstanding performance
not only in terms of competitiveness and market growth, but also in their
corporate governance and their corporate citizenship.
World Economic Forum, Responding to the Leadership Challenge: Global Corpor-

ate Citizenship Initiative, 2003, p. 2
3.1 Introduction
Amongst other things, this chapter explores how the issue of corporate
social responsibility (CSR) has quietly morphed into a concern to estab-
lish global corporate citizenship (GCC), and what the significance of this
move might be. It focuses on the political aspects of this move in a
preliminary way; and the following chapter extends the discussion
further. There has been much written on the economic and social aspects
of CSR but less on the political aspects of GCC. As will be argued later in
this chapter and the next one, CSR and GCC are not the same thing
though they are often conflated. But what is noticeable is the rapidity
with which the issues of both CSR and GCC have entered the commer-
cial and academic vocabulary, how seriously this is being addressed in
many quarters and by many parties—though by no means all companies
are to be included here (see below)—and how extensive is the concern
with ‘corporate citizenship’ matters amongst a growing number of
organizations and groups operating on an international scale. CSR
became a major concern for the corporate business world—and for
business school academics—particularly after the large-scale corporate
53
scandals of the early 2000s in the United States (Enron, WorldCom) and
in Europe (Ahold, Vivendi Universal, Parmalat). But it was a well-estab-
lished trend before these particular events. GCC is of a more recent
vintage, but it is a category that has gained added momentum as global-
ization has become perceived as the driving force behind corporate
expansion internationally.
Several important issues arise when considering the fate of corporate
citizenship as claimed in an international context. Traditionally, as
discussed in the previous chapter, citizenship pertains to a particular
territorially defined and designated polity, one characterized by a ‘con-
stitution’ of a sort (whether written or unwritten) that lays down a
certain Grundnorm for that polity (Kelsen, 1945—see Chapter 6). This
defines the rights and obligations associated with citizenship, broadly
speaking. But what happens in an international context? What does
‘globalization’ do to citizenship or for citizenship? Other than under-
mining the clear link between territory, jurisdiction, and citizenship,
can it inaugurate a different field or domain for citizenly behaviours and
activities, one in which, for instance, corporations can legitimately
claim a new form of global citizenship (Logsdon and Wood, 2002;
Post, 2002; Thompson, 2005a; Crane and Matten, 2008)?
A preliminary issue is whether, after the advent of an international
system of states in the seventeenth century, national legal orders have
ever been quite as distinct as they are commonly thought to be. Given
an international system of states, their mutual recognition already pre-
sumes a certain common terrain of legal communication within which
territorial distinctions are marked (Grotius, 2001[1625]). Thus, ‘judicial
borrowings’ between states are nothing new. And territories themselves
are less about drawing geographical or spatial boundaries than they are
about drawing social distinctions between peoples. ‘Territory’ is primar-
ily a way of dividing up and governing people, not space (etymologically
it is associate with the term ‘terror’: a place from which people are scared
away from—see Hindess, 2006; Elden, 2009; Hunter, 2011). In addition,
jurisdiction does not necessarily coincide with territory. Jurisdiction is
either claimed or designated by a definite act that provides legitimacy
and force for juridical operations. Take the European Court of Justice, for
instance (the EU’s Supreme Court). This does not have any inherent
jurisdiction either over the territory of the EU states or in terms of some
‘natural’ defence for that space or the rule of law (RoL). Rather, it has
jurisdiction only insofar as the EU Treaties and similar instruments have
conferred jurisdiction upon it in particular areas. It is a creature of the
Treaties, and one limited by their embrace—see Chapter 6. (In commer-
cial and civil matters, EU jurisdiction is handled by the 1968 Brussels
54
Convention on Jurisdiction, which, as its name implies, is not the result

of a treaty as such—it is part of ‘customary’ soft law; see Abbott and
Sindal, 2000.) Similarly, some US courts operate extraterritorially in a AQ1
way so as to claim jurisdiction over matters that either do not happen on
their territory or which take place in another jurisdiction (as in the case
of the US Patriot Act and Foreign Corrupt Practices Act).1
One of the contexts in which this issue has arisen is in the debate
about the possible emergence of a Lex Mercatoria (new merchant law) or
Lex Informatica (new law governing cyberspace) as raised in the previous
chapter. This refers to a transnational legal order for global markets and
electronic communications that has developed outside of national or
international law, strictly speaking (though it is often thought to be
heavily implicated in the latter—e.g. Delaume, 1989). Many MNCs, for
instance, have arrived at commercial contracts which they submit nei-
ther to national jurisdiction nor to national substantive law, or so it is
claimed. Instead, they agree on international arbitration and the appli-
cation of a transnational common code or law that is formally inde-
pendent of any national legal order (though see below). This is often
thought to be a form of ‘global law without a state’. Indeed, for some,
this development is at last destroying law’s hierarchy—killing the sover-
eign father (and with it the ‘Kings two bodies’),2 exposing the law’s
paradoxes, and triggering its self-destruction. Globalization is thus the
harbinger of a truly heterarchical transjurisdictional legal order (Teub-
ner, 1997a: 777—more on this later).
3.2 The Corporation in ‘International Law’
In the Appendix to this chapter, the legal position of the modern corpor-
ation operating within a national legal context is analysed in detail
(Appendix II—dealing mainly with the Anglo-American corporate
form). This shows that there remains a surprising amount of ambiguity
over the exact legal status of various stakeholders in respect to the
enterprise, particularly as to the legal position of shareholders as owners
1
The Foreign Corrupt Practices Act (FCPA) (1977) invests American courts with extrater-
ritorial jurisdiction over American citizens or American companies for using bribery abroad—
thus, effectively, natural citizens and companies are treated alike.
2
This refers to the idea that the sovereign (the ‘King’) has two separate forms of existence:
as a natural entity and as a social body. The traditional doctrine of modern sovereignty is
thought to embody both of these at once: it has a single unified presence—one confined
within territorial borders, and possessing a single set of interests, ruled by a supreme author-
ity that unambiguously advances those interests (Kantorowicz, 1957).
55
of the company. The respective positions of shareholders and managers

in regard to ownership and control of commercial corporations has an
obvious impact in the case of internationally operating companies:
these tend to be incorporated in a particular jurisdiction, and are listed
on one or more stock exchanges; as a consequence, they are subject to
the legal and listing rules of those jurisdictions. But things get a good
deal more complicated when companies become ‘multinational’ (or
‘transnational’) in their operational characteristics. How can they be
made responsible or accountable—if at all—for ‘wrongful’ acts that are
committed beyond the jurisdiction of that country in which they may
have been first incorporated, for instance? The exact legal position of
companies as they operate in the international sphere remains the
subject of dispute. Initially, ‘international law’ is put in inverted
commas to indicate that the discussion below will not confine itself
just to the field of international law as normally understood, that is, as
a field of law initiated by, and policed and sustained by, national states
operating within the state system. This is very important of course, but it
does not fully encompass the entirety of legal determinations of the
corporate entity and the adjudication on its behaviour (Zerk, 2006).
However, we begin with international law as normally understood:
involving the principles and norms of international conduct. Here, a
preliminary question is whether corporations have legal personhood in
this context analogously to that in their domestic contexts (as analysed
in the Appendix), thereby enabling corporate behaviour to be subject to
court-bound actionable endeavour at the international level. This
remains heavily disputed. For instance, Hansen (2010) and de Jonge
(2011) demonstrate almost diametrically opposed views (see also Backer,
2006). On the one hand, we have: ‘Legal personality is defined as the
capacity for rights, duties and claims within a legal system and in recent
years, the international legal personality of the MNE has quietly
emerged’ (Hansen, 2010: 1–2). On the other hand, we have: ‘At the
international level, the corporate form is barely recognized, still less
directly bound . . . TNCs have been able to operate largely in a legal
vacuum because international law, including international human
rights law imposes no direct legal obligations on corporations . . .
[which] . . . has been . . . instrumental in denying corporations “person-
hood” under international law. . . ’ (de Jonge, 2011: 67–8).
Thus, whilst as yet there does not seem to be a strong presence of the
corporation as a proper subject of international law, there are many
moves afoot that have either already confirmed its presence in soft law
or that are ‘surrounding’ the corporation with an elaborate apparatus of
formal domestic and international law that in effect circumscribes its
56
activities and behaviours in a way that confirms a kind of surrogate

personhood (McBarnet et al., 2007). And it is precisely these moves AQ2
that are an important contributory factor in the quasi-constitutionaliza-
tion of the international corporate sphere. These and other develop-
ments are analysed in the rest of this chapter (and extensively in
Chapter 6).
One of the main instruments of international law is treaties. And it is
in respect to treaties that the strongest grounds for characterizing cor-
porations as legal subjects can be found. This involves a vast array of
international law emanating from the UN system, regional free trade
agreements like NAFTA and the EU, from the International Criminal
Court (ICC), the WTO, various international conventions and protocols
dealing with civil liberties, environmental sustainability, sea and land
jurisdictions, resource extraction, financial dealings, fishing, forest pro-
tection, contract arbitration, and more besides.
A second source of possible international corporate personhood is
those aspects of national corporate law that enforce a jurisdictional
competence beyond the immediate territorial limits of any particular
nation state. In part, the extension of national legislation to impose
standards on company behaviour beyond their borders is a direct con-
sequence of the enforcement of international treaties and conventions:
these have to be rendered into a national legal framework and hence
become subject to ‘domestic’ adjudication. But there are many outward-
looking initiatives, often included in domestic company acts, that pre-
scribe general codes of conduct and which, as a result, apply to company
activity when operating abroad. The 2006 UK Company Act and the
2008 South African Company Act both impose some (minimal) consid-
eration of stakeholder involvement and duties to consider ethical and
environmental issues.3 A similar proposal was embodied in the 2009
India Companies Bill. And Danish corporate legislation puts the obliga-
tion for extensive CSR engagement on companies unless they explicitly
opt to excuse themselves from this (which few of them do—see Danish
Government, 2008). Inasmuch as companies originating from these
jurisdictions conduct their business abroad, they would be subject to
3
For instance, the UK’s framework is summarized thus:
Our proposals will require quoted companies to provide a narrative report setting out the
company’s business objectives, its strategy for achieving them and the risk and uncer-
tainties that might affect their achievement. It will require companies to report on other
matters where these are necessary for an understanding of the business. These matters
include employees, the environment and social and community issues.
Corporate Social Responsibility: A Government Update (March 2004), <http://www.bis.gov.
uk/files/file48771.pdf> (accessed 2 March 2011).
57
this ‘domestic’ legislation (even though some of it may have arisen as

discussed above by incorporating this from obligations entered into by
international treaties and conventions).
Then there is the US Alien Tort Claims Act (ATCA—better known as
ATS—Alien Tort Statute) which would seem to enable action to be taken
in US courts for harms done by US companies when operating abroad.
The ATS was passed by the first US Congress in 1789 and was initially
designed to tackle piracy on the high seas. Formally, it gives US federal
courts jurisdiction over ‘any civil action for a tort only, committed in
violation of the law of nations or a treaty of the United States’. It has
been read as giving US courts jurisdiction over non-criminal abuses
that occur anywhere in the world, so long as the alleged wrong would
violate international law (A-M. Slaughter and D.L. Bosco ‘Alternative
Justice’ <http://www.globalpolicy.org/intljustice/atca/2001/altjust.htm>
(accessed 6 January 2010), Shamir, 2004). After lying dormant for 200 AQ3
years, the Act was revived in the late 1970s. As of 2006, there had been
thirty-six corporate ATS cases initiated in the United States, mostly over
alleged human rights abuses by companies.
However, the exercise of federal jurisdiction over human rights cases
arising out of actions in Nigeria and South Africa in particular, spurred
debate and controversy over the ATS. In 2009, there were several import-
ant courts’ judgements upholding the dismissal of cases filed against
corporations under the ATS. And in September 2010, after a somewhat
fractious debate among its judges, the US Court of Appeals for the
Second Circuit held that corporations could not be held liable for viola-
tions of customary international law.4 Some legal experts called this a
landmark judgement and it looks like companies cannot now be liable
in US courts (under ATS) for violations of international human rights
law. We tackle the international human rights programme in respect to
corporations in the next chapter.
But in addition to this public international law, there is, of course,
natural and private law (Weinrib, 1995). Here is where the question of AQ4 AQ5
the juridicalization of the international most controversially arises.
A key feature of this process—and the one that takes it into its most
4
Formally, it found that: (a) under both US Supreme Court and Second Circuit precedents
over the previous thirty years that address ATS suits alleging violations of customary inter-
national law, the scope of liability is determined by customary international law itself (and
therefore not domestic US law); (b) under Supreme Court precedent, the ATS requires courts
to apply norms of international law—and not domestic law—to the scope of defendants’
liabilities. Such norms must be ‘specific, universal and obligatory’; and (c) under inter-
national law, ‘corporate liability is not a discernible—much less a universally recognized—
norm of customary international law’, that the court could apply to the ATS, and that the
plaintiffs’ ATS claims should indeed be dismissed for lack of subject matter jurisdiction.
58
developed form—is to see the emergence of a truly global ‘private

authority’ via the establishment of a set of institutions that arbitrate
private contracts. Amongst these institutions are the Paris-based Inter-
national Chamber of Commerce, the London Commercial Court, and
the International Law Association. In addition, there are a series of
intergovernmental organizations like the United Nations Commission
on International Trade Law and its Institute for the Unification of
Private Law, the International Maritime Organization, the Hague Con-
ference on Private International Law (and many others besides, see
Cutler, 2003) that operate to codify, unify, and adjudicate such private
law. The question is what do these amount to and how important are
they in the ‘global’ legal system.
For the likes of Gunter Teubner (1997a, 1997b, 2002), these develop-
ments are a key indicator of a wider radical transformation of the
international system wrought by the forces of ‘globalization’. As men-
tioned above, and in the previous chapter’s discussion of ‘societal con-
stitutionalization’, Teubner claims that the new world of globalization AQ6
finally breaks the link connecting the law to democratically constituted
political discourses and practices. It produces a double fragmentation:
cultural polycentrism and functional differentiation. New ‘linkage insti-
tutions’, like those mentioned immediately above, create a new law
directly by transjurisdictional operations without being translated into
formal political issues. They escape and evade regulatory claims of both
national and international law and practice, and form a legal (quasi)-
sovereignty of their own (see below). This global law has no legislation,
no political constitution, and no politically ordered hierarchy of norms.
It is a ‘polycontextual’ law—law with multiple sources displaying no
unifying perspective, produced by different mutually exclusive dis-
courses of society. Such a system of recursive legal operations works in
terms of more than one code, combining conjunctural and disjunctural
operations, connected through transjurisdictional operational net-
works. It displays a heterarchical multitude of legal orders rather than
a clear and traditional differentiation into legislation and adjudica-
tion—a plurality of law production comprising a patchwork of ethnic
and religious minority laws, rules of standardization, variable profes-
sional disciplines, contracting, intra- and intergovernmental rule
making, etc. Curbing the abuses of power—by the RoL in the traditional
sense—will not help in civilizing this many-headed hydra, Teubner
suggests. Indeed, we must face the impossibility of constitutionalizing
this legal multiplicity in the language of legal restraint or the arbitrari-
ness of the sovereign. In the final analysis, there is no sovereign power
left, or so it would seem. And as is clear from this summary, at best this
59
could only amount to a quasi-constitutionalization of the global sphere,

even if the terminology of constitutionalization remains remotely
appropriate to this form of analysis (which Teubner indicates in only
ambiguously the case). AQ7
But what are we to make of this vision? The problem is that it may be
little more than an interesting flight of fancy. Even Teubner recognizes
that such law—if it exists in a stable and significant form—is always
judged against and according to existing legal orders. It tends to remain
tethered to a national arena. Indeed, the strong trend in the contexts
that Teubner describes is towards the Anglo-Americanization of such
law (Teubner, 1997a: 782; Appelbaum et al., 2001: part 4; Kelemen and
Sibbitt, 2004; Levi- Faur, 2005; Morgan and Quack, 2005). As Riles
(2010) has pointed out in the case of Japanese financial swap contracts,
for instance, posted collateral is either booked under UK or US law,
which remain the internationally recognized jurisdictions for adjudi-
cating on these transactions.5 And the wider internationalization of law
is being driven by legal firms and MNCs who all still have their own
strong national organizational patterns and routines. The older and
traditional trans-European network of constitutional lawyers and arbi-
tration judges, who found and cultivated a specialist niche in the ICC
and Hague Conference arbitration panels, are being displaced by new
aggressive transnational legal firms operating under Anglo-American
(and German) legal dominance. What is more, the empirical evidence
suggests that the appeal to such transjurisdictional law is highly limited
and marginal, and may even be declining, as MNCs and others seek
judicial redress in national courts (Dasser, 2001). Applebaum et al. thus
conclude: ‘The lex mercatoria, at least at the present time, seems to have
far greater significance in the minds of legal scholars and sociologists of
law than it does for merchants themselves’ (2001: 18).
But whilst a strong lex mercatoria may not be in the making, there is
little doubt that there remains a definite general trend towards a juridi-
fication of social, political, and economic life more generally, at both
the domestic and the international levels. This seems unstoppable.
In many ways, this also parallels, and, indeed, is part of the ‘privatiza-
tion of authority’, something that impinges in the case of those many
5
Swap contracts are a particular type of derivative whereby differences between the
financial conditions attached to one financial instrument in one location can be exchanged
for another similar one in a different location so as to ‘arbitrage’ differences between them.
Riles’s case concerned mainly currency swaps conducted under the umbrella of the Inter-
national Swaps and Derivatives Association ‘Master Agreement’ which specified either UK or
US law as the options for contract jurisdiction and dispute settlement.
60
organizations discussed below and in the next chapter that seek to

manage and regulate GCC.
3.3 Corporate Social Responsibility: Setting up the Issues
CSR involves corporate activity that focus on enhancing relations with

stakeholders while at the same time improving social welfare (McBarnet
et al., 2007). But Colin Crouch recently proposes a much narrower
definition focusing on just ‘corporate externalities’, that is, ‘. . . behav-
iour by firms that voluntarily takes account of the externalities produced
by their market behaviour, externalities being defined as results of
market transactions that are not themselves embodied in such transac-
tions’ (2006: 1534). Such an approach overlaps with a widely recognized
definition of CSR offered by the European Commission: ‘a concept
whereby companies integrate social and environmental concerns in
their business operations and in their interaction with stakeholder on
a voluntary basis’ (European Commission, 2001: 6). This definition
invokes the famous ‘triple bottom line’ approach to CSR: that com-
panies should pay attention not only to their financial bottom line
but also to their ethical/social and to their environmental bottom lines
as well and at the same time.
As often suggested, the conventional views of CSR are dominated by
two key positions, presented by both CSR advocates and their critics
(Gond et al., 2011). The first, associated with the critics of CSR and more
broadly of neo-liberalism, is that CSR is a smoke screen for deregulation
(Shamir, 2005) and window-dressing for disguising irresponsible behav-
iour on the part of companies (Banerjee, 2008; Gond et al., 2009).
According to this view, corporations actively shape the CSR agenda in
order to ‘de-radicalize’ CSR and to ultimately undermine its potential for
social reform (Shamir, 2004a; Banerjee, 2008). Corporations do so by
creating, supporting, or co-opting ‘market-friendly’ NGOs that frame
the notion of CSR in ways that suits business interests. Hence, it would
be wrong to consider CSR as an ‘emancipatory social project’ or a
‘counter hegemonic force’ to the dominant neo-liberal paradigm.
Rather, social responsibility is a subtle but nevertheless effective
response from the corporate system to the threat of further governmen-
tal regulations. These practices fit neatly with an approach to neo-
liberalism that focuses on ‘self-responsibilization’ and stresses new
modes of governance through ‘market-embedded morality’ (Shamir,
2008; Thompson, 2008b). As a consequence of this, the current devel-
opment and diffusion of CSR would achieve a ‘silent takeover’ by
61
corporations of political and social spheres, which was a concern shared

by the earlier CSR thinkers (Bowen, 1953; Levitt, 1958; Chamberlain,
1973).
The second position, firmly underpinned by neo-liberalism and cen-
tral to many definitions of CSR influenced by the US experience, is that
CSR is what government policy or regulation does not require of busi-
ness or that which occurs ‘beyond compliance’—beyond the require-
ments of government and the law (McGuire, 1963; McWilliams and
Siegel, 2001, 2011). This view puts CSR and government into a certain AQ8
alignment but tends to keep them apart: corporations undertake social
responsibilities entirely on a voluntary basis and governments adminis-
ter public policy. This perspective, often endorsed by the mainstream
economics and management studies literatures, considers CSR to be
either a form of philanthropy that has ethical and normative objectives
or a business strategy that has an instrumental dimension: to enhance
reputation and reap the marketing rewards (Porter and Kramer, 2006). In
both cases, CSR is conceptualized as a form of corporate self-governance
which exists alongside government and the public system of govern-
ance (McBarnet et al., 2007: 13–27). Thus, government and CSR coexist,
but reflect no obvious relationship. However, two recent developments
somewhat undermine this view: first, governments have increasingly
taken a closer interest in promoting CSR via legislative moves;6 second,
there is an argument that CSR represents a new form of governance
complementary to traditional governmental activity so that governments
and firm governance (in respect to CSR in particular) are now closely
aligned (Scherer and Palazzo, 2011). We return to this latter influential
view in the following text, but here is where corporate citizenship
appears sharply since it is just this widening governance role for com-
panies that focus the idea of their citizenship.
3.4 What is Different about Corporate Citizenship?
As just indicated, CSR integrates traditional financial issues with social

responsibilities and environmental sustainability concerns. But what
about the idea of ‘corporate citizenship’? Is this different to CSR?
6
This is not just the case in Europe (Steurer, 2010; Knopf et al., 2011) but also in Africa and
Asia (Bertelsmann Stiftung, 2007). One needs to be cautious, however, in describing these
strongly as legislative moves. Close inspection shows they are mostly rather weak in terms of
formal legislation, relying instead on public policy and regulatory and administrative initia-
tives that still rely heavily on voluntarism for their implementation. This is discussed further
below and in the following chapter.
62
Despite the widespread and growing use of this phrase, it remains

somewhat ill-defined. In fact, there are obvious and close overlaps
between the two. Post (2002)—who is typical of many—defines ‘global
corporate citizenship’ as:
. . . the process of identifying, analysing, and responding to the company’s
social, political, and economic responsibilities as defined through law and
public policy, stakeholder expectations, and corporate values and business
strategy. . . . [It] involves both actual results (what corporations do) and the
processes through which they are achieved (how they do it). Businesses are
citizens, whether or not they want to be, and global companies are global
corporate citizens. Firms can choose to be active or passive in their behaviour,
and constructive or destructive in their relationship to society. Whatever
course their leaders chart, corporations will be judged for what they do and
how they do it. (Post, 2002: 8; italics as in original)
Similar sentiments are expressed by the World Economic Forum (WEF)

in their founding document on GCC:
First and foremost, our companies’ commitment to being global corporate
citizens is about the way we run our own businesses. The greatest contribu-
tion we can make to development is to do business in a manner that obeys
the law, produces safe and cost effective products and services, creates jobs
and wealth, supports training and technology cooperation and reflects inter-
national standards and values in areas such as the environment, ethics,
labour and human rights . . . [ . . . ] A key element of this is recognizing that
the frameworks we adopt for being a responsible business must move beyond
philanthropy and be integrated into core business strategy and practice.
(World Economic Forum, 2003: 2)
Both of these definitions speak of a very wide agenda for companies, to

some extent beyond just the three aspects that have traditionally been
associated with CSR—the triple bottom lines of financial, environmen-
tal, and ethical activities—though they encompass these as well (what
might be termed ‘CSR-plus’). They recognize a different environment in
which companies are working: that they need to come to terms with
their overt political role as active agents of governance and not just as
economic agents out to ameliorate externalities, or engage more widely
with affected stakeholders. And this expansive agenda encourages com-
panies to claim a ‘citizenship’ of a kind. This conception is reinforced by
Schwab (2008) when defining corporate citizenship:
It expresses the conviction that companies not only must be engaged with
their stakeholders but are themselves stakeholders alongside governments
and civil society. International business leaders must fully commit to sustain-
able development and address paramount global challenges, including
63
climate change, the provision of public health care, energy conservation, and
the management of resources, particularly water. (Schwab, 2008: 3)
But what is it a citizenship of ? This is an issue taken up later. In addition,

Post, in the quote above, claims all companies are ‘citizens’; there are
just good citizens (the ‘CSR-plus’ companies) and bad citizens (presum-
ably, those who decide to largely ignore this agenda). Presumably, it is
for the court of global public opinion to finally pronounce on this
distinction, since there is no other obvious arena that could do so. In
the following text, we return to the good and bad sides of GCC.
So corporate citizenship becomes the particular manner in which the
business world absorbs the terminology of civic virtue and public duty
into its day-to-day functions and longer term operational characteris-
tics. So what exactly does civic virtue involve?
3.5 Features of Citizenship and Civic Virtue
Citizenship and civic virtue are often considered as closely related but
they are not exactly the same. Citizenship is about a specific set of
characteristics involving statuses, rights, and responsibilities. Civic
virtue is about activity that promotes and supports the common good,
sometimes at the expense of private interests. However, there is a good
deal of overlap between these two features of the political landscape, so
we deal with each of them separately and in turn.
Citizenship implies above all a full and equal membership of a polit-
ical community. This status aspect typically gives citizens an extensive
set of civil, political, social, and cultural ‘rights’—the right to vote, to
run for public office, to social assistance (‘social citizenship’), to due
process, not to be exiled, etc.—and also a relatively small number of not
very onerous legal duties: military service when required, jury duty, and
(in some cases) a duty to vote. By and large, only a modest set of acts is
required to confirm citizenship. But traditionally, citizenship also
involves membership and identification with the political community,
providing a locus for solidarity and commitment to an essentially self-
governing body.
Often a distinction is drawn between ‘liberal citizenship’ and ‘repub-
lican citizenship’ (recall a similar terminological distinction in the con-
text of constitutional matters discussed in Chapter 2). Strictly speaking,
liberal citizenship does not impose any necessary obligations on citizens
to actively participate in political activity or to sacrifice their individual
interests for those of the common good. In addition, it does not press a
64
requirement to accept collective determination of personal choices or to

place the public above the private interest. On the other hand, repub-
lican citizenship tries to improve the common good for its own sake and
sometimes involves or implies a duty to participate in political activity.
And it is this republican citizenship idea that most closely connects
citizenship with civic virtue, and which seems to pervade the way
such citizenship is interpreted in the context of the corporate world
being dealt with here.
Thus, the kind of civic virtue we are dealing with has to do with the
disposition to further public over private interests in action and deliber-
ation and to contribute to the well-being of the community, promoting
and enhancing the commonwealth or civitas, sometimes at the expense
of the purely private good. Amongst political theorists, the consensus is
that to possess civic virtue is to be properly disposed to promote the
common good (of some relevant community) over purely private ends.
But this definition does not imply that civic virtue necessarily requires
direct political participation, nor does it necessarily imply that political
participation is the best way to exercise civic virtue, though again, in
practice, these tend to be closely linked.
Typical features of civic virtue are law abidingness, the paying of taxes,
treating fellow citizens with respect, voting for candidates to political
office, fighting intolerance and against prejudice, and promoting the
common good. And cultivating the public realm in this way means
engagement in public discourse—a willingness to listen to competing
views and to act professionally in this respect. For companies, it might
additionally involve competing fairly, advertising honestly, paying sup-
pliers and creditors on time, operating efficiently, charging a fair price.
These features of citizenship and civic virtue are most readily associ-
ated with individual personal citizenship. How far they can really be
stretched to encompass corporate citizenship and civic virtue is another
matter. Here is where the debate lies.
3.6 CSR/GCC Trends and Characteristics
In this section, we turn to the trends in corporate reporting of their CSR/

GCC activities. As will become apparent later in this chapter and in
Chapter 4, there is an expanding group of institutions and organizations
that clutter the ‘social reporting’ landscape. A useful service is provided
by Corporate Register.com which collates and analyses corporate reports
appearing in this field. The aggregate growth in the number of these
reports is illustrated in Figure 3.1.
65
6,000
5675
5,000 4799
4105
4,000
3394
3,000 2886
2471
2136
2,000 1927
1490
1209
1,000 838
639
366 464
201 267
62 114
0 26
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
19
19
19
19
19
19
19
19
20
20
20
20
20
20
20
20
20
20
20
Figure 3.1 Global ‘social responsibility’ reports per year (1992–2011)
Source: Corporate Register Reporting Awards (2010: 4, figure 1).
As can be seen, the numbers have grown almost exponentially since

1992. In 2011, there were over 5,600 firms that issued a ‘social responsi-
bility’ report in one way or another. But how are companies describing their
activity in these reports? A picture of this can be gained from Figure 3.2.
The data shown here divides reports into several categories depending
upon how these are titled, so it gives a reasonable impression of the
trends in concerns and emphasis, even though there are obvious over-
laps between the categories. The important trends are a clear move away
from an exclusive emphasis on the ‘environment’ as ‘sustainability’ and
‘responsibility’ became the buzzwords in the early 2000s. Clearly, sus-
tainability can encompass environmental sustainability as well as
organization and financial sustainability. But notice that ‘sustainability’
has shrunk in popularity since 2007, as ‘responsibility’ re-emerged as the
favoured term, along with ‘integrated reporting’, which might indicate a
desire to show how ‘triple bottom line’ concerns are being considered
together—a major objective for those promoting CSR as a genuine
integrative business project.
As mentioned above, CSR has become a worldwide trend (Bertelsmann
Stiftung, 2007), but it is an unevenly distributed one. In terms of the
frequency of various terms associated with CSR/GCC appearing in
66
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
92
93
94
95
01
02
03
04
05
06
07
08
09
10
96
97
98
99
00
11
19
19
19
19
20
20
20
20
20
20
20
20
20
20
19
19
19
19
20
20
Environment Environment, Health & Safety Corporate Responsibility
Environment, Health & Safety, and Community Environment & Social
Sustainability Integrated Philanthropy Social/Community Other
Figure 3.2 Global reporting output by ‘type’ (1992–2011)

Source: Corporate Register Reporting Awards (2010: 5, figure 4).
newspaper reports, Barkemeyer et al. (2009: 82, figure 6) analyses the

trends for several countries and regional areas. They show the importance
of the term ‘responsibility’, particularly with its early 2000s upsurge as the
corporate scandals of that period hit the headlines. ‘Accountability’ is a
popular term particularly in the United States and the United Kingdom,
where this is to some extent seen as an alternative mechanism to full-scale
‘social responsibility’ for ensuring transparency and proper corporate
governance. But elsewhere, accountability does not really figure. ‘Busi-
ness ethics’ represents a fairly common base category. Finally, ‘corporate
citizenship’ is only modestly represented as a separate category.
3.7 The Extent of Corporate Citizenship Claims
So where does this leave corporate citizenship?

Clearly, not all companies claim the title of ‘citizens’—global or other-
wise—even those who are committed to CSR. Indeed, this is a distinct
67
minority. Surveying over 500 company annual reports available on the

Internet in 2008 revealed just under 120 companies that explicitly
mentioned ‘global corporate citizenship’ in their annual reports, and
many of these only mentioned it in passing. Even fewer actually pro-
duced a report entitled ‘Corporate Citizenship’ (thirty-one from the
approximately 500 companies surveyed). A lot more companies issue
CSR reports, of course, as just analysed.
One source of information of the extent and coverage of CSR/GCC-
type activity is provided by two stock-exchange-based information and
indexing organizations that provide important verification procedures
in the case of CSR companies. The Financial Times Group produces the
FTSE4Good Index in the United Kingdom and the Dow Jones company
produces the Dow Jones Sustainability Index for the United States (both of
these include companies floated on various stock exchanges). Data on
both these are provided in Table 3.1.
These indexes report on and include only what might be termed the
‘hard core’ of floated companies that seem to be committed to CSR- and
GCC-type activities and approaches. And as can be seen, these are not a
large group in each case.7 In terms of the sectoral composition, ‘finan-
cials’ dominate. Technology companies and consumer goods producers
are a long way behind. And (not shown) extractive and fuel com-
panies—where one might expect the environmental and ethical
impacts to be greatest—comprise an important aggregated category in
the Dow Jones index (19.2 per cent) but less so in the FTSE index (12.1
per cent). Finally, as far as the geographical distribution of companies is
concerned (measured in terms of their capitalization), it is the trad-
itional OECD countries that dominate—particularly those companies
originating from the United States. One of the great concerns of the
CSR/GCC movement is how to get corporations from elsewhere
involved and ‘signed up’ to the agenda, a problem indicated in the
table by the fact that—other than Japanese—Asian companies are con-
spicuous by their absence.
Turning now to explicitly internationalized companies, according to
United Nations Conference on Trade and Development (UNCTAD) in
2008, there were upwards of 82,000 MNCs (UNCTAD, 2011: 17). Of
these, nearly 60,000 (78 per cent) were headquartered in the developed
7
Both FTSE4Good and Dow Jones Sustainability produce several different indices contain-
ing different combinations of companies. In Table 3.1, the largest and most internationalized
of indexes are shown. But the variation means that a greater number of companies appear in
their expanded lists, though this does not amount to more than a few hundred extra
companies overall.
68
Table 3.1 Industrial distribution and country weightingsa for FTSE4Good and
Dow Jones Sustainability Indexes (end of 2010)
FTSE4Good Index Dow Jones Sustainability Index
Index name ‘Global’ ‘World’

No. of companies 656 325
Industrial distribution (%)

Financials 26 21.4
Technology 15 10
Consumer goods 12 12.3
Health care 11.1 10.1
Consumer services 7.6 5.4
Telecommunications 7.5 4.7
Total 79.3 63.9
Country weightings (%)

The United States 38.0 28.4
The United Kingdom 15.3 17.4
Japan 9.8 5.1
France 6.5 6.6
Switzerland 4.9 7.6
Australia 4.7 5.2
Germany 4.3 8.1
Total 83.4 78.4
Rest of the world 16.3 21.6
Of which rest of Asia 0.8 2.5
a
Weights are based upon capitalization.
Source: Compiled from FTSE4Good Markets Performance Report, Q4 2010, FTSE Research 2010; Dow Jones
Sustainability Indexes, SAM Sustainability Investing, Zurich; and Dow Jones Sustainability World Index Fact
Sheet, SAM Sustainability Investing, Zurich, February, 2011.
countries. But this percentage has been falling (in 1992 it was 92 per
cent), which indicates the urgency felt by the CSR/GCC advocates for
extending their concerns beyond the core countries shown in Table 3.1.
Several important international organizations explicitly address their
members or participants as ‘corporate citizens’ (the UN Global Com-
pact, the WEF, the US Chambers of Commerce, amongst others). As of
November 2010, there were 8,700 signatories to the UN Global Com-
pact, 6,200 of which were companies.
Thus, one thing to bear strongly in mind is that GCC companies are in
a decided minority in relation to domestic or even international com-
panies as a whole. Very small numbers of companies are actually actively
involved it seems, but these do tend to be the large and important
companies. In terms of capitalization and brand image, their import-
ance belies their low absolute number (see Thompson, 2009). AQ9
The substantive concerns of corporate citizenship that appear in the
reports and publications just referred to are summarized in Table 3.2. All
69
Table 3.2 Activities associated with GCC
Ethical issues/values/human rights

Working conditions/labour standards/health and safety at work/gender inequalities/
child labour
Environmental preservation/emission of pollutants/sustainable development
Tackling poverty
General health care/fighting HIV-AIDS/epidemic prevention and fever control
GM crops and foods/preserve biodiversity
‘Fair’ trading
Tax avoidance/corruption
Transparency/accountability/corporate governance—create metrics of performance
Conflict prevention
Fostering the local community
Shareholder returns/marketing/traditional business bottom line issues
Source: Derived from scrutiny of thirty-one ‘corporate citizenship’ reports, surveyed in October 2008.
these issues are to be found specifically in these reports but not all of
them appear in each one.
The question arising from this survey is quite how companies are
supposed to be able to deliver on all these issues. One of the key
problems as they become more overt political players is that greater
demands are thrust upon them, or they create higher expectations
themselves.8 The final issue in the table—shareholder returns and trad-
itional bottom line considerations—may become overwhelmed by all
the other issues that companies are confronting in their role as citizens.
The range of topics is huge. Can companies really be expected to ‘solve’
what amounts to a vastly expanded Millennium Development Goals-
type agenda embodied in these topics, let alone address them seriously?
The politics of this is considered in the following chapter.
One point to raise here is how to classify various models of corporate
citizenship. There are a number of variant conceptions of this depend-
ent upon motivation and beneficiary. Shareholders and stakeholders are
differentiated here, as are instrumental and moral/ethical motivations.
Figure 3.3 shows how this might be classified (Locke, 2002b). AQ10
The minimalist position represents the traditional conventional
wisdom. It was expressed most succinctly by Milton Friedman in the
New York Times in 1970: ‘The social responsibility of business is to
8
This is echoed by Schwab (2008) in his expansive suggestions about corporate citizen:
‘Global corporate citizenship refers to a company’s role in addressing issues that have a
dramatic impact on the future of the globe, such as climate change, water shortages, infec-
tious diseases, and terrorism. Other challenges include providing access to food, education,
and information technology; extreme poverty; transnational crime; corruption; failed states;
and disaster response and relief. Each of these problems is global in scope, even if the
solutions may be locally focused.’ (p. 2).
70
MOTIVATION
Instrumental Moral/Ethical
Shareholders Minimalist Charitable

BENEFICIARIES
Stakeholders Encompassing Social Activist
Figure 3.3 Alternative models of corporate citizenship
increase the wealth of the shareholder’ (Friedman, 1970). Those who

have invested in the company are the only consideration. There should
be no violation of the law, however, or irregular activities. But there is no
wider social responsibility beyond this.
The philanthropic conception is an extension of the minimalist view.
It is mainly the shareholder interest that should be maximized, but on
occasions it is justifiable to temporarily temper this by engaging in
philanthropic activities, like supporting the ‘arts’, giving to charities,
supporting local community activity, providing sports clubs, and even
supporting political parties in an open way. This philanthropic motiv-
ation is a highly topical one because it has received added impetus in the
wake of the fiscal austerity moves after the financial crises. Companies
are being asked to ‘fill the gap’ left as the state withdraws from public
service, welfare, and infrastructure provision. This trend is analysed in
Chapter 4 (see also Thompson, 2012).
The encompassing tradition extends management responsibilities
beyond shareholders to other groups like employees, consumers, cred-
itors, suppliers, customers, etc. The interests of all these stakeholders
should be taken into consideration when the company makes a
decision, so as to maximize the benefits to this wider group. But it
is still ‘management’ that decides how to do this. There is no need for
a radical reform of corporate governance to enable these voices to
gain their own independent say over such decisions taken within the
firm.
Finally, the social activist approach extends the boundary around
corporate citizenship beyond groups directly affected by company
71
decisions—towards society at large. With this view, companies must (not

just should), as a result, act on moral and ethical considerations, not just
commercial ones. Because companies are such powerful and wealthy
actors, and affect so many aspects of life, they have a moral duty to do
this. In addition, this approach often argues for radical reform of cor-
porate governance to encourage such a wider moral responsibility (see
Chapter 4 where this is pursued).
Of course, all of this has become more heated and complex because of
‘globalization’. As indicated above, companies are facing increasing
pressures and are increasingly being subject to scrutiny and monitoring
by a wide range of bodies and processes, operating both internally and
externally. This provides the opportunity to investigate the way stand-
ards are being promoted in the corporate citizenship environment.
Standard setting has become a key element in the current discussion
of globalization, nowhere more so than in the context of the internal
and external governance of international companies. Again, this is a key
topic for the following chapter. There it is argued ‘standards’ are an
important feature of the quasi-constitutionalization process: they repre-
sent a form of soft law, the importance of which is on the rise in an
international commercial context.
3.8 What Kind of Citizenship is Being Claimed

by Companies?
There are several features of the rights that firms can claim that do
parallel those of ordinary citizens. The clarification of these is probably
easiest to identify in the case of US legal practice, since here there is
appeal to the Constitution for clarification (Aligada, 2006). The distri-
bution of these is shown in Table 3.3.
But companies do not just exist as ‘citizens’ in terms of their legal
status. Alert readers might have noticed another distinction that was
operating in the above discussions of citizenship: that between citizen-
ship considered as a status and as an act (Waddock, 2001; Isin, 2008).
This is an important distinction for the way any such citizenship might
be interpreted in a global corporate context. The best way to illustrate
this difference is to refer to Table 3.4.
Companies that claim to be citizens do so mainly in terms of how they
behave and what they do. They demonstrate those aspects included
under the heading ‘acts’ citizenship as shown in Table 3.4 (e.g. Crane
et al., 2008; Thompson, 2008a, 2009a). It is a voluntary activity, associ-
ated with their behaviour in taking responsibility for the social,
72
Table 3.3 Corporations claims on formal ‘legal citizenship’ (the United States)
They can claim the following:

(a) Equality of protection and treatment
(b) Trial by jury
(c) Protection from unreasonable searches and seizures (e.g. of property)
(d) Protection from takings without compensation
(e) The exercise of due process
(f) Non-discrimination
They cannot claim the following:
(a) Protection against self-incrimination (i.e. the prevention of a witness from testifying
against himself or herself)
(b) That corporations and their officers are the same ‘person’ (thus, corporations are
separate from their officers—whereas there is no analogously similar claim that can be
made by ‘natural person’)
(c) Claim certain protections whilst abroad
(d) They cannot command a vote or exercise any of the political consequences that follow
from this capacity (see also footnote 9)
Table 3.4 Characteristics of two types of citizenship
1. ‘Acts’ citizenship
(a) Act in a way that invokes a civic virtue
(b) Stresses active engagement or involvement in public affairs and in the public sphere
(c) Voluntaristic
(d) Behavioural
(e) Represents a ‘claim’ only
2. ‘Status’ citizenship
(a) Rights and obligations determined within the context of a definite polity
(b) These embodied in a clear legal form
(c) Involves the democratic exercise of membership duties and obligations
(d) Obligations thrust upon citizens in a ‘take it all’ manner
environmental, and ethical aspects of their business operations and

conforming to the civic virtue agenda outlined above. Their public
mindedness is driven by the ‘softer’ elements included under an acts
heading.
Several implications follow from these points. First, it shows how
claims are a contingent consequence of the status of companies as
created by statute law. Companies are always incorporated in a definite
jurisdiction. But could this give them the status of being citizens of the
polity in which they are incorporated? Clearly, in some respects it does
as indicated in Table 3.4. But what it crucially does not confer are rights
associated with ‘political citizenship’, roughly indicated by those
aspects of legal citizenship included in the bottom half of Table 3.4. As
discussed in the Appendix, a corporation is a legal ‘person’ (or subject),
73
but it is a ‘fictitious person’ or ‘virtual person’. Strictly speaking, ‘polit-

ical citizenship’ is a legal status only afforded to natural persons.9 And
natural persons must possess certain attributes to qualify: they have to
be cognate beings, able to rationalize and make decisions, and have
continuity through time. In a positive analytical sense, then, we
would have to redefine ‘citizenship’ for it to properly encompass com-
panies as legally recognized citizens. In the normative sense, however,
there seems no reason why a corporation cannot be considered a nor-
mative citizen. The same ‘acts tests’ can apply to human persons and to
corporations: a corporation can perform good works, support commu-
nity initiatives, reduce its deleterious impact on the environment, that
is, behave in a civic manner as discussed above. However, all this just
shows how loosely defined the normative dimension of citizenship is:
recall the discussion above where it was difficult to precisely pin down
what civic virtue means. To talk of corporate citizenship in this sense
should be recognized for what it really is, perhaps little more than a
rhetorical strategy—an attempt to disguise a policy option, or set of
options pursued, within an inappropriate discursive category. Recalling
what Marx had to say about utopian socialism—that the bourgeoisie
want the proletariat to love it—there are no problems with corporations
trying to be loveable, but they should be loved for the right reasons.
Under present definitional rules, to call this ‘citizenship’ is a confusion
of categories.
Thus, the approach adopted here is not the same as what could be
termed the ‘organizational–ethical’ approach to corporate citizenship
(Matten and Crane, 2005; Moon et al., 2005). This approach stresses a
normative and ethical notion of citizenship to the neglect of its legal
and positive definition. It celebrates an extended vision of the CSR
agenda, very much driven by a commitment to ‘ethical acts’ and partici-
pation by companies in fulfilling—or taking over—civic duties in the
name of their ‘values’. This is considered in a basically ‘domestic con-
text’, where deliberative democracy occupies a key role in pushing the
9
There may be some partial exceptions to the norm that only ‘natural persons’ can vote
and make a status claim on citizenship in this manner. For instance, the City of London has
an unusual governmental structure made up of the Lord Mayor and The Court of Common
Council which comprises Aldermen who are in part elected by City corporate businesses and
commercial partnerships, not just by resident individuals (see <http://www.cityoflondon.
gov.uk/Corporation/about_us/governing.htm>). In addition, Hong Kong has special repre-
sentatives of certain commercial interests who can vote in the legislature, who are not
exactly elected by individual voters, but, in effect, appointed from ‘functional constituen-
cies’ (see <http://en.wikipedia.org/wiki/Legislative_Council_of_Hong_Kong>). In both
cases, ‘citizen voters’ are not necessarily natural persons. However, these tend to be marginal
cases, ones either of an historical anomaly with little real power or arrangements designed to
deal with limited and unusual situations.
74
normative agenda.10 What is more, the organizational–ethical approach

endorses the way companies are increasingly operating ‘alongside’ gov-
ernments, not just as auxiliary supports for the provision of public
services but as parallel governance arenas for such a provision. This
thus supports an expansive view of company social responsibility
agendas (Crane et al., 2008). Companies—as overt political agents that
are taking on more and more responsibility for society’s many troubles
and ills—need to be considered as part of a wider governance process—
to include governments and state actors almost as equal partners in that
provision of public goods and the maintenance of civic virtue ( Jones
and Haigh, 2007; Néron and Norman, 2008). In addition, this speaks to
a rather Harbermassian conception of the political being fundamentally
a problem of legitimacy, so that companies (in parallel to polities) are
confronting an issue of bolstering their legitimacy as they go about
exercising their citizenly duties. In addition, the category of ‘identity’
that informs such a central part of the analysis of citizenship in Crane
et al. is one that precisely serves as a mechanism that combines the acts
and status elements of citizenship as outlined in Table 3.4.
In an overt international context, of course, it is convenient to under-
play the status aspects of citizenship because these just cannot operate
there in the same way that they might in a domestic context; there is no
obvious substantive polity with the administrative or governing cap-
acity to establish and enforce citizenship rights and obligations. Instead,
we have a range of organizational bodies that have arisen to claim,
advocate, and monitor the GCC aspect of MNCs’ business practices as
they see them. These are not inconsequential in practice, and they have
a genuine impact on the nature of some international businesses in the
GCC context (Thompson, 2005a—this is examined at much greater
length in the next chapter).
When faced with this combination of actual organizations, Figure 3.4
explores a preliminary way to categorize them. Two types of ‘inter-
national regime’ are identified: communitarian (which presumes relatively
closed borders between national communities) and cosmopolitan (which
presumes relatively open borders and porous relationship between
10
Perhaps this also invests too much in the idea of deliberation to the detriment of
substantive notions of democracy (deliberative norms refer to democratic aspects of activity
such as transparency, due process, the representativeness of participants, etc.; substantive
norms refer to rule of law; genuine contestation and compromise over policies and out-
comes; separation of powers, including, crucially, an independent judiciary, freedom of the
press, etc.). For deliberative democracy, ‘procedure’ is everything in terms of democracy, just
as this now animates the commitment to a certain conception of citizenship by the corpor-
ate ‘organizational–ethical’ approach. The connection of this to a Habermassian view is
confirmed in Palazzo and Scherer (2006).
75
TYPES OF INTERNATIONAL REGIME
Communitarion Cosmopolitan
(closed borders) (open borders)
Democratic
POLITICAL OBJECTIVE
Sovereignty OECD/ WEF

WB ICGN
UN GLOBAL INGOs
Social COMPACT
Justice
Figure 3.4 Corporate governance regimes

WB, World Bank; WEF, World Economic Forum; ICGN, International Corporate Governance
Network; (I)NGOs, (International) non-governmental organizations
national communities, or, at the extreme, a single such international

community). On the other axis are ‘political objectives’, which are di-
vided into the preservation or acceptance of ‘democratic sovereignty’ on
the one hand and the promotion of ‘social justice’ on the other. Repre-
sentative organizations that fit into each of the cells are also illustrated.
A task for Chapter 4 is to fill out this picture with an examination of the
form and function of these and other bodies. This will also involve
drawing a clearer distinction between those organizations of advocacy
and those of monitoring, which are rather run together here. But what
Figure 3.4 does is to provide another ‘layer’ to the multilevel governance
structure of CSR/GCC, which is addressed in further detail in Chapter 6.
However, does a lot of the activity centred on what these organizations
do amount to ‘constitutionalization’ by the back door? Are we seeing an
informal, unrecognized, almost surreptitious emergence of global con-
stitutionalizing creeping up on us unnoticed as these organizations go
about their business of advocating and promoting GCC? These key
questions remain the ones to be explored in the rest of this book.
3.9 Corporations and Moral Personhood
One difficulty in the corporate citizenship debate revolves around

whether companies can be legitimately considered as equivalent to
76
‘moral persons’. This is particularly important from the point of view of

their citizenship rights, since one of the attributes of ‘natural persons’ is
that they are imparted with a certain moral agency: as subjects of rights,
they must administer those rights in the form of intentions and can be
held individually responsible and subject to an accountability scrutiny
as a consequence. In that companies are increasingly claiming to be
ethical entities—undertaking public duties and paying particular atten-
tion to the moral consequences of their actions—they are demanding
concomitant rights accordingly.
This issue has generated an enormous body of literature and discus-
sion and it is not the intention to review all this here (though see
French, 1979 and Wherhane, 1985 for the basis of the remarks here;
and also Thompson, 2008b). A central issue is that the legal personhood
of companies imparts them with a decision-making procedure and
capacity that pertains to their own activity as such. But although these
corporate rules and procedures specify organizational behaviour, they
seldom define the ‘intent’ of those rules or behaviour. So the question
arises as to whether the concept of intentionality can be appropriately
ascribed to corporations at all. On the other hand, it is surprising how
frequently this has become part of corporate behaviour: articles of asso-
ciation and mission statements abound with such statements. Inas-
much as corporate internal decision structures incorporate and impart
these objectives into properly considered procedures that are followed
through, events are re-described as corporate policy and attributions
made accordingly. In effect, these become the ‘intentionality’ of the
corporation independently of those of its officers. But inasmuch that
corporate responsibility can become re-described as social responsibility,
does this necessarily coincide with them being morally culpable?
(Wherhane, 1985: 47).
Whilst this debate continues—and there is very much more that
could be said about it—below I make an attempt to circumvent its
terms by setting up corporate citizenship in a different manner: this
involves asking the question of the persona of citizenship in a corporate
context. As explored below, the idea of a persona is that this is a deliber-
ately constructed ‘image’ involving a range of determinations that are
exercised, enacted, and performed rather than being moral or ethical
beliefs or values held as a consequence of subjectivity. This also goes to
further disrupt the discourse of rights that saturates this and any other
discussion of moral personhood. However, before that it will be useful to
examine the form of the claims to be ‘citizens’ made by companies, and
who is addressing them as such.
77
3.10 How is Corporate Citizenship Being ‘Made’?
This section returns to the issue of what is involved with the conception
of corporate citizenship, in particular with how citizenship is being
constructed both for companies and by them: how are companies (re)
presenting their position? Such a discussion provides the underlying
contours for a consideration of the way they are constructing their
political character: their political persona.
The question to ask in this case is whether corporate citizenship is
about the public mindedness of companies? About them recovering a
spirit of humanity in an expression of their civic virtue? This is what
companies are themselves claiming as the key aspects of their citizen-
ship. But on the other hand, is it more about the possession of certain
definite powers and capacities derived from a certain position occupied in
the domestic and international sphere? Is the source of their citizenship
to be found in the persona of the modern corporate personality, its
powers and capacities, its attributes imagined and fostered, and not in
the form of some ‘ideal’ of citizenship? (Burchell, 1995, 1999).11 Thus,
to ask the question of the persona of the corporation is to ask the
question in a way that avoids issues of direct moral agency. Rather, it
speaks to a presentation, a performativity, and an enactment by com-
panies themselves.
Modern personal citizenship derives its capacities from the activities
of government, it is argued here, not from nature. In the case of com-
panies and GCC, are these capacities derived analogously from bodies
like the UN Global Compact, the WEF, and the US Chamber of Com-
merce—each of which deliberately addresses its members as citizens?
Are these the places where companies are made fit for citizenship by
self-formation and self-discipline operating through the category of
‘responsibilization’, or rather through the practice of responsibilization
(Thompson, 2008b)? How is this practice acquired and fostered as a set
of practical skills and routinized functioning?
This approach would emphasize the spaces of forums like the UN
Global Compact and the WEF as the places where these obligations are
fostered. They represent a ‘welcoming association’ for the rhetorical
examination of responsibility. Similarly with company-backed confer-
ences about CSR and GCC, like those organized by the magazine Ethical
11
The idea of a corporate persona is to focus attention on the way a particular ‘self-image’
of the corporation is actively constructed via a range of cognitive and social mechanisms
which, whilst including its legal designation, would not rely exclusively on this.
78
Corporation and the US Chamber of Commerce. These spaces constitute

a kind of ‘clan network’ encouraging the activity of citizenly self-culti-
vation by those companies attending.
And it is important that these places represent a kind of private
sphere. This provides the conditions for this activity to be seen as a
matter of companies expressing their freedom, away from direct govern-
mental sponsoring or interference. Companies become the civic-
minded ‘burghers’ of these private associations. Having attended several
of these conferences, I can testify that they are full of declarations of
public spiritedness by companies. An exhortatory style is in evidence
that sometimes smacks of civic revivalism. So these are occasions for a
declaratory outwardness dependent upon an inward self-reflection and
moral discipline.
And these conferences and meetings are important in another respect.
They are places where all sorts of manuals of best practice are marketed
and sold: handbooks of ‘how to do it’, describing how to be a good
corporate citizen. Publishing companies like Earthscan and particularly
Greenleaf market a series of these, one of the most interesting of which
is Raising the Bar (Fussler et al., 2004), which has become almost the
bible of how to work the UN Global Compact (see also Jonker and de
Witte, 2006). These are books of conduct and civic instruction, offering
technique, practical, and moral guidance through the maze of risks
associated with non-sustainability. They say to companies ‘examine
yourself and then do this’.
Also, around these conferences and meetings are to be found
consultants, hovering like hawks ready to swoop on any passing
company representative. Risk analysis? We can do it for you!
Reputation management? We can do it for you! Writing your yearly
Sustainability Report? We can do it for you! These consultancy firms
provide a support mechanism for cultivating a sense of corporate
citizenship.
And finally, endorsement by a high-profile academic is also import-
ant. John Ruggie fulfilled this role for the UN Global Compact (Ruggie,
2002, 2004) and now in respect to the UN Human Rights Commission
in its attempt to extend full human rights into the corporate world
(Ruggie, 2008). Michael Porter fulfilled a similar role for the WEF in
terms of its general programme of corporate citizenship (Porter and
Kramer, 2006; WEF, 2008—a discussion which Porter chaired). The
initiative by the UN to embed Human Rights in the business world—
which is being spearheaded by Ruggie—is discussed at length in the
following chapter.
79
3.11 The ‘Good Corporate Citizen’
A number of leading firms involved in the GCC movement claim to be

‘good global citizens’. As we will see in the following text, the distinction
between the ‘good’ and the ‘bad’ corporate citizen is important from the
point of view of assessing how far and with what consequences GCC is
advancing.
What, then, is meant by the idea of a ‘good citizen’? Étienne Balibar
(2004) suggests the good citizen is one that forsakes a more central or
‘primary’ allegiance or identity for a ‘secondary’ identity based upon the
allegiance to a nation state. S/he is one who forsakes their community for
a citizenship. And in particular, the ‘good’ citizen is one who ‘undoes’
their relationship with a ‘pervious’ realm of identity formation based
upon a ‘community’ to join a new national community or forum, which
itself confers a citizenship status as discussed above. Only then can the
individual join their new citizenly community.
Thus, this idea of a good citizen implies a distinction be drawn
between community—and allegiance thereunto—and a citizenry alle-
giance: between status as a member of a community and status as a
member of a national forum or citizenry. Note here that both the act and
the status are combined and conferred in such a single move.
Clearly, this idea draws on a distinction between what might be called
primary identity (PI) and secondary identity (SI). PI is assumed to be
based upon attributes like class, sex, religion, familial position, regional
of local association, linguistic grouping, ethnic status, etc., that is, some-
thing ‘primary’ about existence. SI, on the other hand, is assumed to be
based on national, civic, or ‘public community’ attributes. In principle,
this might provide a basis—at least in part—for distinguishing between
the cultural emphasis on acts citizenship and the more political notion
of status citizenship. Acts citizenship would seem to more closely emerge
from that activity associated with primary identities, while status citizen-
ship would seem to be more closely associated with secondary identities.
This idea of the good citizen casts a particular shadow over, or into,
the space of sovereignty. The ‘bad citizen’—one who takes to be a citizen
just in name, who cannot cast of the bonds of their primary community
allegiances perhaps—undermines sovereignty by being cosmopolitan,
transnational, and extraterritorial in their allegiances or identities. It is
the good citizen who confirms sovereignty.
Many of these observations could illuminate the idea of the good
corporate citizen, but in this case in a reverse manner. It is the
good global corporate citizen who would seem to precisely cast off the
burden on the national arena to become footloose and cosmopolitan.
80
3.12 Classifying Companies in Relationship to Global

Corporate Citizenship
So we need a way of preliminarily classifying companies in respect to

their attitudes towards GCC values and practices: to distinguish
between the good and the bad corporate citizens. Broadly speaking, it
is those companies that readily promote the idea of GCC that also fall
into the category of claiming this as ‘good’ citizenly activity. A way of
classifying all companies in respect to their attitudes towards GCC is
shown in Figure 3.5. Companies can be divided into those that think
social, environmental, and ethical values (se&ev) are central for their
business activity and those who think these are irrelevant. This is shown
along the horizontal axis. On the other hand, there is the business and
financial rewards dimension to company activity. Do they think that a
commitment to se&ev enhances their financial bottom line or is irrele-
vant to it, or—perhaps put slightly differently—would the market
reward these businesses for their commitment, or otherwise, to se&ev?
This dimension is shown on the vertical axis.
We could begin to place different companies in the four cells marked
out in Figure 3.5, and what is shown here is a preliminary classification.
It contains some headings, some sector affiliation, and some possible
named companies. None of this distribution is meant to be rigorous. It is
for illustrative purposes only: it is a heuristic device.12 The ‘Bottom
Feeders’ would be those that felt a commitment to se&ev to be irrele-
vant, and that it would have, or has, no impact on their financial and
business rewards or performance. At the other extreme are those com-
panies that felt se&ev to be vital to their business and that it would have,
and indeed does have, a very significant impact on their financial and
business performance. These are designated the ‘Enthusiasts’.13
12
This diagram was originally developed as a teaching aid. But as it stands, it still rather
lacks analytical rigour and extensive empirical content. One difficulty is that several com-
panies that might fall into the ‘Bottom Feeder’ box issue variants of a CSR report (e.g.
Halliburton issues a Sustainability Report dealing with its environmental impact). It is only
on a close scrutiny of these reports and other commentary in the public domain that
companies can be allocated to the various cells in Figure 3.5 (in the case of Halliburton, it
is a fine judgement between the ‘Bottom Feeder’ box and the ‘Cynics’ box, but the general
reputation of this company encouraged a final allocation to the former). For a more system-
atic treatment of 100 Danish top socially responsible companies using this framework, see
Haakonsson and Vertterlein (2010). In Chapter 4, the case of BP is discussed, which has
probably removed itself from the ‘Enthusiast’ box as a consequence of the Deep Horizon
events.
13
Most of these companies can be found from the FTSE4Good Index discussed above on
which the leading socially responsible companies are listed or those companies appearing to
commit to the ten principles of the UNs Global Compact (see <http://www.unglobalcom-
pact.org/ParticipantsAndStakeholders/index.html>). This list can be supplemented by the
81
IMPORTANCE OF SOCIAL, ETHICAL,

AND ENVIRONMENTAL ACTIVITIES
Irrelevant Essential
‘CYNICS’ ‘ENTHUSIASTS’
Energy Co’s, Novo Nordisk,

FINANCIAL AND BUSINESS REWARDS
Extractive Lefrage,
Strong Industries, Petrobras,
Wal-Mart, GlaxoSmithKline
Mc Donalds
‘BOTTOM ‘ETHICAL
FEEDERS’ PRODUCERS’
Weak Ryanair, Fair Trade Co’s,

Hedge funds Organic
News Corporation producers,
Small co-op banks
Figure 3.5 Company attitudes towards GCC
Between these two cells lies ‘Cynics’ on the one hand and the ‘Ethical
Producers’ on the other. The former represent those companies who
might think that se&ev are basically irrelevant, but that recognize a
pragmatic commitment to these is a sensible (if sometimes unfortunate
and burdensome) necessity because it does provide financial and busi-
ness rewards and benefits. Often, these are the companies that have
experienced a public campaign against their activities (or who wish to
ensure against one), and who want to present a more appropriate public
image as a result (Locke, 2002a). From the point of view of those
committed to se&ev in business, or who advocate for this, moving
companies from this cell to the top right-hand-side one is the main
objective. This is what the GCC movement is committed to. Finally,
there are the ‘Ethical Producers’ who are fully committed to se&ev but
who reap a thin reward from it. In part, this would be because the
companies reporting to the Global Reporting Initiative (GRI), which is probably the most
widely supported CSR reporting framework. For all these bodies, firms are required to meet
extensive business financial, environmental, and social reporting requirements. These are
comprehensive and transparent, and they are policed in several ways (Thompson, 2008c).
82
‘CYNICS’
‘ENTHUSIASTS’
‘ETHICAL
PRODUCERS’
‘BOTTOM FEEDERS’
Figure 3.6 Relative importance of ‘good’ and ‘bad’ global corporate citizens
importance of se&ev to their business outcomes is not yet fully recog-

nized by customers or the market in these cases. Alternatively, it could
be because these companies are small and often inefficiently run.14 In
terms of the previous discussion of good and bad citizenship, those
companies in the right-hand column (‘Enthusiasts’ and ‘Ethical Produ-
cers’) are the good citizens, whilst those in the left-hand column
(‘Bottom Feeders’ and ‘Cynics’) are the bad citizens.
As mentioned above, the relative importance of these different cat-
egories of companies in terms of their capitalization or brand image is
likely to vary. A way of illustrating this is provided in Figure 3.6, in
which the relative size of the boxes varies according to number and
significance of the companies and their commitments.
The ‘Bottom Feeders’ remain by far the largest group; there are a lot of
‘vicious companies’ in the market place, trading on the ‘savage con-
sumer’ (Thompson, 2005a).15 Many of the companies in this group are
14
It should be noted that this figure pertains to the possible effects on performance and
bottom line financial considerations of attitudes towards se&ev only. It does not illustrate
the overall financial performance of companies. For instance, Ryanair is a highly profitable
company despite it appearing as a ‘Bottom Feeder’ here.
15
Here, it is suggestively to define a savage consumer as one who will search out and
exchange similar products for ‘1 cent less’. Thus, if they can get a ‘happy meal’ for 99 cents at
MacDonald’s rather than for a $1 at Wendy’s, or the same bar of soap can be purchased at
Wall Mart for a cent less that at another supermarket, consumers will switch between these.
Of course, this is only supposed to be emblematic of real situations, but such consumers
exist, and in growing numbers. But this is not to lay blame on such consumers. There are
good reasons for the rise of such ‘savage consumerism’, associated with the growth of
poverty and inequalities in the United States and elsewhere, where 1 cent saved clearly
does count. Companies like McDonalds and Wall Mart have clearly very effectively tapped
83
largely anonymous—being intermediary supplies in long production

chains where they can hide their business practices, and who have a
low-profile brand image at the final consumer level as a result. The
‘Cynics’ are also likely to be a large group, made up as they are of
those companies that rather play it ‘fast and loose’ with the GCC
agenda. And while the ‘Enthusiast’ may be small in number, they are
very important in terms of brand image and market capitalization,
comprising some of the largest and most important internationally
recognized companies. Their symbolic significance is also important:
as the leading advocates of GCC, they provide an example for others to
follow (Kell, 2003; McIntosh et al., 2004; Ruggie, 2004; Porter and Kra-
mer, 2006).
3.13 Conclusions
This chapter has served to open up the political character of the corpor-
ate form as it operates at both the domestic and the international level.
The clear emergent difficulty is to link these two domains: to specify
how and to what extent the formation of the corporate form at the
domestic level can be appropriately carried over into the international
domain, if at all. The key category in play here was GCC, and it was the
extent and forms this takes that was analysed at length. Differentiating
GCC from CSR is an important task because GCC is the more pertinent
category for the further analysis of global constitutionalization. To this
end, the chapter has advanced the discussion of the way legal know-
ledge and constitutional practice has become central to the infrastruc-
ture of international governance. Companies as citizens are not just
peripheral or marginal actors on the global constitutional scene but
central conduits through which such governance takes place. They are
part of the operational assemblage of governance and quasi-constitutio-
nalization. Before we turn to a further elaboration of the modalities of
this process, the Appendix to the chapter extends this legal knowledge
about the company by examining the precise position of companies in
law and their relationship to a possible citizenship status. This appendix
illustrates the surprising and continuing ambiguity in relationship to
the company as legal subject, which demonstrates that there is an
opportunity to exploit this ambiguity by those committed to company
into this market. In part, McDonald’s poor reputation as a corporate citizen derives from its
extensive resort to controversial legal means to protect its brand image when criticized
(Kuszewski, 2010). Many of the libel cases initiated have backfired.
84
reform. Clarifying this before moving on to a further elaboration of the

politics of company reform in Chapter 4 is thus an important task.
Appendix
A.II: Citizenship and the Modern Corporation in Law
As suggested earlier in this book, there is an intimate connection
between legal personality, citizenship, and constitutionality. This
appendix explores the connection between legal personality and citi-
zenship in the context of the modern corporate form. It elaborates on
the potential for considering ‘corporate citizenship’ as a legal category
(in distinction to its status as an instrument of civic virtue). In the
Anglo-American legal tradition, the modern corporation is the conse-
quence of an accumulation of statutory enactments and court judge-
ments. Its twin key features are legal personality and limited liability.
Whilst the discussion here mainly draws on this Anglo-American trad-
ition, these twin features are mirrored in other legal jurisdictions, so the
characteristics of the modern corporation outlined below are more or
less duplicated elsewhere. We begin with legal personality.
A.II.1: LEGAL PERSONHOOD

The classic case of legal personhood applies to ‘natural persons’. But this
term should not be taken to imply an unproblematic naturalness on
behalf of humans. As suggested in the main chapter, a ‘natural person’ is
a legal category: defined as a cognate being perceptible through the
senses, able to rationalize and make decisions, and having an identity
that persist through time; and minors and those of impaired mental
capacities, or criminals, are often treated as special cases for various
purposes (like voting). On the other hand, there is the category of
‘artificial person’ or ‘virtual person’, which applies to corporate bodies
of various kinds (though see the discussion below on this terminology).
These display various features, but the basic characteristic is that the
entity so constituted is considered a separate one from the human
persons who own it, manage it, or otherwise work for it. It has the status
of a legal entity in its own right, which enables it to contract business as
it sees fit (subject to constraints of law and custom of course). In the
following text, we return to the kinds of persons companies can be
considered to be—which remains controversial. In the main text, the
rights they can claim in law that are analogous to those of natural
persons are discussed, which arise from this consideration of various
forms of corporate personhood.
85
But the question of legal personhood is not confined just to natural

persons or corporate bodies. There is a debate over extending some of these AQ11
features to other inanimate entities or non-sentient beings. The classic
examples are trees, involving a debate initiated by Christopher Stone’s
suggestion (1974) that these be afforded the status of ‘standing’ (enabling
a party to sue for damages in a court) so as to enable them to literally
remain standing when under threat from logging companies for instance.
‘Friends of the trees’ would establish a form of legal guardianship over such
trees under threat, and use the courts to seek protection for them.
This inaugurated an ongoing debate about extending such legal rights
to other animals and entities (e.g. Varner, 1987; Solum, 1992; Teubner,
2006—the great apes come immediately to mind),16 and in seeking
stakeholder status for such objects in respect to corporate governance
(Starik, 1995). In addition, robotic entities have also been the subject of
such discussion (e.g. Solum, 1992), and even completely artificial agents
like search engines, shopping website operations, and databases (Allen
and Widdison, 1996; Chopra and White, 2004). Below and in the main
text, we reflect on quite what all this might mean for the category and
status of citizenship, which is the one closely linked to the idea of
‘personhood in law’. But a quick comment on the trees issue is appro-
priate at this stage since it began this debate and serves to illustrate some
wider concerns. The difficulty with affording the status of personhood
or standing to these is where it would end. Supposing trees had this legal
status, one tree could then in principle sue another tree if there were
some conflict over access to light, for instance. And why not extend the
status to aphids? If they were then to attack the tree’s leaves, presumably
the tree could sue the aphids. The possibilities are endless, but this just
demonstrates where all this loose ‘rights talk’ might take us.
Finally, single people can also be a legal corporate body. This arises in
the case of ‘the corporation sole’. In Anglo-American law, this is a legal
entity consisting of a single (‘sole’) incorporated office, occupied by a
single (‘sole’) man or woman. This allows a corporation to pass vertically
in time from one office holder to the next successor-in-office, giving the
position legal continuity with each subsequent office holder having
identical powers to his or her predecessor. Although this capacity is
usually associated with religious offices (the head of the Church of
16
As Teubner (2006) amply demonstrates, bringing animals before the court to face
charges is not a new phenomenon. For him, anything that participates in communication
(however remotely) can in principle be considered analogously as a ‘person in law’: this is
particularly so of associations of non-human (‘actuants’) and human interactions (‘hybrids’)
operating in social subsystems.
86
England, The Archbishop of Canterbury, is such a corporation sole), it is

not confined to this office alone. The British monarch, for instance, is
not just a human person (indeed, she is not just a ‘natural person’ either;
inasmuch that she claims divine lineage she is also a ‘supernatural
person’ of sorts) but has several ‘corporation soles’ which allow her to
hold property in the name of the monarch in several different countries
and jurisdictions.17
To sum up, broadly speaking, to have legal personality implies that a
body has an existence independent of its members, that is, it does not
terminate with the death of its founders; that it can sue and be sued in a
court in its own name, with respect to contracts as well as to torts and
crimes, even in relation to its members (we return to torts below); and
finally, that it may own property in its own name. This latter point is
very important in the context of the question of who or what ‘owns’ a
limited liability (L-L) company. Conventional language vests ownership
in the shareholders, but strictly speaking and in a legal sense this is not
quite the case. The subsequent sections review the position of com-
panies as legal persons in the context of this vexed question of who or
what owns them. It does this as a first clarificatory move in anticipation
that this will help in a further clarificatory move associated with the
relationship between the personhood of companies and their role in
claiming to be ‘citizens’, which is pursued in the main text.
A.II.2: OWNERSHIP AND LEGAL PERSONHOOD

In the long dispute over corporate personhood, there have been three
basic positions. These are neatly summed up by Iwai:
The corporate realists believe that the corporation is a fully-fledged organiza-
tional entity whose legal personality is no more than an external expression
of its real personality in the society. The corporate nominalists, in opposition,
assert that the corporation is a contractual association of individual share-
holders whose legal personality is no more than an abbreviated way of
writing their names together for legal transactions. And both claim to have
superseded the ‘fiction theory,’ the traditional doctrine since the time of Pope
Innocent IV, which maintained a position one might well think tortuous:
that the corporation is a separate and distinct social entity, but that its legal
17
This might need to be modified a little since the succession in the United Kingdom is
governed by the 1701 Act of Settlement. This limits heirs to the throne to a Protestant line
derived directly from Electress Sophia of Hanover and her descendants. Thus, the matter of
who inherits the crown in the United Kingdom is, strictly speaking, a legal matter and not an
ecumenical or a divine one. On the other hand, the popular imagination is saturated with
notions of the divine inheritance of the crown.
87
personality is a mere fiction conceded by the state or created by law. (Iwai,

1999: 584; italics added)
According to Iwai, Maitland’s ‘Introduction’ to Otto Gierke (1900) estab-

lished the forerunner to the realist position: that on the basis of ‘real’
conditions on the ground and found in practice, corporations are
entities absolutely equivalent to natural persons (see also Laski, 1916).
Corporations are ‘organic’ bodies that display all the characteristics of
natural persons (Gierke, 1900). This is sometimes known as the natural
entity theory of the corporation: that the corporation is neither a legal
fiction created by the state nor a contract among individuals, but a
natural person whose existence is prior to law. In fact, the contemporary
realist position distances itself from Gierke’s formulations since it wants
to found the ‘realistic’ corporation in law. Thus, it distances itself from
the ‘physico-spiritual unity’ conception of the corporate entity as an
organization somehow endowed with a mysterious organicist meta-
physical will of its own (Note, 1982; Iwai, 1999: 616). As we will see in
the following text, the contemporary realist position views corporate
autonomy as a consequence of interactions between human beings,
both inside and outside the entity, but who address their activities in
the name of the corporation itself in the first instance, rather than in
terms of their own personal proclivities, inclinations, or intentions.
On the other hand is the nominalist position. Although this has a long
tradition in the economics literature, it is modern agency theory and
particularly the idea of the corporation as nothing more than a ‘nexus of
contracts’ that has given it added impetus (Jensen and Meckling, 1976;
Williamson, 1990). As a nexus of contracts, the firm can be considered to
be something other than the aggregation of its constituent parts. From
this perspective, however, ‘ownership’ (in the form of possession) is
rejected as an appropriate category in respect to business firms; contracts
cannot be owned as possessions in the same manner as asset can (though
see below). Instead, shareholders are considered as ‘principals’, able to
direct their ‘agents’—the managers and directors. But this does not go
quite far enough since the modern corporation is more than this: it is a
fully fledged subject of property ownership in its own right so it too can
make contracts of its own and enter into litigation; it acts beyond what
can be accommodated simply by an ex-ante contractual specification
(see also Parkinson, 1993: ch. 6, who nevertheless supports a strict
ownership model of the corporation criticized in the following text).
Finally, there is the ‘fiction theory’, often first attributed to German
romantic F.C. von Savigny (see Rattigan, 1884; Maitland’s ‘Introduction’
to Gierke, 1900; Rückert, 2006). In this case the corporation is
88
considered an artificial entity admitted as a subject in law by means of a

‘pure fiction’ sanctioned by the State. However, it is possible to interpret
Savigny more subtly as affording legal relational status to corporations
other than by State sanction, though it perhaps needs the recognition by
the State ‘in the last instance’ so to speak (Iwai, 1999: 602–3).
The difficulty in judging between these approaches to specifying the
appropriate relationship between personhood and ownership arises
because the corporation recognized in law is both a ‘thing’ and a
‘person’ at the same time. It is a kind of ‘cyborg’: analogous to both
human and machine. The definition of a cyborg employed here is less
one that sees it as a cybernetic organism in the form of a network of
communication and control, but rather views it as an entity that shares
properties of both synthetic mechanical operationality (thingness) and
properties of humanness (personhood). So this is not humanness in the
form of a natural person but as an artificial person.
We return to the consequences of this way of viewing the firm in
terms of its ownership but first we deal with the nature of that other key
feature of the modern corporate form, namely limited liability.
A.II.3: LIMITED LIABILITY (L-L)

Limited liability is a ubiquitous feature of the modern business world. It
was gradually introduced in the United Kingdom and the United States
in the later part of the nineteenth century (Plesch and Blankenburgh,
2007: 8–15). Prior to this, development companies had unlimited liabil-
ity. The idea was that such a legal limitation on shareholder losses would
foster investment and the development of industrial capitalism. Subse-
quently, it spread throughout the world.
L-L is principally about the protection of assets and creditor confi-
dence. It is the principle whereby a member of a company cannot be
made personally liable for the debts of the company beyond the capital
invested, or, in general, beyond a certain amount. Debtors or plaintiffs
in any action against the company thus make their claims against the
property or assets of the company, not those of its shareholders. Share-
holders are only liable to their own personal creditors. Clearly, L-P and L-
L are different but complimentary aspects of company form.
[legal personality] protects the assets of the firm from the creditors of the
firm’s owners, while limited liability protects the assets of the firm’s owners
from the claims of the firm’s creditors. (Kraakman et al., 2004: 7–8)18
18
Note that Kraakman et al. (2004) still refer to the shareholders as ‘owners’; indeed,
throughout their book, this is the terminology used. But I would suggest that their own
description and analysis reinforces the points made in the main text about this not being the
89
Both L-L and L-P are argued to make better deals possible because they
instill confidence. But L-L also reduces confidence because it limits the
pool from which debts can be paid. L-L does not exist if you have to put
up personal assets as guarantees. Thus, L-L means you do not need to
know who the other investors are, that is, fellow shareholders—or their
wealth. As a result, the aptly named socie´té anomie produces a bigger
investment pool and greater investment, or so it is argued.
But L-L is paradoxical in respect to confidence and risk. On the one
hand, it reduces risks for the shareholders. L-L and shareholding means
that the shareholder knows what his/her liabilities are. He/she is not
responsible for anything other than the value of his/her shareholding.
But on the other hand, it might encourage companies to take on more
risk than is socially justifiable, as explained in the next section.
And whilst the establishment of L-L was a clear move in terms of
legislative enactment in the United Kingdom, the United States, and
other countries, the status of legal personality just discussed was only
afforded companies as a result of a series of landmark decisions by the
courts (Santa Clara County v. Southern Pacific Railway Co. in 1886 in the
United States and Salomon v. Salomon & Co. in the United Kingdom in
1897). And whilst it was not the original intention of company law
legislation to extend the status of legal personality to companies, gov-
ernmental authorities have done little to prevent its application. But it
has been essentially a court-led process.
What we have as a result, however, is a very privileged position for
companies in the way they are allowed to operate, involving legal
immunities not extended to ordinary citizens (Ireland, 1999, 2010). As
a result, they are often accused of having extensive rights without
concomitant responsibilities. Certainly, this accusation can be legitim-
ately laid at the door of shareholders and directors, who can for all
intents and purposes avoid any personal liability for misdemeanours
or damages they may cause (directors, for instance, can insure against
this possibility). But shareholders can also escape liability in the case of
tort actions as will be discussed in the following text.
This stacks the legal cards very much in favour of the corporate world
against the rest of civil society independently of the enormous power
companies can wield because of their wealth, financial muscle, and
political influence. What is more, inasmuch as companies have been
in the forefront in arguing for their release from the many shackles of
case. It is Hansmann and Kraakman (2001) that provide an argument that every legal system
is moving towards their favoured model of direct shareholder ownership (a point reinforced
in the second edition of Kraakman et al., 2009[2004]).
90
the law and regulation—to free them up and let them take responsibility
for their own actions—they have single-mindedly failed to add the
abandonment of limited liability to this list of demands. Thus, there
may be a limit to how far companies will support what might otherwise
seem to be a rather self-serving, neo-liberal project.
A.II.4: ‘HIDING BEHIND THE VEIL’ AND TORT CLAIMS

Owner-shareholders and top executives exercise immense power in
society both locally and globally. But they are not immediately respon-
sible for any damage they might cause the environment for instance.
Essentially, this means that if a company fails or is sued for damages, the
shareholders only lose the sum of money they have invested in the
company. And directors and top management—as agents of the share-
holder within the company—are similarly protected. If they cause harm
to a third party, they are potentially subject to a ‘tort claim’ which are
considered in the civil courts. But shareholders—and to a large extent
company directors—can escape personal liability under these circum-
stances because the company exists under L-L.
In addition, companies use their L-L status to minimize their exposure
to tort claims. A successful tort claim would result in seeking redress via
the liquidation of company assets to pay the fine or meet the compen-
sation. But the modern corporation is a many-tiered structure with a
myriad of subsidiaries and holding companies. This legal structure can
be used quite legitimately to ‘hide’ assets or to limit exposure to particu-
lar risky ventures (where damage and a subsequent tort claim might
arise). This is known as ‘hiding behind the veil’. Under present condi-
tions this is quite legal, if not exactly ethical. But it also means com-
panies can ensure against or avoid some liabilities associated with their
behaviour that ‘natural persons’ like ourselves cannot. This might tempt
them to take added risks and act irresponsible.
But problems arise when the creditor is replaced by the victim (involv-
ing Torts—involuntary harms). L-L thrives upon the distinction
between contracting party and tort victim. Torts involve involuntary
harms that are not ‘dealt’ or contracted. Shareholders can avoid liabil-
ities to tort victims—because they are only liable up to the value of their
shareholdings. As they are allowed to do this, shareholders of L-L com-
panies might take more risks than is socially justified. Companies can
also arrange their structures to create subsidiaries that absorb or bear the
risks but do not have enough capital (shares) to cover eventualities
associated with Torts if they create harms. This means they can escape
responsibilities for harms, if this comes to law.
91
What can be done about this? Companies could insure against this
eventuality—or be forced to do so. Alternatively, torts victims could be
made a priority in terms of ‘claims on assets’. In effect, this would mean
abandoning separate company personality and L-L in Tort cases. Finally,
the ‘corporate veil’ can be ‘pierced’—the corporate veil is when com-
panies create subsidiaries that disguise the true risks or capital involved
in different aspects of their businesses, so that they can avoid the
responsibilities or liabilities if they are sued for Torts. To pierce this
veil, responsibilities could be shifted up the line of company structure AQ12
until somewhere were found where losses could be covered. In fact,
attitudes towards piercing the corporate veil vary considerably between
different jurisdictions: the UK legislative system and courts are the most
reluctant to countenance this possibility, the United States somewhere
in between (though also the most litigious), but German (and Japanese)
authorities are the least hesitant in allowing such claims to be pursued
(Miller, 1998).
A.II.5: CONSEQUENCES FOR OWNERSHIP AND CONTROL

All these distinctions have important implications for how one con-
siders ownership and control. Shareholders own ‘shares’ (and stockhold-
ers own ‘stocks’) but not the assets or property of the company as such,
which are invested in the company itself: in a legal sense the company
‘owns’ itself (Ireland, 1999, 2010). Thus, we could say that it is subject to
a double ownership relation: once by the shareholder who ‘own’ shares,
and once by the corporation itself which owns the company assets.
Shares (pieces of paper) give shareholders certain rights (or perhaps
better put, afford them certain ‘claims’, see below): they share in the
surpluses generated by the company, they have voting rights in respect
to the officers of the company and in terms of mergers and acquisitions,
and they can sell (and buy) shares. But that is about it.19
In this respect—within Anglo-American legal practice at least—the
shareholder is in a very similar legal position to any other creditor vis-
19
This may have become even more complicated with the advent of complex derivative
instruments. Corporate profit streams can now be separated from share ownership, packaged
into a derivative instrument, and traded in their own right, independently of ‘share owner-
ship’. Thus, there may be a threefold structure of ownership emerging: one for company
assets, one for shares, and one for profit streams. Ultimately, however, the two-level owner-
ship remains the paramount one: profit streams are legally dependent upon share owner-
ship—they are derivative upon that relationship. And this is increasingly being
overwhelmed by the sheer rapidity with which shares and such derivative instruments are
being traded. Portfolio managers are not interested in exercising control, or able to do so, as
they are focused on continually ‘rebalancing’ their portfolios and ‘trading on’ their share-
holdings (which they may only hold—i.e. ‘own’—for minutes or even seconds).
92
a-vis the company as legal subject (nb. Dodd, 1932); they are both its
‘claimants’ and have no direct proprietary entitlements in the com-
pany’s assets or property as such. Their interests jointly represent poten-
tial liabilities from the point of view of the company (Hadden, 1995). In AQ13
fact, ‘ownership’ was precisely a legal category developed to prise apart
property from possession, originally developed in the context of legal
moves in the early Medieval period in Europe to regularize the status of
women—up until then women were considered as the property of men
and part of their direct possessions (Thornhill, 2012).
Similarly, although the managers may be (formally at least) elected or
appointed by the shareholder, they are legally constrained to work in
the best interests of the company in the first instance, not the share-
holder: they have obligatory fiduciary duties. As Iwai comments:
These duties specify the standards for judging the ‘trustworthiness’ and
‘fairness’ of the managers’ decisions and transactions which may conflict
with the best interests of the corporation. And these standards usually
include the so-called ‘duty of care’, the restraint on ‘excessive’ managerial
compensations, the strict rule on the disclosure of information, and the
prohibition of self-dealing, trading corporate opportunity, trading on inside
information, and outright theft. (Iwai, 1999: 623)
When shareholders enter the Board, they too must adopt these stand-
ards and constraints. But this idea of fiduciary duties is controversial.
Despite some ambiguities, Kraakman et al. (2004), and particularly Par-
kinson (1993), argue against this position (see footnote 18). Indeed,
these authors of well-established textbooks remain the main contem-
porary supporters of the direct shareholder ownership position (which
is criticized here). But it is more generally recognized that the role of
‘management’ is to supervise the continuing organizational, financial,
and legal (and increasingly political) reproduction of the company—to
maintain it as a ‘going concern’, to ‘keep the capital intact’, and so on.
And as McSweeny (2009) has drawn attention to, when actionable
endeavour has been sought in the courts over what or who has primacy
in terms of fiduciary duties, judgement has invariably fallen to the
management rather than to the shareholders (see especially Marens
and Wicks, 1999; Lan and Heracleaus, 2010).20 The judgements
20
McSeeney quotes from Aranson v Lewis 473 A.2d 805 Supreme Court of Delaware
[1984], where Justice Moore argued ‘A cardinal precept of the General Corporation Law of
the State of Delaware is that directors, rather than shareholders, manage the business and
affairs of the corporation.’ 8 Del.C. } 141(a). This is doubly important since Delaware is the
state where most US businesses are incorporated, and is thought to have the most ‘liberal’
(read ‘business friendly’) corporate law regime. But these declarations have a longer history
and apply to other jurisdiction in the United States. For instance:
93
reviewed in footnote 19—which form the basis for the ‘business judge-
ment rule’ in the US courts (which has been similarly embodied in the
commercial law and practice in other jurisdictions, particularly in the
United Kingdom) protects the directors in the conduct of their ‘duty of
care’ for the corporation and its employees. If the directors act in good
faith, in the best interests of the corporation, on an informed basis, in a
non-wasteful manner and without personal interest (i.e. that they are
‘duly diligent’), then the courts have protected their position. But this is
the site of a real issue because it is often thought that the ‘default
position’ in respect to company operations is that they should operate
to maximize profits. Is it the ultimate purpose of a firm in current
business law to generate profit, any deviation from which makes the
managers ‘liable’? This is a complex issue which would ultimately have
to do with legal interpretations of the articles of association, but it looks
. . . the idea that a company’s board of directors is subject to any sort of direct ‘agency’
relationship with that firm’s shareholders, requiring ongoing subservience to the latter’s
expressed interests, was dispelled in a line of cases decided by the New York courts over a
century ago. In one of the earliest and also most clear refutations of the so-called
‘principal-agent’ model of corporate governance, Comstock J of the Court of Appeals
of New York stressed the fundamental corporate law tenet that:
[t]he board of directors of a corporation do not stand in the same relation to the
corporate body which a private agent holds toward his principal. In the strict relation of
principal and agent, all the authority of the latter is derived by legislation from the
former, . . . [b]ut in corporate bodies the powers of the board of directors are, in a very
important sense, original and undelegated . . . in the sense of being received from the
State in the act of incorporation.
Moreover, according to Comstock J:
The recognition of this principle is absolutely necessary in the affairs of every corpor-
ation whose powers are vested in a board of directors. Without it the most ordinary
business could not be carried on, and the corporate powers could not be executed. (Hoyt
v Thompson’s Executor, (1859) 19 N.Y. 207 (Court of Appeals of New York), p. 216).
Over half a century later, Chase J of the same Court reiterated this basic line of
reasoning, expressing the principle that ‘the individual directors making up the board
are not mere employees, but a part of an elected body of officers constituting the
executive agents of the corporation’. Setting out the parameters of what is today
known in corporate law jurisprudence as the business judgment rule, Chase
J explained that directors ‘hold such office charged with the duty to act for the corpor-
ation according to their best judgment, and in so doing they cannot be controlled in the
reasonable exercise and performance of such duty’. (People ex rel. Manice v Powell, (1911)
201 N.Y. 194 (Court of Appeals of New York), p. 201) (Moore and Rebérioux, 2011:
86–97).
A similar legal position can be discerned in the case of UK company law, despite that fact that
shareholders in the UK model are granted somewhat wider democratic powers. Moore and
Rebérioux (2011) quote from Lord Justice Couzens Hardy to the effect that: ‘it is a fallacy to
say that the relation [between shareholders and the board] is that of simple principal and
agent . . . . I do not think it is true to say that the directors are agents. I think it is more nearly
true to say that they are in the position of managing partners appointed to fill that post by a
mutual arrangement between all the shareholders.’ (Automatic Self-Cleansing Filter Syndicate
Co. v Cunninghame, [1906] 2 Ch 34 (Court of Appeal), p. 45).
94
as though this requirement so far remains an untested default

position.21
Some would argue, however, that it is continually tested by the range of
measures associated with ‘shareholder protection’: involving not just
‘hard-case’ company law but also provisions found in securities law and
in the ‘soft law’ of codes of corporate conduct and takeover regulation
(Armour et al., 2008). This discussion arose from the seminal contribu-
tion of La Porta et al. (1998) that put forward the proposition that there
were two basic forms of ‘legal origin’ as far as shareholder protection is
concerned: civil law societies and common law societies. They went on to
claim (a) that common law societies systematically provided more effect-
ive protection of the shareholder interests and (b) this stimulated more
robust economic development and growth. Whilst, in their terms, there
had been some subsequent convergence between these legal systems—
and a growing recognition that there were other ‘subsystems’ within (or
around) each core grouping (like a distinctive Scandinavian grouping
within the civil law tradition)—underlying differences between the two
groups of countries have continued to provide the same differential
consequences along the original lines (Djankov et al., 2008).
This set of arguments has attracted a great deal of attention. Many
criticisms have been made of—and suggestions for improvements to—
the original La Porta formulation, particularly in respect of how to
construct a ‘correct’ index of ‘shareholder protection’, and allocate
countries in respect to this (e.g. Siems, 2007, 2008; Armour et al., AQ14
2008; Spamann, 2010—Thompson and Mortensen, 2009 discuss the AQ15
Danish literature on this issue). Broadly speaking, this challenges the
idea of two clearly defined groupings as the differentiation and hybrid-
ization of each separate legal system is uncovered. Nevertheless, the
basic thrust of the attempt to link legal/regulatory systems to different
degrees of shareholder protection continues in these critical studies.22
21
Drawing from Moore and Rebérioux (2011) once again: ‘[i]f powers of management are
vested in the directors, they and they alone can exercise those powers. The only way in
which the general body of shareholders can control the exercise of the powers vested by the
articles in the directors is by altering the articles, or, if the opportunity arises under the
articles, by refusing to re-elect the directors of whose actions they disapprove. They cannot
themselves usurp the powers which by the articles are vested in the directors any more than
the directors can usurp the powers vested by the articles in the general body of shareholders.’
(John Shaw & Sons v Shaw & Shaw, [1935] 2 KB 113, p. 134) (p. 98).
22
And there is an issue as to whether a single index of shareholder protection is appropri-
ate. Bebchuk and Hamdani (2009) argue convincingly, for instance, that the differences
between ‘control’ firms—ones where there is a single identifiable shareholding that could
in principle exercise control—and ‘non-control’ firms—where there is a widely dispersed
shareholding that lacks the capacity to exercise control—means that at least two indexes
would be needed to cope with this complexity in corporate governance.
95
This remains contentious however. In general, this literature and debate

ignores the earlier case histories that established the ‘business judge-
ments rule’ discussed above. It takes this as a given, so it is not so much
concerned with the precise questions of ownership raised earlier. And
although it is centrally concerned with control, one might need to
remain cautious. There is a considerable attention to the detail of con-
trol as demonstrated in the ex ante sense of what laws, rules, and
conventions are in place to try to prevent managers/directors exercising
their ‘agency’ at the expense of shareholders (see Armour et al., 2008 in
particular and the detail at: <http://www.cbr.cam.ac.uk/research/pro-
gramme2/project2-20output.htm>). Broadly speaking, this involves
the collection of data on ease of challenge over ‘self-dealing’ on the
part of directors, likelihood of success if action is taken, and some
attention to important case judgements. So there is some consideration
of the ex-post outcomes when challenges have been made in the courts
or other arenas of regulation. But this is always difficult to judge and
tends to vary on a case-by-case basis. Although ex-ante mechanisms
might be in place, success with proof of misdemeanours and malprac-
tices on the occasion of litigation is another matter. In general, this still
takes place under the shadow of the business judgement rule—which
tends to protect the managers if they exercise due diligence. And—as
recent events associated with various pre-crisis financial scandals and
the financial crisis itself has surely demonstrated—these mechanisms
proved hopelessly inadequate to prevent widespread abuse of share-
holder interests and potential wrongdoing in common law countries
in particular. The point, then, is not to continually lament the lack of
shareholder control or to seek some further robust ultimate rule that
guarantees shareholder primacy, but to recognize that—in situations of
‘normal business’—shareholders are necessarily of minor interest and
remote from actual decision-making. The emphasis, instead, should
shift to better preparing the managers/directors for their role as the
actual guardians of the company as an institution that owns itself,
which was explored in the chapter earlier.
Obviously, a different set of legal conditions hold if the company is in
liquidation, creditors having a prior claim over shareholders in this
instance. But even under these circumstances, neither creditors nor
shareholders can seize the company’s assets at will, nor do they ‘own’
it in this sense. Here, both shareholders and creditors are similarly
constituted as ‘claimants’ with only a contingent title in respect to the
company’s assets (Hohfeld, 1919).
In addition, claimants must act in accordance with due legal process.
What this means is that legal rights in respect to any company are
96
always highly specific and contingent and what they impart to different
agents are differential capacities and capabilities to undertake actions or
engage in litigation. Legal rights do not exclusively or unconditionally
guarantee access to ‘ownership’ or anything else but only arrange possi-
bilities for undertaking litigation or initiating actionable endeavour in
the courts.
This point is important in several respects, particularly in the debates
about ‘property rights’ in economics (and by extension for the ‘Law and
Economics’ school of analysis, which informs many of the hard ‘share-
holder ownership’ positions mentioned above). These do not impart an
exclusive, unconstrained, or unconditional possession to a definite sub-
ject or agent. It is not the case, then, that any attenuation of those
rights—involving a circumscription or restraint on their exercise, usually
thought to be imposed by the political process or the State—necessarily
represents an unwarranted challenge to those rights of possession. ‘Prop-
erty rights’ attribute no more (or no less) than a capacity or capability to
initiate something (like a claim on the assets of a firm). But that guaran-
tees nothing in terms of outcomes. It only contingently and condition-
ally arranges a series of possibilities for legal disputation and action.
The more general importance of this formulation is to move away
from a discourse of ‘rights’ to one about ‘claims’. Rights imply a posses-
sion by a constituted subject, whereas claims only imply a contingent
entitlement, one dependent upon particular circumstances (in the case
here as specified by a legal framework). And this aspect of the law
confirming claims rather than rights is well illustrated by bankruptcy
law. Although Carruthers and Halliday’s comprehensive analysis situ-
ates bankruptcy in the terminology of rights in the first instance, it is
clear from the discussion that it imparts various parties with a range of
claims that must be tested in law (Carruthers and Halliday, 1998; Halli-
day and Carruthers, 2009). For instance, their Table 1.1 ‘Ranking of AQ16
Claims in Bankruptcy’ (my emphasis, Carruthers and Halliday, 1998:
39–40) sets out the hierarchy of claimants in the United States and the
United Kingdom, while ‘The Legal Constitution of Markets’ (Halliday
and Carruthers, 2009: ch. 1) extends this approach to the potential for AQ17
disputation and enforceability during bankruptcy proceedings to the
Asian countries. What is clear from this extensive analysis is that there
are no general ‘rights fights’, only contingent claims dependent upon
the particularities of each jurisdiction, its characteristics, and institu-
tional limitations.23
23
Such ‘claiming’ would also be likely to expand considerably if US bankruptcy law were
to be radically transformed along contratualist lines (Warren and Westbrook, 2005).
97
So with this conception, there is no general public or private privil-

eged possession of, or exclusion from, ‘ownership’. In principle, the law
could thus establish a set of ‘claims’ that impart capacities and capabil-
ities to any number of stakeholders without this necessarily undermin-
ing a deeper or more fundamental ‘ownership’ relation because, as
argued above, rights in law are never rendered with respect to an exclu-
sive possession, but only in respect to a claim. Here, we see the way a
discussion of the nature of company law could establish the principles
for the wider notion of stakeholder democracy without this necessarily
compromising a ‘deeper’ set of fundamental truths about ownership (as
pursed in detail in Thompson, 2008c).
Author Queries:
AQ:1 This sentence has been modified. Please check whether the mean-
ing has been retained.
AQ:2 The year "2005" in McBarnet et al. (2005) has been changed to
"2007" as per reference list. Please confirm.
AQ:3 Please indicate whether "2004a" or "2004b" for Shamir (2004).
AQ:4 The year "1955" in Weinrib (1955) has been changed to "1995" as
per reference list. Please confirm.
AQ:5 This sentence seems to be incomplete. Please check.
AQ:6 Please check whether the edit conveys the intended meaning.
AQ:7 This is not clear. Please check.
AQ:8 The year "2010" in McWilliams and Siegel (2010) has been changed
to "2011" as per reference list. Please confirm.
AQ:9 Please indicate whether "2009a", "2009b", or "2009c" for Thomp-
son (2009).
AQ:10 Figures have been renumbered in order to match the caption of
respective figures. Please check.
AQ:11 The year "1972" in Stone (1972) has been changed to "1974" as per
reference list. Please confirm.
AQ:12 This sentence is not clear. Please check.
AQ:13 The year "1997" Hadden (1997) has been changed to "1995" as per
reference list. Please check.
AQ:14 The year "2009" in Siems (2009) has been changed to "2008" as per
reference list. Please confirm.
AQ:15 The year "2008" in Spamann (2008) has been changed to "2010" as
per reference list. Please confirm.
AQ:16 Please check the insertion of the reference citation here for clarity.
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98
The Politics of the ‘Citizenly

Company’ and Global Corporate AQ1
Governance Reform
4.1 Introduction
Companies are often thought to be one of the main culprits in causing a

wide variety of environmental and social problems. They are seen as the
wilful creators of pollution and waste; generators of greenhouse gas
emissions; the rapacious users of water resources, raw materials, and
fuels; the perpetrators of corrupt practices; exploitative of their work-
force; cavalierly indifferent to their customers; and only out to reap
financial rewards and profits for their shareholders. As a consequence,
it is argued there is a need to force companies to amend their behaviour,
to use government action and legal rules to constrain their activities in
the face of the environmental and social problems they create. In this
context, an assessment of what companies themselves are doing volun-
tarily to address human rights and environmental concerns becomes
more pressing. As already pointed out in previous chapters, and we will
see further below, it is through voluntary means that the vast majority of
companies are seeking to fulfil their citizenly duties as they see it in
respect to social, environmental, and ethical values (se&ev) matters. But AQ2
this emphasis on voluntarism may have peaked, and it raises many
political issues around both external and internal corporate governance.
In this context, the potential constitutionalization of the corporate
sphere may be taking a new turn: away from voluntarism and towards
a more overtly legalistic governance regime. Or, perhaps, both of
these trends are proceeding at the same time and in parallel. Indeed,
this is part of the ambiguous and contradictory nature of ‘global quasi-
constitutionalization’, as considered at greater length in Chapter 6.
99
In fact, whilst many of the accusations levelled against the world of

business could be true for some companies, as argued in the previous
chapter, they do not appear to be true for all companies. In the modern
world, whether we like it or not, we are reliant on companies to provide
the main provisions for existence. This means we need to take a closer
look at the variety of companies and their practices vis-à-vis se&ev
issues, and to examine how the world of business has reacted to the
threats posed by climate change, other environmental issues, growing
public scrutiny, political pressures, and the attempts to manipulate their
brand image. This is not to suggest that a voracious plundering of the
planet’s resources or the super-exploitation of workers by companies is
to be sanctioned. But it does suggest that we need to investigate carefully
company responses to environmental and these other challenges (New-
ell, 2001).
A clear message of this book is that companies are not all alike. Of
course, they all try to reproduce themselves financially, organization-
ally, and legally, which in the modern capitalist economy means making
operational surpluses. But there are many different ways companies can
make a surplus, reproduce themselves, or expand, and, as we will see,
some of these may be more ‘citizenly friendly’ than others. Like any
other economic agent, companies are not immune to the concerns and
pressures associated with environmental destruction, for instance, and
many make quite far-reaching claims about how much they are doing to
protect the environment. Of course, there are always good reasons to
remain sceptical—even suspicious—of the claims companies make for
themselves in respect to this and other concerns. Like any other activity
or claim, companies should be examined for what they actually are
doing as well as for what they say they are doing. This will be pursued
below.
The main question addressed in this chapter, therefore, is this: in a
policy context which has militated against greater direct government
regulation of companies, how far do companies’ claims to be acting in a
socially and environmentally responsible way stand up to a close scru-
tiny? How far are they genuinely being ‘citizenly’?
In answering this, the chapter explores the relationship between the
world of business and global social and environmental problems and
assesses the reasons why companies have created voluntary codes of
conduct, and how we might go about critically evaluating these
responses. It also seeks to put such voluntary codes into a broader
framework of neo-liberal governance. As will be seen, throughout this
discussion, there is a tension between seeking economic growth and
100
The Politics of the ‘Citizenly Company’
profitability, on the one hand, and social and environmental sustain-

ability on the other.
The chapter proceeds as follows. Section 4.2 lays out some context for
understanding the nature of companies as political players and their
functions and characteristics. Section 4.3 then turns to how claims
companies make in respect to their citizenly activities might be evalu-
ated particularly with respect to corporate social responsibility (CSR). In
the light of this, Section 4.4 evaluates British Petroleum’s (BP) record as a
socially responsible company post the Deep Horizon oil spillage in mid-
2010. The political business of human rights is the subject of
Section 4.5, which ends the discussion of corporate responsibility, broadly
conceived. The chapter then moves on to discuss corporate accountability
as a key complement to the discussion of responsibility. Section 4.6
revisits and develops the analysis of ownership and control in this
context, while Section 4.7 evaluates how legal reform might be organ-
ized to install greater internal democratic control and accountability of
corporations.
4.2 Positioning Companies
Companies lie at the heart of the tensions between ‘development’ on

the one hand and social or environmental ‘sustainability’ on the other.
They compete against one another to make a surplus. One conse-
quence of this is the relentless downward pressure put on costs and
the ever-widening search for cheaper supplies of labour, raw materials,
and components. Supply chains now span the globe, and they can be
one of the main channels facilitating social and environmental harms
as production is moved abroad to seek out locations where govern-
ment regulations are low or non-existent, or where the scrutiny of
company activities and their impact on the local environment is less
intense. This gives companies opportunities to cut corners in terms of
social and environmental consequences and to ignore the damages
they perpetrate. In addition, corruption and lack of local political
mobilization in these locations can disable attempts to prioritize
these concerns.
Offsetting trends do exist—the growth of communication technolo-
gies and information sharing which enables governmental and NGOs
to more easily monitor what companies are doing. But as companies
conduct their competitive struggles, there is an inbuilt tendency for
them to seek lower costs and greater surpluses. Thus, there is no obvious
101
sustainable ‘steady-state’ for capitalist companies as a whole. In this

case, the competitive game of survival suggests a primary pressure to
expand not only against each other but also against nature itself. As a
consequence, this may pose a prima facie threat to the environment, for
instance. Companies are prone to look to the short term rather than the
long term; they are often after quick profits, and the financial system
often forces companies to make instant returns to their shareholders
and to ignore a longer term perspective.
For some, this apparent conflict between business growth and sus-
tainability means that public bodies ought to act to regulate companies’
social and environmental impacts. And much government regulation
does exist, as preliminarily discussed in previous chapters—there are
domestic and international laws, UN Charters and EU Directives, rulings
of the World Trade Organization (WTO), and an array of international
treaties which regulate environmental and human rights matters. Yet,
since the mid-1970s, there has been a general move away from direct
government intervention in regulation, substituting for this an
emphasis on market mechanisms or private-led initiatives. Indeed, com-
panies have been instrumental in this shift and are powerful players in
the game of politics that it represents. They are not passive bystanders as
politicians and lobby groups debate, negotiate, or struggle over policy
options. Companies are in there fighting their own corner, with huge
resources and powerful allies at their disposal.
One result of this shift towards neo-liberalism has been an ‘unburden-
ing’ of companies from bureaucratic regulation and a reliance upon
their self-regulation via voluntary ‘responsibilization’, that is, making
companies responsible for, and possibly accountable for, their own
actions (see later). In effect, this has created a new, neo-liberal approach
to governance for a good deal of corporate activity. Key aspects of this
agenda of responsibilization are the encouragement of ‘self-governance’
on the part of companies and the institution of mechanisms of indirect
‘governance at a distance’ rather than direct interventionism. This
involves the production of benchmarks, standards, targets, norms, and
so on that are either set for companies by government authorities or are
set by companies themselves. Such performance benchmarks are moni-
tored and audited in various ways rather than enforced by the use of
hierarchical administrative means (e.g. through the law and courts).
This shift is not comprehensive—there is not a complete lack of regula-
tion. But the form of regulation has taken a different turn, away from
direct command and control towards variations of supervisory and
‘light touch’ guidance.
102
4.3 Evaluating and Verifying Citizenly Claims: Codes of

Conduct and Standards
There are a vast number of bodies addressing the internal and external
governance of internationalized corporations.1 This section briefly men-
tions a few of the most important ‘private’ voluntary compliance mech-
anisms. Public bodies like the Organisation for Economic Co-operation
and Development (OECD) and International Labour Organization
(ILO)—which have their own principles and codes for conduct—are
discussed in the next chapter which deals with these as instances of
administrative law. The exception here is the United Nations (UN), the
initiatives of which (in terms of the Global Compact and business human
rights) are discussed later in this chapter since they fit closely with the
‘voluntaristic’ nature of the private bodies concentrated upon here.
Companies that issue citizenly reports are trying to persuade us that
growth, sustainability, and ethical conduct are indeed compatible: they
think the circle can be squared; the ‘dilemma’ between growth and
sustainability outlined earlier can be overcome. But how should we
evaluate these CSR/GCC (global corporate citizenship) and sustainabil-
ity reports overall? Are they just a public relations exercise designed to
mislead the public into believing that the company is genuine about
tackling social and environmental aspects of its business?
4.3.1 Corporate In-house Standard Setting

Companies develop their own elaborate internal standard setting pro-
cedures. These involve various conventions, codes of conduct, rules, and
protocols by which companies try to ‘govern’ their own commitments
to social responsibility objectives. These are particularly prevalent for
those companies with multiple production sites, and which operate in
many different countries. They involve both procedural-monitoring and
performance-monitoring activities. These internal mechanisms do not just
involve the meeting of International Standards Office ISO 9000 or ISO
14000 management systems, though these are often treated as min-
imum targets. Additionally, there are several other more expansive
standard setting processes like the AccountAbility AA1000 Series
that provides an overarching framework for governing corporate
1
In its 2004 report on corporate governance codes, the OECD identified forty-five current
and predecessor governance codes and principles originating from twenty-nine different
country contexts (Corporate Governance: A Survey of OECD Countries, OECD, Paris, 2004
<http://www.oecd.org/dataoecd/58/27/21755678.pdf>; accessed 19 November 2011).
103
responsibility (involving accountability principles, assurance standards,

and a stakeholder engagement standard); Social Accountability SA8000
which provides detailed guidelines on how to internally organize and
manage for workplace rights and activity along the supply chain; and
the relatively recent ISO 26000 sustainability standard which unlike its
counterparts mentioned above is not a certificated management system
but a set of voluntary guidelines for social responsibility (Murphy and
Yates, 2011). As discussed elsewhere (Thompson, 2005a), all standard
setting processes—to be acceptable and effective in so many different
locational environments—have to remain fairly open and flexible in
respect to their rules, so they do not necessarily confer a very ‘tight’
standard of compliance (though ISO 9000 and ISO 14000 may be partial
exceptions).
These firm-centred approaches are backed by their own set of organ-
izations and bodies that register company commitments, disseminate
best practice, monitor developments on a voluntary basis, etc., like the
Global Reporting Initiative (GRI), the International Business Leaders
Forum (IBLF), Corporate Sustainability Reporting, Institute for Social
and Ethical Accounting, and many others besides, some of which over-
lap with the types of organizations discussed in the previous paragraphs.
These developments can be seen as an example of the so-called ‘third-
generation’ standard setting. First-generation standard setting involved
direct regulation, usually by official public bodies operating in an essen-
tially hierarchical manner. Second-generation standard setting was
based upon market instruments, while third generation relies upon
‘voluntary’ information disclosure, consumer and community pressure,
etc., to achieve acceptable standards, driven in this case by firms them-
selves. In many ways, the World Economic Forum’s (WEF) GCC initia-
tive falls under this umbrella. This has to do with what has come to be
termed ‘reputation capital’ which firms are assumed to what to foster
and preserve. AQ3
In the context of these standard setting and monitoring bodies, citi-
zenly companies report on health and safety, supply chain, environ-
mental, and other standards that they set for themselves, either entirely
internally or in conjunction with some external lobbying/advocacy
group like those discussed above or, increasingly, NGOs. These reports
tend to cover a range of their activities that have an impact on the local
community and its social and sustainable environment, for example,
energy use, waste management, water use, local pollution, land degrad-
ation, etc. Sustainability reports detail the progress made in respect to
environmental targets and comment on future developments. A typical
example is provided in Figure 4.1. This is taken from the company
104
Gross CO2 emissions
(per metric ton of cementitious product)
780
654 651 632 626
1990 2007 2008 2009 2010
Our gross emissions per metric ton were 19.7%

down on 1990 levels. On average, developed
countries and emerging markets have reached
the same level of performance per metric ton
(gross and net emissions).
Net CO2 emissions*
(per metric ton of cementitious product)
774
647 631 614 606
1990 2007 2008 2009 2010
Our net emissions per metric ton were 21.7%

down on 1990 levels, already better than our
Sustainability Ambition which was achieved
in 2009.
Figure 4.1 Lafarge CO2 emissions

Source: Lafarge (2010: 26). AQ4
105
Lafarge’s 2010 sustainability report and shows its reductions in CO2

emissions per tonne of cementitious product (from a 1990 base year).
Lafarge is a very large French-based multinational company that makes
cement and other building materials. It operates in more than seventy
countries, and is one of the most prominent advocates of sustainability
and environmental damage limitation, appearing as a supporter of all
the main bodies dealing with this.
Cement production is highly energy intensive (because limestone has
to be heated to high temperatures), it pollutes the local environment
with dust, and it degrades the nearby landscape. World cement produc-
tion produces about 5 per cent of total man-made CO2 emissions. The
company has worked hard to benchmark its plants against each other
and against competitors in an effort to reduce various aspects of emis-
sions like CO2, toxic wastes, and to reduce water use. Inasmuch as one
can rely on its sustainability report—from which the above figure was
drawn—this seems to be gradually showing fruit in terms of the reduc-
tion of emissions and use of water.2
The issue of how to verify the information contained in such reports is
at best a difficult process. It is often impossible to gain access to com-
panies for a sustained enough period of time, or to visit many of the sites
of their activity, in order to assess independently whether what is
claimed is actually being put into practice.
What mechanisms exist to enable at least some ‘independent’ verifi-
cation of the claims made by companies in their CSR/GCC or sustain-
ability reports?
4.3.2 External Reporting Standards and Audit Firms

One method of verification is through reliance on audit firms. Most of
the big citizenly companies have their social and environmental sus-
tainability reports audited by independent audit companies in the same
way that they have their financial accounts audited (Lafarge’s sustain-
ability report is audited by Ernst and Young). So, there is some independ-
ent check on the verifiability of the claims and information supplied in
these reports, though ‘moral hazard’ considerations might inhibit this.
A second method of verification is to rely on organizations which
scrutinize company reports to see whether they meet their criteria for
inclusion in terms of best practice reporting standards set by those
2
As is recognized in that Report, however, this is largely driven by technical advances in
the production of cement. Older ‘clinker’-based plants are being phased out—which are
major CO2 polluters—as new ‘carbon capture friendly’ plants are phased in.
106
organizations. The GRI mentioned above is a leading body in this

respect (GRI, 2007). It describes itself as a worldwide multi-stakeholder AQ5
network, involving businesses, civil society actors, labour organizations,
and accountants, and it provides guidance for organizations about their
sustainability reporting. Its activities encompass corporate businesses,
public agencies, smaller enterprises, NGOs, industry groups, and others.
Companies that meet its reporting standards framework are then regis-
tered and monitored for broad compliance. As of 2009, nearly 1,400
organizations from sixty countries use the guidelines to produce their
sustainability reports. In fact, there are many such scrutinizing organiza-
tions (e.g. IBLF—embracing eighty-five leading MNCs—and the World
Business Council for Sustainable Development (WBCSD)—a CEO-led
organization of 200 companies).
Another example, perhaps the most respected of these, is the United
Nations Global Compact inaugurated by the then UN Secretary General,
Kofi Annan, at the WEF in Davos in 1999. Annan invited the corporate
world to join the UN in a partnership to advance the agenda of ‘corpor-
ate citizenship’. The ten principles (not rules) of the Global Compact
stress human rights, labour standards, environmental sustainability,
and anti-corruption. The Compact stresses that it is not a regulatory
instrument, but rather a forum for discussion and a network for com-
munication. It includes governments, companies, and labour organiza-
tions, whose actions it seeks to influence; and civil society bodies. It
is facilitative, and works to encourage dialogue and learning, local
networking, and project enhancement. It involves various UN bodies
active in human rights issues, the ILO, and several international non-
governmental organizations (INGOs) like Amnesty International,
Oxfam, and the International Union for the Conservation of Nature.
Companies and other organizations ‘sign up’ to its principles, which are
deliberately left vague. But this does not mean they are certificated in
any way. They must simply register a statement each year on how they
are tackling the goals. If they fail to return such a statement, they are
eventually removed from the list of signatories.3
Among its periodic Global Compact Leaders Summits, the July 2007
Summit focused especially on climate change and initiated a new com-
mitment from participating companies to ‘set goals, develop and expand
strategies and practices, and to publicly disclose emissions’ (UN Global
Compact, 2007 <http://www.unglobalcompact.org/NewsAndEvents/
3
For an analysis of the way the UN’s Global Compact interacts with corporate govern-
ance, analysed around the extent of company delisting from the Compact, see Knundsen
(2011).
107
event_archives/Leaders_Summit_2007.html>; accessed 10 December

2010). This was promoted as an attempt by the UN to ‘toughen-up’ the
Compact, but it still remains ‘voluntary and optional’. And this
toughening up message was reinforced in March 2011 when the internal
UN Joint Inspection Unit (JIU) strongly criticized it for its inadequate
entry criteria, lack of effective monitoring system, and poor internal
governance structure. The JIU argued this was undermining the reputa-
tion of the ‘UN brand’ (<http://www.unjiu.org/data/reports/2010/JIU.
REP.2010.9_For%20Printing_17%20January%202011.pdf>; accessed 13
December 2011). As mentioned in Chapter 3, as of November 2010,
there were 8,700 signatories to the Compact, 6,200 of which were
businesses.
But the voluntary nature of the Compact is defended as an appropri-
ate and the only politically feasible response to the business CSR/GCC
and greening agenda because it provides a regulatory forum without
being a compulsory one (Kell, 2003). In addition, John Ruggie (2002,
2004) has argued it provides a learning network which in effect uses
moral persuasion to enrol companies into treating the principles ser-
iously: it is becoming the harbinger of a wider global civil society that
generates its own momentum for global governance. Best practice
benchmarking is discussed in this forum, which spills over into other
areas.
On the other hand, critics suggest that, without any effective moni-
toring and enforcement provisions, the Global Compact fails to hold
corporations accountable. Rather, what is needed is for it to evolve into
formal multilateral social and environmental governance mechanisms
incorporated into an international treaty on corporate accountability
designed to directly influence the ethical and environmental behaviour
of MNCs for the better (Clapp, 2005). This would clearly act to inset and
consolidate a more formal piece in the global constitutional jigsaw. As it
stands, the Global Compact represents another of those ‘soft law’ and
relatively informal mechanisms that make up the quasi-constitutiona-
lization of the global corporate sphere.
Moreover, critics argue that companies can misuse the Global Com-
pact as a public relations instrument for ‘bluewash’ (Bruno and Karliner,
2002).4 It provides an excuse and an opportunity to oppose any binding
international regulation on corporate responsibility, and acts as an entry
door to increase corporate influence on the policy discourse and the
development strategies of the UN. The UN has a mandate to engage with
4
‘Bluewashing’ is a term used to mean that an organization joins the Compact to improve
its public image by wrapping itself in the UN flag.
108
civil society (under Article 71 of the UN Charter),5 and the NGOs it

associates with are consequently monitored closely for their internal
organizational structure, representativeness, geographical spread, etc.
However, in respect to MNCs, anyone can join the Compact without
such similar scrutiny.
Similar initiatives by other intergovernmental organizations have
followed this example. A key one in the area of project finance is the
so-called Equator Principles. These are performance standards promoted
by the International Finance Corporation (IFC), the commercial lending
arm of the World Bank, for any infrastructure projects it supports of
over US$10 million. Again, environmental impact factors, health and
safety, and social impacts are central elements in the scrutiny of pro-
jects. Commercial banks involved in these are scrutinized by the IFC on
the biodiversity and habitat consequences of their projects. By 2011,
seventy-two investment banks had signed up to these principles (see
Equator Principles, <http://equator-principles.com/>; accessed 3 May
2011).
Finally a third, somewhat different, organization involved with stand-
ard setting in this area is the International Corporate Governance Net-
work (ICGN). This is a body involving institutional investors like
pension funds and insurance companies. Those investors not only
wanting to appear to be ethical but to actually make concrete decisions
in respect to this can scrutinize these indexes, league tables, and lists.
The ICGN is mainly concerned with cross-border shareholder issues, like
proxy voting. This leads neatly into another area of ‘independent’
accountability assessment, namely stock-market-based indices which
also aid the ethical investor to make appropriate decisions.
4.3.3 Stock-Exchange-Based Verification

In addition to those organizations of advocacy and scrutiny just dis-
cussed, two stock-exchange-based information and indexing companies
provide important verification procedures, which were discussed in the
previous chapter: the FTSE4Good Index in the United Kingdom and the
Dow Jones Sustainability Index for the United States, both of which
include companies floated on various stock exchanges. These indexing
5
Article 71 reads as follows: ‘The Economic and Social Council may make suitable
arrangements for consultation with non-governmental organizations which are concerned
with matters within its competence. Such arrangements may be made with international
organizations and, where appropriate, with national organizations after consultation with
the Member of the United Nations concerned.’
109
companies provide investor information on those companies claiming

to be corporately socially responsible. This information is designed to
aid individual ethical investors or investor companies and funds that
want to invest in the ethical and sustainable sector.
The FTSE4Good Index has an extensive, publicly available set of ‘inclu-
sion criteria’ which companies have to meet if they are to be a continu-
ing part of its index. The FTSE4Good assigns teams of analysts to
scrutinize company activities, deriving information from a range of
sources (not just their own reports). If companies do not meet these
criteria (which included the usual environmental, social, working, eth-
ical, and supply chain considerations), they are removed from the
index. There is a significant turnover rate of companies on the index
because of this, indicating that it is not just a routine matter that they
are included. The index is used by ethical investment and other funds to
determine their investment strategies.
Of course, this still remains at the level of secondary scrutiny. The
FTSE4Good analysts do not scrutinize company activity directly. They
rely on reports and information from the company itself and other
sources. And there is much dispute over the validity of these indexes
as an accurate reflection of a commitment to—or measure of—social,
environmental, and ethical values (O’Rourke, 2003; Porter and Kra-
mer, 2006; Chatterji et al., 2008). An added problem is the inconsist- AQ6
ency of where companies are placed on different assessments. For
instance, the controversial company Monsanto was placed last on
the Covalence’s annual ranking of the overall ethical performance of
MNCs in 2010 (581st place—<http://www.covalence.ch/>), while it
was rated much higher (31st place) on the Corporate Responsibility
Magazine’s 100 Best Corporate Citizens list, all based upon the same
publically available data (see further below where BP’s record is
considered).
But does the ‘investment community’ generally take any notice of
these information gathering, reporting, and dissemination mechan-
isms? Based on an analysis of Bloomberg’s database of ‘hits’ on non-
financial environmental, social, and governance information between
November 2010 and April 2011 (over 48 million hits—a hit being every
time a user accesses this data), Eccles et al. (2011) view this as an indica-
tion of considerable interest and use of the information. The metrics
constructed by Bloomberg from the primary data provided by com-
panies deal with the degree of transparency in disclosure of social,
environmental, and governance standards. Whilst ‘social’ issues were
not heavily used, governance and particularly environmental metrics
were heavily accessed. Eccles et al. go on to document the considerable
110
growth in the use of other reporting initiatives, many of which have

been reviewed above.
In addition to this, the UN has its own initiative to press the world’s
stock exchanges to adopt sustainable reporting standards as a manda-
tory element for corporate listing (Sustainable Stock Exchanges: Real Obs-
tacles, Real Opportunities, 2010).6 It documents successes in encouraging
stock exchanges in Brazil, China, Egypt, India, Indonesia, Malaysia, and
South Africa to enhance transparency listing in respect to social envir-
onmental and governance standards.
4.3.4 NGO-Based Accountability

As indicated above, there are a range of organizations that lobby, scru-
tinize, and track companies as they claim and issue their citizenly
reporting details. Not all of these are commercial organizations or
those sponsored by the business community. And this provides another
layer of verifiability.
NGOs operating in this field vary significantly. There are those that
‘mirror’ in some sense the commercial indexing companies like those
just described (e.g. AccountAbility, 2007). There are those that cooperate
with companies to both help devise environmental standards and
implement them within companies (e.g. Oxfam and the WWF). On
the other hand, there are those NGOs that stand steadfastly aside from
cooperating with companies, instead adopting a resolutely critical
stance in respect to the claims about CSR (e.g. Christian Aid, 2006).7
These are supplemented by ad hoc campaigning groups on various
environmental issues.
What all these NGO and NGO-like organizations—and many more
besides—do is to provide another level of scrutiny and monitoring.
6
UN Principles for Responsible Investment Sustainable Stock Exchanges (<http://www.respon-
sibleresearch.com/Responsible_Research___Sustainable_Stock_Exchanges_2010.pdf>;
accessed 19 November 2011).
7
As a slight aside, an interesting feature of the corporate social responsibility debate,
where human rights, ethical, and moral considerations are brought squarely back into the
frame of debate, is that it has served to reinvigorate religious organizations as a voice in that
debate. Not only is Christian Aid an influential player but the SA8000 benchmarking
standard is heavily promoted by religious organizations. And religious voices are important
elsewhere in this and other similar debates, for example, in connection to toleration,
security, trust, and respect initiatives discussed below in the main text. What this raises is a
general issue about the political implications of this reinvigoration of religion. Does it herald
the return of religious organization as a definite ‘technique of governance’? Indeed, what are
the specifics of contemporary religious forms of governance? Are these compatible with a
broadly liberal art of government? What are we to make of, and how are we to accommodate,
new regimes of religious government and governance? These are obviously general issues but
they are concretely raised by the CSR/GCC process currently underway.
111
But as well as NGOs, the news media can be vociferously indignant in

their investigations, and delight in the exposure of double standards
and malpractice by companies. In addition, there are many academic
studies in this area, which often provide longer term and considered
assessments of company practices based upon participant observation
studies (Angel and Rock, 2005).
Again, however, this is not to suggest that things are completely—if at
all—satisfactory in this respect. By and large, all these reporting initia-
tives by companies, and their scrutiny, are voluntary. They are part of the
wider process of substituting regulation and enforcement with volun-
tary codes, norms, and standards. Rules (which have to be ‘obeyed’ and
often have the sanction of legal enforcement) have been in decline
compared with principles—towards which agents need only ‘aspire’.8
All these examples are part of the wider change in the regulatory and
governance regime outlined in Section 4.2 above: the neo-liberal gov-
ernance regime of voluntary responsibilization, self-regulation with an
emphasis on ‘private authority’, embraced in some of these cases by
international intergovernmental organizations like the UN and the
World Bank (Hall and Biersteker, 2002; Overbeek et al., 2007; Graz and
Nölke, 2008).
4.4 BP as a Counter Example?
British Petroleum (BP) was, until recently, considered one of the

strongest advocates for social responsibility and had a reputation as
the world’s leading socially responsible company. It appeared in all the
indexes of CSR (e.g. FTSE4Good—high in the rankings there), and was
award winning for its ‘honesty and transparency’ (e.g. on the Fortune
Magazine/AccountAbility 2008 list and Corporate Register’s 2010 CSR
Reporting Awards). In terms of Chapter 3’s classification of company
8
A defence of the principles-based approach can be made, of course. For instance, in her
subtle analysis of the UK Financial Services Authority’s (FSA) relationship to British financial
institutions, Barbara Sennholz-Weinhardt suggests one of the FSA’s principles of good regu-
lation is to avoid being unnecessarily prescriptive about rigid rules. So, rather than telling
firms in detail how they should achieve a certain result, they leave scope, where appropriate,
for different means of compliance. This is a necessary component of the principles-based
approach, she suggests. By not laying out rules in too much detail, the FSA seeks to avoid
behaviour of firms designed to technically get around a rule and undermine the effectiveness
of the rule. The FSA guideline for personal account dealing, for example, requires a firm to
have ‘suitable and adequate’ policy, but does not specifically prescribe a firm certain proced-
ures such as requiring ‘approval for every trade’ (Sennholz-Weinhardt, 2011: 17–18). As is
made clear in this analysis, however, it requires a commitment to certain commonly held
culture amongst public regulators and private financial agents.
112
attitudes towards the importance of ethical and environmental issues

(Figure 3.4), it would have been a ‘True Believer’.9
However, with the Deep Water Horizon oil spill in the Gulf of Mexico
in April–July 2010, that image took a dramatic turn for the worse. In
fact, BP had been negligent on oil spillages in several respects before this
event: Prudhoe Bay pipeline spill in 2006, Texas City refinery explosion
in 2005 (for which it was fined US$87 million in 2008 by the US
Chemical Safety and Hazard Investigation Board). But Deep Water Hori-
zon dwarfed these (and other) misdemeanours: it is estimated that the
final cost to BP would be at least US$10 billion in clean-up costs and
compensation payments.
Was this the result of a general regulatory non-compliance by the
company, or was it because those regulatory requirements were poor
to start with? What should be clear is that BPs risk management system
was severely at fault, as was probably the robustness of its general
management system. On the other hand, there is the issue of bad luck
and the inherent risks associated with deep-sea oil exploration. If
licenses are issued to pursue this kind of activity, no company is
immune from these uncertainties and possibility of ‘accidents’, however
diligent they might be in meeting regulatory requirements or setting
their own internal operational standards. BP is a very large MNC with
several of the features of a multidivisional and multiple-entity corpor-
ation discussed in the previous chapter, where the shortcomings of
these structures in terms of legal accountability were outlined. Its two
main operating arms, in the United Kingdom and in North America,
displayed quite different management approaches and styles, and
indeed attitudes towards CSR/GCC. The commitment to CSR in the
United Kingdom and Europe under the stewardship of (Lord) John
Browne is generally recognized to have been genuine. His successor as
CEO, Tony Hayward, may have lets things slip as commercial pressures
to deliver increased ‘shareholder value’ escalated. And it is noticeable
that the main problems appear to have been in North America rather
than in Europe. An example of the European approach is BP’s lead
involvement in the Baku to Ceyhan oil pipeline running through Azer-
baijan, Georgia, and Turkey. By all accounts, the company carried one of
the most detailed and wide-ranging public consultation exercises ever
conducted into a project of this kind with the people directly affected by
the course of the pipeline. And the course of the pipeline was modified
on several occasions and in several respects as a result. But this project is
9
Indeed, in terms of student assessments based upon publically available material about
the company in respect to CSR issues, it was so classified.
113
highly controversial and sensitive, and at least one INGO objected to the
form of BP’s involvement (WWF—see the full page advertisement in the
Financial Times, 9 December, p. 15). However, this should be viewed AQ7
with caution, as for many commentators, BP-Europe outmanoeuvred
the NGO community on this occasion by undertaking such a compre-
hensive pre-project consultation exercise, one, indeed, so extensive that
it could not have been undertaken by an INGO.10
None of this is meant to excuse BP for its many failures: after all eleven
workers died in the initial explosion on the Deep Water rig—a massive
blow to any company’s health and safety record, which is always a key
component in their CSR and citizenly presentations. And it rather
dramatically illustrates the issue of how to internally manage MNCs or
indeed how to appropriately externally regulate them or govern them in
an international context.11
Returning to the main issue, however, not all company declarations
and attempts to implement citizenly standards should be considered as
purely a cynical public relations exercise or simply window dressing
designed to dupe a gullible public. There are a group of companies
who have taken their CSR/GCC genuinely and seriously. They remain
a small number, but are growing. Not all of them deserve to be con-
demned too quickly for not going far enough or fast enough. There
are complex issues in inaugurating and seeing through a programme
of socially responsible activities across large MNCs with multiple
supply and production sites operating in different national and com-
mercial environments, which take time and energy to implement. The
range of bodies, institutions, and organizations, discussed above,
directing their attention to monitoring all of this should engender
some confidence in the quality of the trends and information being
produced.
4.5 Human Rights and Corporate Citizenship
The issue of ‘human rights’ in respect to business activity deserves a

special mention since it has come to the fore since the publication of a
report to the UN in 2008 under the principle authorship of John Ruggie,
10
Information on this comes from BP itself and from the scrutiny of the documentation it
produced from the exercise, from its website, from someone who studied this particular
project in some detail (Andrew Barry), and from speaking with the UK’s ex-Ambassador to
Georgia (Richard Jenkins) who had first-hand experience of BP’s involvement.
11
In the wake of the crises, there were rumours that BPs’ European and North American
activities would be separated and floated off from one another.
114
a Special Representative of the Secretary General (Ruggie, 2008).12 Of

course, the UN has a long history of concern with human rights going
back to its original Charter and the UN Universal Declaration of Human
Rights in 1948; and the twin International Covenants of 1966 on Eco-
nomic, Social and Cultural Rights and Civil and Political Rights
(entering into force in 1976); and many more conventions and proto-
cols. All these are now established instruments of international law,
though—like a lot of international law—with a variable record of com-
mitment, application, and enforcement.
The specific issue of business and human rights also has its own
history within the UN system. Prior to Ruggie’s recent activity, perhaps
the most important effort to promote an enforceable protocol in respect
to these rights was the 2003 Draft Norms on Responsibilities of Trans-
national Corporations and Other Business Enterprises with Regard to
Human Rights (which can be viewed in <http://www1.umn.edu/
humanrts/links/NormsApril2003.html>; accessed 30 May 2011). This
sought to impose on companies, directly under international law, the
same range of human rights duties that States had accepted for them-
selves under the various UN treaties and conventions just mentioned
(see the ‘General Obligations’ section).
This proved hugely controversial and was rejected almost universally
by the business community and governments alike (though not so
readily by the NGO community). The result was a retreat into a more
‘voluntary’ framework of advocacy, involving wide-ranging stakeholder
consultation exercises designed to elicit support at various levels
for what has turned out to be a perhaps surprisingly expansive set of
‘implementable principles’ for business human rights development.
Of course, as this brief description indicates, this is a process full of
12
The UN ‘Protect, Respect and Remedy’ Framework (<http://198.170.85.29/Ruggie-
protect-respect-remedy-framework.pdf>). Ruggie’s history within the UN system is an inter-
esting one. Formally, he holds a position at Harvard University. But from 1997 to 2001, he
served as United Nations Assistant Secretary-General for Strategic Planning, a post created
specifically for him by the then Secretary-General Kofi Annan. In this capacity, his area of
responsibility included establishing and overseeing the UN Global Compact which was
launched in 1999. His role in justifying this was mentioned above. Annan left the UN in
2006 just after Ruggie moved to the UN Commission on Human Rights (now the Human
Rights Council) when Annan appointed Ruggie as the Secretary-Generals Special Represen-
tative for Business and Human Rights in 2005, a post he continued to hold in the UN
administration of Ban Ki-Moon. The Global Compact was clearly closely associated with
Annan’s Secretary-Generalship and has rather lacked a champion within the UN since his
departure. On the other hand, human rights look like another fruitful avenue to pursue the
same basic agenda as Ruggie had done in respect to the Global Compact: taking ‘voluntarism’
as the necessary framework but working around this as far as possible to encourage an
expansive, multi-pronged, and multileveled response that edges towards enforcement with-
out actually declaring it.
115
diplomatic nuance, nudging, and potentially contradictory outcomes,

though it has attracted widespread support.
In June 2008, Ruggie proposed his new framework for considering the
relationship between business and human rights to the UN Human
Rights Council (HRC) (Ruggie, 2008). This Report proposed three prin-
ciples to guide the process (‘Pillars’):
1. the state’s duty to protect (D2P) against human rights abuses by

third parties, including business;
2. the corporate responsibility to respect human rights; and
3. greater access to victims for effective remedy, both judicial and non-
judicial.
The HRC unanimously approved this Framework in 2008 and it has
since gathered considerable momentum.13
It is the concept of the D2P that forms the centrepiece of this frame-
work and which links it to wider intellectual concerns and trends. For
instance, this principle has been generally accepted within the UN
system as a whole.14 According to this doctrine, states have the responsi-
bility to protect their citizens from violation of human rights and Ruggie
is attempting to import much of this into the commercial world.
Amongst other things, it charges individual states with ensuring com-
pliance with D2P and extends this to the UN’s specialized agencies, the
international financial institutions, regional organizations, NGOs, the
business community, the media, and scientific communities. All these
will have a D2P which should be monitored and enforced through
Security Council resolutions.
And this almost directly coincides with Habermas’s influential advo-
cacy of restricting national sovereignty for D2P reasons, as outlined in
Habermas (2006) and preliminarily discussed in Chapter 2. There he
argues that ‘the constitutionalization of international law has evolved
along the lines prefigured by Kant towards cosmopolitan law and has
assumed institutional form in international constitutions, organiza-
tions and procedures’ (Habermas, 2006: 115). He welcomes this
13
For a long list of official supporters and applications as of May 2011, see ‘Applications of
the U.N. “Protect, Respect and Remedy” Framework’ Special Representative of the United
Nations Secretary-General for business & human rights’ (<http://www.business-human-
rights.org/Links/Repository/965591>; accessed 12 August 2011), and Ruggie’s ‘Final Report’
to the HRC: A/HRC/17/31—accessed 20 April 2011.
14
The UN Global Leaders World Summit of 2005 produced an Outcome Document
(subsequently endorsed by the Security Council) where this principle was outlined as a
general response to ‘genocide, war crimes, ethnic cleansing, and crimes against humanity’
(<http://www.un.org/summit2005/presskit/fact_sheet.pdf>).
116
‘transition towards a post national constellation of a global society’

(ibid.: 115) and the associated decline of state sovereignty through the AQ8
juridification of international law.
But Habermas rather assumes (along with many others) that there is
some universal consensus on the desirability of moving towards such a
Kantian ‘cosmopolitan condition’ through the universalization of
human rights norms—but he never quite demonstrates it. For him, the
dispute now is only about the means to achieve this end. In this Kantian
perspective, extending the constitutional framework of fundamental
human rights from the national arena to this cosmopolitan global
level is a command of practical reason. Habermas echo’s Kant’s argu-
ment that international law must be superseded by a constitution of a
community of states (Kant, 1977), and the UN system is in the vanguard
of this move.
According to Habermas, at the level of the nation state the rule of law
(RoL) is legitimated by the deliberative and representational processes of
democratic governance. But, he argues, such democratic practices are
not necessary for legitimating the constitutionalization of international
laws. The legitimacy of the global supremacy of human rights derives
from the fact that ‘the normative substance (of human rights legisla-
tion) evolved from constitutions of the republican type. This hold
(s) . . . even for the treaties (such) as the WTO . . . The constitutionaliza-
tion of international law. . . depends on advances of legitimation from
democratic constitutional states’ (Habermas, 2006: 140–1). The consti-
tutionalization of international law legitimating punitive action against
nation states violating human rights norms is thus a means for
extending the global authority of liberal capitalist states and their asso-
ciated multilateral institutions like the UN, the IMF, and the
WTO. Habermas argues that a ‘global public’ endorsing human rights
doctrine can be constituted with the support of the media and news
organizations (classic ‘communicative action’). Such a global public
‘need not reach the level of the implicit consensus on thick political
value orientation that is necessary. . . for civic solidarity among fellow
nationals. Consonance in reactions of moral outrage towards egregious
human rights and acts of aggression is sufficient’ (ibid.: 143) for the AQ9
operation of legislating such a global governance order.
Thus, Habermas takes it for granted that basic human rights are
globally accepted as valid and legitimate (Habermas, 2006: 174), and
at this level the same seems to be the case for Ruggie in respect to the
global business world. But since many UN member states are not liberal
constitutional democracies, this assumed consensus cannot be based on
a shared history of deliberative and representational processes of
117
democratic governance, and this is certainly not the case for corporate
affairs. Thus, even if an operative consensus on the legitimacy of con-
straining national sovereignty on grounds of violating human rights
may be said to exist, it cannot be accepted as a product of Kantian or
Habermasian deliberative democracy. Rather, it must be an outcome of
the presently unassailable hegemony of the global liberal order. It is the
globalization of markets and communication networks which is the
motivation for the global dominance of the capitalist order and not
non-distorted ‘communicative action’. Habermas recognizes this expli-
citly in his extensive discussion of the ‘post national constellation’
(ibid.: 176–9). Humanitarian intervention and its legitimation may
thus be seen as part of a strategy for universalizing a liberal international
order. Human rights doctrine legitimates a particular world view which
might—in true Habermasian style—be termed the ‘capitalist life world’.
Clearly, this Habermasian schema presents a rather generous inter-
pretation of the current ‘global human rights regime’. It probably
remains an aspiration rather than the reality. It is yet another of those
grand schemas for global cosmopolitan democracy, predicated on moral
authority and reasoned persuasion. As indicated, its worthy principles
would need the sanction of a concrete UN resolution when particular
violations are uncovered, something always difficult to generate where
human rights are concerned and even more difficult to properly imple-
ment and enforce on the ground. And whether similar sentiments can
be effectively imported into the world of business ethics is equally
improbable, despite Ruggie’s gallant efforts and seeming partial suc-
cesses. It is when the ‘hard decisions’ have to made about any violations
of Ruggie’s ‘three pillars’, and particularly the D2P, that we will glimpse
its effectiveness or otherwise. And what is the effective global institu-
tional body that will decide and enforce such violations of the three
principles?
Nevertheless, these moves and discussions are yet another indicator of
a definite trend: towards the quasi-constitutionalization of the global
corporate (and security) sphere. A lot of this remains aspirational, of
course. The attempted full-scale and formal incorporation of human
rights into the corporate world has proved highly controversial in the
past, and is likely to prove as difficult in the present and future. But does
this amount to much more than an extension of the discourse of human
rights into this area, amounting to a new form of quasi-constitutionalism
in Loughlin terms (see Chapter 2)? Is it an attempt to ‘talk up’ such a
possible programme in the hope and anticipation that this will have the
desired rhetorical effects in persuading an assumed sceptical political
class and public of the importance and acceptability of such a regime?
118
Such wishful thinking is not unimportant, and it can prove effective.

But the imperatives of realpolitick will probably speak strongly against
it under the conditions of contemporary international concerns and
pressures.
4.5.1 From Responsibility to Accountability?

So far in this chapter, we have been analysing what might be broadly
termed the notion of responsibility in respect to the citizenly activity
claimed by companies—CSR being a key operative category in this
respect. But responsibility is only one aspect to the governance activity
that surrounds the politics of the business world. And responsibility can
only be pushed so far and has its limits, even if effectively pursued. To
illustrate this, consider the CEOs, directors, or senior managers of organ-
izations who respond to being found seriously wanting in the manage-
ment of their tasks by resigning—and thereby accepting their
responsibility. Calls for resignations when things go demonstrably
wrong are the conventional response. But when resignations happen,
that tends to be the end of the matter. The organizations—and those
ultimately in control of its destiny—tend to heave a very loud sigh
of relief and think the task is complete. The ‘bad apple’ has been
removed from the barrel. Legitimacy has been restored. But things
can just ‘return to normal’ as a result. Resignations by those held respon-
sible can be a way of diverting or offsetting more serious attempts
to govern organizations and businesses. Attention is diverted towards
incompetency and away from incrimination. Thus, responsibility
needs to be accompanied by accountability. Accountability is the key
category for longer term and deeper structural governance. Of course,
responsibility and accountability are not totally spreadable, and much
of what has been discussed above implicates accountability as well. But
we need to confront accountability and governance more centrally and
head on. So, it is towards assessing accountability that the chapter
now turns to. And addressing this directly means returning to issues
discussed in Chapter 3, to do with corporate governance, ownership,
and control.
4.6 Debates about Ownership and Control of the

Modern Corporation
The context for this discussion is a broad debate over the politics
of corporate governance imitated in its current phase by Mark Roe’s
119
influential book, Political Determinants of Corporate Governance (Roe,

2003), though as we will see, this debate has a much longer historical
pedigree dating back to at least Berle and Means (1932) book, The Modern
Corporation and Private Property. The issue at stake in this debate is how to
explain different (mainly national) forms of corporate governance and
their implications.
4.6.1 The Domestic Politics of Corporate Control

In asking the question why corporate governance systems differ around
the world, Roe argues strongly that this is a consequence of macro-
political forces. Thus, internal corporate governance is a primary conse-
quence of a range external political forces that bear in upon it. Tradition-
ally, where social democracy has been strong, shareholder rights were
weak and shareholder diffusion low. The politics of social democracy
ensures a wider set of claims from ‘stakeholders’ as against exclusive
shareholder interests. By contrast, where social democracy is weaker,
shareholder diffusion is wider, shareholder rights stronger, and, import-
antly, the constraining power of labour much weaker.
This ‘political’ analysis is pitched against the ‘quality of corporate law’
(QCL) approach championed by La Porta et al. (1998) which was exam-
ined in the Appendix to Chapter 3. As discussed there, La Porta et al. put
forward the proposition that there were two basic models of ‘legal
origin’ as far as shareholder protection is concerned: civil law societies
and common law societies. They go on to claim (a) that common law
societies systematically provided more effective protection of the share-
holder interests and (b) this stimulated more robust economic develop-
ment and growth as a result. The subsequent debate about these specific
propositions was dealt with in Chapter 3, but the point to emphasize
here is that this places the law in a primary position in respect to
corporate governance and neglects the role of politics, or so Roe argues.
For Roe, it is political forces that define the nature of law and determine
how it operates. The QCL approach, on the other hand, only recognizes
politics as a background determinant, perhaps important historically in
determining initial choices of legal systems, but operating only very
indirectly since then and without much effect.
In part, of course, this debate hangs on quite how politics is defined.
Given there is so much obvious on-going political intervention in
establishing the codes and law of corporate governance in all societies,
it is difficult to ignore the role of politics all together. But what exactly is
the nature of that politics and exactly how does it influence corporate
governance outcomes in different national contexts? And what about
120
the progressive internationalization of corporate activity and the poten-

tial for any corporate governance convergence it might stimulate? For
instance, Gourevitch has suggested Roe’s particular ‘political interpret-
ation’ is limited—it needs supplementing by a detailed examination of
preference aggregation and interests group formation on the one hand,
and examination of the explicit role of institutional differences on the
other (Gourevitch, 2002–3: 1835–6—see also Gourevitch and Shinn, AQ10
2005 and below). In addition, what about more ‘culturalist’ interpret-
ations which would stress norms, habits, routines, and values as the
determinants of corporate control. Are these also aspect of politics? And
as far as internationalization is concerned, market-driven processes
might be expected to encourage forces for regulatory convergence and
competitively driven corporate governance adaptation, leading to hom-
ogenization of national differences. But would not any such market-
driven governance adaptation also be considered political? Markets are
political instruments inasmuch as they are established, configured, and
governed by public policies.
As it stands, however, both the political accounts and the QCL
accounts share a certain common ground.
First, they both invoke a dichotomous classificatory schema reminis-
cent of the ‘varieties of capitalism’ (VoC) two-fold division of countries
into coordinated market and liberal market variants (Hall and Soskice,
2001): for Roe’s political account, this is between social democratic and
non-social democratic countries, and for the QCL approach, it is
between civil law and common law countries. And whilst the countries
classified into each of these groups vary a little, there is a basic overlap
between their divisions, including that offered by the VoC approach—
indeed, this operates as something of a base categorical distinction for
the others. But a problem increasingly recognized in the context of these
dichotomous approaches is: (a) whether there are in fact a greater
number of base categories than just two and (b) the incredible diversity
within any grouping (actually, at the limit, these two points amount to
much the same thing).
Second, they both share a common intellectual frame in the way the
law is seen as mainly operating to shape the prevention of managerial
agency, minimizing the cost of this to shareholders as the main stake-
holder, and establishing protections for the minority shareholders. But
as Chapter 3 demonstrated, the relationship between shareholders and
managers is not well specified by agency theory (Bratton, 1989a, 1989b).
By and large, this is a red herring. And it is precisely the arguments about
developing a regime of trusteeship at various levels later in this and in
121
previous chapters that offer an alternative to the principal–agent frame-

work so prevalent in this type of analysis.15
There have been several attempts to reconcile, extend, or address
these issues. Gourevitch (2002–3) and Gourevitch and Shinn (2005),
while emphasizing an overtly ‘politics approach’, seek to organize this
around the politics of regulation and the law in particular. They propose
an elaborated political framework invoking political structures (unitary
and federal state forms), voting arrangements, political party forma-
tions, regulatory traditions, executive–legislative relations, and crucial
interest groups to classify and determine corporate governance regimes
and their dynamic. For them, the effectiveness of corporatist coalitions
between managers and workers are a key element in determining
outcomes. Cioffi (2010) pays particular attention to the advent of finan-
cialization and globalization in accounting for the progressive juridifica-
tion of national systems, so he looks towards the international arena for
an explanation of changes and adaptations. Culpepper (2011) situates
his analysis in the context of hostile takeovers in various countries: how
these are organized and governed and the possibilities afforded this
mechanism by the typical structures of share ownership. He suggests
political parties are relatively unimportant (contra Roe), but demonstrates
the significant variation of national circumstance and determinants
that follow in the wake of this—though the strength and effectiveness of
business lobbying is a key element.
These analyses provide a rich and telling ‘comparative politics’ of
corporate control regimes. But given the emphasis on constitutionaliza-
tion and juridification in this book, it is the legal forms of corporate
control and their consequences that are pursued in what follows in this
and later chapters. What is the legal politics of corporate governance
reform? Whilst a good deal of this has already been broached in the
previous chapter, in the rest of this chapter, we put the issues of com-
parative politics aside to concentrate upon the Anglo-American corpor-
ate form in particular. It is not that the debate outlined above is
unimportant or uninteresting, but rather that it does not chime directly
with the issues being foregrounded here. We concentrate on the legal
literature for the good reason that a critical examination of this exposes
the ambiguities and contradictions in one of the strongest justificatory
discourses supporting shareholder supremacy, which is the key element
15
On visiting a lawyer or doctor, for instance, the ‘principal’ (me) does not instruct the
‘agent’ (the lawyer or doctor) what exact legal course should be taken or diagnosis and
remedy to be offered, but seeks and takes advice in the context of comparative expertise
and trust.
122
in the corporate control regime of the Anglo-American type of business

entity.
Further pursuing the consequences of the precise relationship
between ownership and control in this light invites a return in the
first instance to the debates in the 1930s and 1940s over the original
‘divorce of ownership from control’ thesis, which took place mainly
around Berle and Means book, The Modern Corporation and Private Prop-
erty (1932). The thesis of this book is too well known to be rehearsed in
detail, so we concentrate upon the way this is being currently reinter-
preted (Ireland, 1999, 2010; Biondi et al., 2007; Ho, 2009; Ireland and
Pillay, 2009; Biondi, 2011; Strasser and Blumberg, 2011). This has largely
to do with the notion of ‘enterprise entity’ and ‘enterprise analysis’ that
was widely discussed in the 1930s and 1940s (Berle, 1932, 1947; Berle
and Means, 1932; Dodd, 1932, 1935, 1941). As we will see in the
following text, the company considered as an entity is contrasted to it
being viewed as a multilayered company with many subsidiaries and
holding structures. While these separate elements may have no neces-
sary operational significance as a matter of business reality or social
expectation, the standard legal practice is saturated with them, focusing
on separate subsidiary corporations and imposing legal requirement of
responsible behaviour only on them. The result is often poor legal
decisions in respect to the requirements for CSR.
Berle and Means posed the issue of the consequences for ‘corporate
governance’ of the divorce of control from ownership and the growth in
importance of the managers (controllers) relative to the shareholders
(owners). Originally, Berle in particular was concerned to re-establish
the traditional conception of shareholders as owners, though later he
modified his position and developed the idea of the firm as an ‘entity’
which needed to be considered as such in its own terms.16 But the
nature of this entity is the key issue (Bratton and Wachter, 2007).
Under pressure from Dodd’s arguments, the idea of an entity not exclu-
sively beholden to the owners/shareholders emerged. And this was the
‘reality’ of the way the modern company operated—so these authors
adopted the corporate ‘real person’ conception of company personhood
as outlined in Chapter 3. Berle recognized that the company was not
just a ‘bank account with rules about who had access to its resources’—a
definition once offered to this author of the nature of a company in law
by a corporate lawyer: it was not just a collection of corporate papers,
16
Some years ago, I discussed the nature of the corporation as a ‘dispersed social agency’
(Thompson, 1982). I insisted then, as I would reiterate now in the context of this debate, that
considering the firm as an ‘entity’ does not necessarily involve considering it as a ‘unity’.
123
minute books, account books, and a bank account, but a real organiza-
tional entity with many functions and operational aspects. Increasingly,
this organized entity was being pressured to operate socially and recog-
nize the need to operate in a socially responsible manner, mainly at the
behest of outside social influences, but also, crucially, by the insider
managers and directors rather than the shareholder-owners—who
were now remote from the company as an organizational entity. This
was the concrete consequence of the divorce of ownership from control.
So, the firm needed to be reconfigured both conceptually and in a legal
sense to recognize this changed nature of its existence. It needed to be
reconceptualized as a ‘singular entity’ and confirmed in law as such and
hence the ideas of the ‘enterprise entity’ and of ‘enterprise analysis’.
Berle and Means argued that the established difference between limited
liability and corporate personhood in respect to company law inhibited
this ‘unifying’ conception: the distinction needed to be abolished so
that the cyborg nature of the firm could be overcome (it being both a
‘person’ and an ‘entity’ in law as discussed in the Appendix to
Chapter 3).
Several political implications follow from this presentation.
First, it enables us to revisit the question of shareholder ownership. In
effect, the idea of an ‘enterprise entity’ undercuts this further. The
company must be run ‘for itself ’, by managers who become the
‘trustees’ of the institutional assets (Berle, 1932; Dodd, 1932), taking
account of a diverse range of variable social and commercial object-
ives.17 And the idea of an ‘internalized’ trusteeship of managers neatly
complements the idea of the ‘externalized’ corporate persona being
constructed by/for the company as outlined in Chapter 3. Trusteeship
would involve cultivating obligations to stockholders, to employees, to
customers, and to the general public—safely, honestly, wisely, properly,
and stressing the obligations of performing public duties as a good
citizen.18
This would amount to what Berle and Dodds describe as a ‘socially
responsible company’ (SRC) in connection to enterprise entity analysis.
As Ireland (1999) has stressed, however, this is not the same as tradition-
ally understood by CSR as described above and in Chapter 3: it is much
more radical in its implications, moving beyond amelioratory activity
to encompass radical reform and corporate democracy. This is an
17
This is what Clerc (2009) terms ‘the corporate interest’ model of corporate governance.
18
Dodd (1932: 1154): quoting a speech by the business executive Mr Owen D. Young in
1928—this involved the first explicit reference to the idea of ‘corporate citizenship’ that
I have been able to find in the literature.
124
important distinction—between CRS and SRC—the implications of

which we take up in the following text.
But quite how the idea of internal trusteeship just outlined might be
formed and ‘enforced’ would be crucial. Here, one might appeal to the
idea of civic prudence and fortitude, originally proposed as a way of
constructing an impartial integrity amongst public officials (Pufendorf,
[1668] 1991; Hunter, 2001; Minson, 2006). This is predicated on a AQ11
system of impersonal and jurisdictionally delimited offices cultivated
by the wise and worldly application of sociality and reason. It involves
neither a reliance on the higher moral values of officials as enlightened
human beings nor the blind trust in the virtues of their guardianship.
Rather, it involves a system of practical obligatory commitments and
integrity built amongst officials who relate their activities to the capaci-
ties of the office to which they are attached rather than to their own
personal interests, values, or proclivities. Whilst this ‘system of offices’
was originally conceived to relate to public officials, the point here is to
suggest its applicability to the directing personnel of a new ‘quasi-civic
milieu’ within the private but citizenly corporation. This would be
‘policed’ in the first instance through entanglements and peer pressures
amongst the office bearers within the corporation, and beyond—a self-
disciplining via mutual scrutiny of tasks, advice giving, and monitoring.
Given that—again as a matter of fact—shareholders do not contem-
porarily contribute much net investment resources in the aggregate for
American (or British) corporations as pointed out in Chapter 2, any
strong idea of legitimate shareholders rights in control is further under-
mined. What is more, enterprise analysis could in principle ‘solve’ the
problem of ‘hiding behind the veil’ (Thompson, 2009a; Strasser and
Blumberg, 2011). It would treat corporate holding companies in a
group as a single ‘enterprise entity’ from the point of view of corporate
law. Virtually, all large contemporary businesses are organized into sep-
arate corporations—subsidiaries—which are owned in a hierarchical
structure by a parent company which is in actual charge of the whole
enterprise group. Standard corporate law treats each of these subsidiaries
as a separate legal entity, with its own rights and responsibilities. What is
more, the shareholders of the subsidiaries are not responsible for its
obligations beyond the extent of their investments, even when the
shareholder is the parent corporation which controls the whole enter-
prise. Thus, limited liability means the parent may not be held respon-
sible for the obligations of the whole enterprise. Strasser and Blumberg
(2011) suggest six criteria for determining and assessing enterprise
entity analysis: the extent of control between parts of company, the
extent of economic integration between these parts, the extent of
125
administrative interdependence, of financial interdependence, and of

employee interdependence, and finally whether the company has a
common public persona. These criteria would be used to determine
whether a company and its parts comprised a single entity or not.
Such an entity would then be treated as a single persona from the
point of view of its legal incorporation. Thus, revisiting the idea of
‘enterprise analysis’ enables a reconsideration of the legal constitution
of companies, and sets out an agenda for the reform of corporate law
that provides a more effective way of reconciling the fact that the
shareholder does not ‘own’ the company. It also provides an intellectual
case for a wider consideration of ‘stakeholder democracy’ (Gerencser,
2005—see also Davies, 2009).
4.6.2 Corporate Citizens as Political Players?

Companies have for a long while presented a problem for democratic
politics (e.g. Patton and Bartlett, 1981; Gerencser, 2005): they have
many legal rights and they claim others through their actions but
what about their obligations and responsibilities? One thing the earlier
discussion of company citizenship demonstrates is that companies are
beginning to think about claiming several additional aspects included
under the ‘status citizenship’ heading shown in Table 3.2 of Chapter 3.
They certainly want clearer status recognition to be associated with their
citizenly ‘acts’.
The first difficulty is that the emphasis on citizenship may obscure
rather than reveal the political role of companies. Even in respect to
natural persons, citizenship is only one way that political activity is
conducted. There are many categories of persons who are not necessar-
ily citizens but who legitimately participate in political activity or have
rights and obligations, like holders of visas or work permits, (illegal)
immigrants, asylum seekers, visitors, etc. And those who can claim or
are granted the ‘right of citizenship’ have changed dramatically over the
years, for example, in respect to gender and racial categories, ethnic and
marital statuses, ‘blood ties’, etc. So, citizenship in not a homogeneous
category for natural persons, even in strict legal terms: it is contested and
always subject to review.
And the same goes for companies as legal persons and what they
can legitimately claim or do as analogous to persons. A sensitive matter
is around the issue of ‘free speech’, particularly in the United States
where this is protected by the First Amendment. This allows—indeed
encourages—citizens to actively support candidates, and make dona-
tions to political parties and individual candidates for office. But how
126
far does this stretch in respect to companies as citizens? (Patton and

Bartlett, 1981). The American courts have—if not so much found in
favour of companies—declared that the First Amendment does indeed
apply to companies as a result of their recognized personhood in law, so
they can become legitimate political actors in this respect. In many
ways, in their political capacities to influence political policies and
decisions, they are no different to natural persons.19 In addition, there
are several ‘legal statuses’ available to companies which affect their
rights and capacities, for example, Chapter 11 in the United States, ‘in
administration’ in the United Kingdom, temporary suspension of
trading on Stock Exchanges, for instance. So, companies as ‘citizens’
are not homogeneous in any natural way, no more so than are natural
persons.
Of course, inasmuch that the law treats agents similarly as citizens it
treats them as ‘equals’: they are equal before the law. But this cannot
account for the very unequal distribution of wealth, power, and influ-
ence of different citizenly agents as exists outside of the law. This itself
raises further complex issue about the role of companies in participative
and deliberative aspects of democratic activity, but similar problems
arise in respect to individual citizens as well; so, companies are not
unique, but they may expose these problems in a rather acute manner.
4.6.3 From CSR to Global Corporate Citizenship: Questions and Issues

This subsection serves to raise several critical points about the ‘political’
characteristics of the social responsibility programme and exactly what
‘global corporate citizenship’ might mean in this context.
A first issue is to reiterate the overwhelming commitment to a volun-
tary approach to standards setting in this environment as stressed above,
which in many respects mirrors the current sentiment in a wider range
of international governance arenas. So, there is nothing unusual here in
respect to companies.
19
Subject to certain—again highly disputable—restrictions; see Patton and Bartlett (1981)
and Gerencser (2005) for the terms of this debate—as in the United Kingdom, companies are
not allowed to offer direct financial support to particular candidates for political office, but
they are allowed to indirectly fund campaign political broadcasts (see <http://en.wikipedia.
org/wiki/Citizens_United_v._Federal_Election_Commissiom>; accessed 17 August 2011).
The defining moment for this position in the United States was the 2010 Citizens United vs.
FEC case, where the Supreme Court struck down a Federal statute banning direct corporate
expenditures on political campaigns. Subsequently, these were channelled into the so-called
super-Pacs in the United States, where corporate donations to support candidates indirectly
raise huge amounts of money. But they are not allowed to coordinate directly with political
campaigns run by the parties.
127
Traditionally, corporate governance matters have been controlled

by national governments via statutory and contractual law and domes-
tic regulation. A question is whether this can be duplicated at the
international level, and what, anyway, is the relationship between
continued national regulation and ‘voluntary’ international standard
setting. In addition, there is another element in this picture since the
EU—a supranational regional body—is becoming a key player in the
corporate standard setting process. Hence, there is already a complex
system of national, supranational, and voluntary regulation/govern-
ance emerging.
One issue for INGOs under these circumstances is whether to impli-
citly support the essentially voluntary approach being promulgated by
the official (and unofficial) international governance bodies set out
above, or whether to remain ‘independent’ of this and to press for
more radical change and a new fully legal framework at the inter-
national level. Some INGOs have opted for the former course, risking
claims of incorporation, while others have stood out firmly for the latter.
Of course, this is the eternal dilemma for NGOs—whether to cooperate
or to oppose, or when to cooperate and to oppose.
Two of the most significant oppositional bodies are the International
Council of Human Rights (2002) and Christian Aid (2004), both of AQ12
which call for supplementing the current voluntary approach with a
newly established international legal regime to govern CSR/GCC issues.
A useful service provided by these bodies is that they show how there
have been successes in converting voluntary code building into a statu-
tory order at the international level. Christian Aid (2004), for instance,
documents how since 1997 thirty-five rich countries of the OECD have
signed up to a convention that outlaws bribery of foreign public officials
by business people (see Chapter 5). But this still relies on the national
governments to enact domestic anti-bribery legislation and prosecute
transgressions in domestic courts. Both the ICHR and CA want to extend AQ13
such regimes to encompass the responsibility for ‘duty of care’ to com-
pany directors for communities and the environment, making them
legally accountable for the actions of their companies overseas. This
advocates a move beyond corporate social responsibility to corporate
social accountability, and it parallels the more general discussion of D2P
outlined earlier.
In addition to this, there have been further ‘unilateral’ national gov-
ernmental initiatives in respect to ‘corporate responsibility’ that, to
some extent, perhaps meet some of the ICHR and CA concerns. The
most notable of these was the recent US Sarbanes Oxley Act (2004)
which established new financial reporting disclosures and boardroom
128
structure and committee requirements, not only for US companies

operating in the United States but for US companies operating abroad,
and extended this to foreign companies operating in the United States,
or just listed in the United States, and even to companies not listed there
but which do business there. This legislation significantly extends the
reach of US extraterritoriality, and it adds to the power of non-executive
directors and to shareholders, and away from CEOs, in boardroom
affairs. The question is, however, whether other countries could act
like the United States even if they wished to, and whether such unilat-
eral action is for the long-term benefit of the international trading
system/regulatory regime as a whole. It is worth mentioning here, how-
ever, that the ILO is in regular and close discussion with the Chinese
government (and other emergent market economy governments) about
constructing specific legally backed domestic corporate responsibility
regimes in connection to worker rights in particular.
Certainly, international companies that have initiated comprehen-
sive ‘internal’ standards of social responsibility are somewhat uneasy
about too much extra ‘unilateral’ national action. These companies see
themselves as having worked very hard at establishing ‘best practice
benchmarking’ across their plants and operations in diverse countries,
and do not want all this hard work possibly undone (as they would see
it) by the proliferation of individual national standards.
What is less likely to gain sympathy is the purely voluntary nature of
some of the initiatives mentioned above which operate no discrimin-
ation in terms of who they allow to ‘sign up’ up to their protocols. The
UN Global Compact suffers from this problem as mentioned above. The
UN has decided not to discriminate in the case of companies (though it
does in the case of NGOs), something that undermines its wider legit-
imacy as an international governance mechanism in this field. And
although it might be easier for the WEF to discriminate, it looks as
though it does not. And this is where the voluntary CSR/GCC move-
ment loses credibility. Many of the companies involved with the WEF’s
GCC initiative are to say the least suspect in this respect. Take the case of
McDonalds, which was a founding signatory to the WEF’s GCC docu-
ment. This company has had difficulty in claiming good practice in this
respect. Indeed, in many respects, it could be considered one of the
‘vicious’ companies that cultivates what might be termed the ‘savage
consumer’ in Chapter 3 (footnote?). The fact that such a vicious com- AQ14
pany can claim virtue so easily surely undermines confidence in those
organizations that allow this. Thus, one way the whole GCC process
could be legitimized would be for organizations like this to be much
more discriminatory.
129
A second area that requires some comment is to get back to the ideas
of stakeholding again. Many of the voluntary initiatives discussed in
this book are designed to enhance the role of the shareholder, to stimu-
late shareholder activism, trim the power of CEOs, and raise the profile
of non-executive directors. In this, they may have been at least partially
successful. On the other hand, the INGO community and those arguing
for wider CSR/GCC reforms leave the implementation of these rather
vague—somehow national law or regulation will come to the rescue. An
explicit role for other stakeholders directly in corporate decision-making
remains the missing link. This used to be called ‘corporate democracy’,
but this term has somewhat fallen out of favour. Even the most progres-
sive of companies that have embraced the full CSR/GCC agenda enthu-
siastically do not talk much about corporate democracy. In large part,
then, CSR/GCC is a substitute process and a less threatening one for
corporate reform than corporate democracy, hence, to some extent at
least, its enthusiastic embrace by the corporate world. A return to the
idea of the SRC discussed by Berle and Dodds would be a step towards
addressing this failure of CSR/GCC. But perhaps a sharper embrace of
corporate democracy would better serve the purpose of corporate
accountability, something pursued in the next section.
4.7 Increasing Internal Democratic Corporate

Accountability
Company reform to increase internal democratic decision-making is a

complex issue, made even more so by the progressive internationaliza-
tion of business activity. But suppose there was a dramatic change in the
sentiment associated with GCC amongst companies and governments
alike so that they were eager to embrace radical reform. How could this
be practically organized and implemented?
Elsewhere, this issue has been addressed in more detail, though still in
a preliminary way (Driver and Thompson, 2002; Thompson, 2008a).
The main problem is exemplified by the case of treating something like
the environment or the unemployed as a stakeholder. How could these
be constituted into viable and convincing ‘constituencies’ able to be
involved in any direct decision-making activity? And these examples,
whilst extreme ones perhaps, are illustrative of the wider difficulty of
constituting all stakeholders as decision-making entities for MNCs as
the international bases of their activities spread.
The normal language employed in these situations would be to think
this precisely as a problem of the representation of an interest. But the
130
difficulty is clear in the case of the environment. How could this be

constituted as an interest? A possible way round this is to abandon the
language—and indeed, the conception—of both representation and
interest altogether. Instead, it is a former language of politics that
is invoked here: that of championing and stewardship. Any reformed
decision-making arena within the firm needs to be thought of as an
‘arena of stewardship or championing’ rather than of representation.
However, champions were elected or appointed, they would simply act
as ‘decision-makers’, not as representatives of an interest. They would be
there to champion a cause, nurture it, and act as a steward of that cause
through the corporate decision-making and implementation processes.
Clearly, this approach raises all sorts of difficulties of its own, not least
as to the mechanism of how such champions would be appointed or
how they would be made accountable. One way forward would be to
strengthen the non-executive directorship role via this route. As it
stands, most existing non-executive directors are appointed very much
through the old-boy network. They are already known to the firm, or are
in its immediate network of contacts. But they lack a clear alternative
mandate as a result, which is why there has been such an interest in
revamping their role in the rather restrictive corporate responsibility
reform so far enacted. The suggestion here would be much more radical,
and would strengthen the role of the non-executive directorship by
making it the job of such directors to champion the cause of the
unemployed, the environment, the community, the employees, the
customer, etc., even the shareholder. And this would put these various
considerations at the very heart of the organizational decision-making
processes.
But from where would such champions be found and how would they
be appointed? Here, we might think of the formation of a pool of such
persons from which could be drawn suitable individuals to serve on
different company boards or senates, or who were ‘elected’ to do so. But
by whom? Here, it is suggested that already existing global governance
organization, national bodies and governments, NGOs, trade unions,
trade and professional association, pressure groups, and even other
companies in completely different sectors, etc., that already address
these separate issues, constitute themselves into ‘quasi-constituencies’
around their existing concerns and provide lists of such acceptable
personnel as potential candidates. They could then either be elected or
appointed as suits the purpose, but operating in an open and transpar-
ent manner. The champions so produced by such a process would then
have to ‘report back’ to such bodies on their stewardship: their account-
ability would be addressed to these new ‘civil-associations’ as these
131
might be termed.20 In a sense, then, what is being promoted is a form of

‘indirect democracy’ where the legitimacy of the process relies upon
the legitimacy of the organizations that support it and feed personnel
into it.21 And in this schema, the role of trade unions would be essential.
Although ‘multi-stakeholder’ initiatives are often paraded in this con-
text, even NGOs have been reluctant to support an active and explicit
role for worker organizations in corporate governance (Riisgaard, 2009).
Any private standard setting process, for instance, has tended to
envision trade unions as passive objects that need to be taken into
consideration, consulted, and managed but not as active contributors
to regulatory practices with positive capacities of their own. Participa-
tion and empowerment are needed instead of patronization and
marginalization.
In some ways, the overall architecture of this process could be less
cumbersome and onerous that either elaborate suggested frameworks for
corporate democracy, such as that detailed by Shaun Turnbull (1994), or
the earnest maximization of CSR/GCC processes in leading social responsi-
bility firms which are heavily bureaucratic and time consuming. Both of
these are in danger of promoting ‘excessive’ democracy. There is always a
trade-off between democracy and efficiency. Thus, the issue is not to
always worry about the charge of not being democratic enough. Just like
everything else, there must be limits to the extent of democracy.
However, what about the concept of GCC itself? Clearly, understood
in its usual sense, this is something of an ambiguous and mismatched
term. As suggested in Chapter 3 at best, it is an elaborate claim only, and
political claims of this kind should be treated cautiously. If an under-
standing of citizenship relates to a definite polity, where members of that
polity are recognized as such and have certain legal rights and responsi-
bilities as a result, this does not describe the current characteristics of the
international corporate system. A civil society of citizenship is one con-
stituted by a nation state—one recognized by other states and by inter-
national law—where the state proclaims the civil society over which it
governs but does not subsume, and citizens are legally members of that
polity. It is not simply a voluntary association of like-minded participants.
20
This would be to operationalize a form of ‘associationalism’ in the spirit suggested by
Paul Hirst (Hirst, 1994).
21
Clearly, this idea seems to share some of formal intellectual architecture of that criti-
cized above when discussing Habermas’s promotion of an international constitutional order
for the legitimation of human rights. But its substance is quite different. The context is quite
different: Habermas looks to a macro global arena of interstate relations which are assumed
to act cordially in supporting universal human rights, while the idea here is for a focused
micro arena of individual firms in which democratic outcomes would have to be negotiated
and enforced through concrete corporate governance mechanisms.
132
What exactly is the constituted polity of which companies are citizens?

Where there is no such polity, there should be no pretence that there is. In
addition, those who proclaim the existence of a GCC have so far at least
failed to press for the proper introduction of a taxation regime on corpor-
ations to support that polity. They have shown no great commitment to
pay for the privileges claimed of their citizenship.
But perhaps we could call this an ‘emergent quasi-citizenship’? In this
softer understanding of citizenship, it is seen as simply involving an
active engagement in public affairs or in a public sphere, as extensively
discussed in previous chapters and above. But what is actually going on
in terms of GCC should not be abandoned, of course. A good deal of this
is to be welcomed. It is rather that a better term needs to be forged to
describe it. To describe it as ‘citizenship’ is perhaps to claim too much
and to wrongly claim.
4.8 Conclusions
What these tentative explorations of alternative corporate accountabil-

ity and governance mechanisms deliver is a strengthening of the idea of
the SRC. This is in contrast to CSR which is mainly voluntary, mainly
amelioratory—dealing with company externalities—and mainly about
responsibility. If accountability is to be taken seriously, then reform of
corporate governance is needed, which inevitably raises legal issue of
control and ownership. What is provided by these remarks is a frame-
work for thinking about this rather than a blueprint for concrete gov-
ernance reform. The political obstacles to such radical suggestions as
discussed here would be formidable. But in the ferment that is corporate
quasi-constitutionalization under present conditions, it is useful to have
an alternative and unorthodox perspective on offer. As it stands, private
and voluntaristic initiatives are abundant and pushing the quasi-
constitutionalization process in a particular direction that suits the
purposes of the business world. As will be argued in Chapter 6, this is
highly controversial and potentially disturbing, and it needs exposure
and debate. So, reminders of an alternative, more radical route that
might suite the democratic sentiment better is worth proposing and
exploring at this stage. This is exactly what has been done here.
Overall, this chapter has added to the analysis of corporate quasi-
constitutionalization by examining how businesses are justifying their
voluntaristic approach to corporate citizenship in all its guises, which so
far has mainly operated though the mechanisms of CSR. But it has also
interrogated these mechanisms to investigate whether what companies
133
say they are doing as part of their citizenly activity is actually what they
are doing. In addition, the chapter has broached what might be
involved in establishing greater accountability of corporate activity to
supplement the current emphasis on responsibility.
All this is highly political. The practices and mechanisms discussed
above smack of constitutionalization by the back door. They would
seem to involve, at least in part, an evolving semi-formal system of
customary commercial law addressing issues traditionally associated
with GCC. They might thus be viewed as ‘acts’ that are thereby conferring
‘statuses’ that were either not intended in the first place or for which there
is no proper legitimate authority. In the next chapter, we investigate
another element in this emerging picture, associated this time directly
with international investment matters in the first instance and then the
role of the OECD as yet another body encouraging voluntary responsibi-
lization via its Principle on Multinational Enterprises. These two features
are gathered together as possible instances of ‘global administrative law’.
Author Queries:
AQ: 1 Please check whether the insetion of “Global” to the chapter title
is correct, as this is found in "Prelims" section and in Chapter 1.
AQ: 2 Pease confirm whether this is the correct expansion for “se&ev”,
changed as given in Chapter 3.
AQ: 3 This sentence is not clear. Please check.
AQ: 4 Lafarge (2010) is not provided in the reference list. Please provide
bibliographic details for this reference or delete it from the text.
AQ: 5 GRI (2007) is not included in the reference list. Please provide
bibliographic details for this reference or delete from the text.
AQ: 6 The year “2009” in Chatterji et al. (2009) has been changed to
“2008” as per reference list. Please confirm.
AQ: 7 Please provide the year.
AQ: 8 Please check whether “ibid.” is appropriate here.
AQ: 9 Please check whether “ibid.” is appropriate here.
AQ:10 The year “2002” in Gourevitch (2002) has been changed to
“2002–3” as per reference list. Please confirm.
AQ:11 Minson (2006) is not provided in the reference list. Please provide
bibliographic details for this reference or delete it from the text.
AQ:12 Christian Aid (2004) has not been provided in the reference list.
Please provide bibliographic details for this reference or delete it
from the text.
AQ:13 Please provide the expansions of “ICHR” and “CA”.
AQ:14 Please provide the footnote number here.
134
Global Administrative Law, the OECD,

and International Investment
5.1 Introduction1
This chapter examines another aspect of the relationship between con-

stitutionality and the law by focusing on administrative law. In the
following text, it explains what global administrative law (GAL) is—or
might be, since this is not a coherent body of law but rather an emergent
field of somewhat disparate developments, something akin to an assem-
blage as discussed in Chapter 1. Then the chapter takes two contempor-
ary examples of where and how GAL is evolving. The first of these is the
Organisation of Economic Co-operation and Development (OECD) and
in particular its relationship to multinational corporations (MNCs) as
exemplified by the Guidelines for Multilateral Enterprises (OECD, 2000;
revised 2011). These guidelines deal with a range of issues but have
mainly to do with sustainable business practices, corporate governance
matters, and international investment. Around these guidelines exists a
complex network of committees and administrative apparatuses, hence
the interest from the point of view of this chapter. The second illustra-
tive example is a related one dealing with international investment
matters, namely bilateral investment treaties (BITs). These treaties
emerged in the 1980s and peaked in the mid-1990s as the process of
‘deep-integration’ discussed in Chapter 2 developed. They consolidated
in the wake of difficulty experienced by the OECD-led attempt to
develop a multilateral investment agreement (MIA) in the 1990s and
its eventual collapse in 1998. These treaties now constitute one of the
main mechanisms dealing with the governance of international
1
I would particularly like to thank Lauge Skovgaard Poulsen for very helpful comments
provided on an early draft of this chapter.
135
investment matters and it is the consequences of this development for

GAL that is concentrated upon here.
5.2 What is Global Administrative Law?
Administrative law is that body of law which governs the activities of

administrative agencies of governments. These agencies undertake tasks
such as rule making, adjudication, and the enforcement of specific
regulatory agendas. It is the law that governs the exercise of power by
public officials: the body of rules and principles developed to ensure that
when public officials act, they do so in accordance with the rule of law
(RoL). Administrative law is often considered to be a branch of public or
civil law. As a body of law, it deals with the decision-making of adminis-
trative units of government, for example, tribunals, boards, and com-
missions that are part of national regulatory systems associated with
such areas as international trade, investment, the environment, tax-
ation, broadcasting, migration, and transport. Administrative law
expanded greatly during the twentieth century as legislative bodies
worldwide created more governmental agencies to regulate increasingly
complex social, economic, and political spheres of activity.
In an international context, this straightaway raises acute problems
since the question becomes one of the statuses of those rules by which
the regulation and governance of international affairs might be made by
public officials. Are these also subject to the RoL—and if so by whom—or
are they still held as the residual prerogative of, say, the executive to deal
with in the context of national interest or national security consider-
ations, and hence remain the ‘arbitrary rule by men’ (sic) (Dyzenhaus,
2005: 129)? In addition, this relates to another important aspect of the
‘dualism’ between international and domestic law arising in the context
of how obligations entered into by public officials (in the broadest sense)
through agreements made in international bodies are incorporated into
domestic law. Most times, this is done by enacting new domestic legisla-
tion to absorb these agreed provisions and procedures into domestic law
but sometimes it is done simply by administrative means so that formal
incorporation is avoided. However, either way, this puts the conduct of
public officials as they administer these principles and rules under scru-
tiny—or not—by the traditional apparatuses of legal and extra-legal
governance operating at the domestic level (Dyzenhaus et al., 2001).2
2
Dyzenhaus et al. (2001) suggest all this can be considered under a general principle of
legality as long as a hearing is granted and good reasons are provided for administrative
136
Global Administrative Law, the OECD, and International Investment
Clearly, GAL is not an organized field—if it exists at all it is embryonic

and disjointed. But there has been a growth of trans-governmental regula-
tion and administration in several fields not least those associated with
commercial activity. One of these, closely related to what is usually desig-
nate as GAL, is private standard setting activity often promoted by hybrid
public–private organizations discussed in Chapter 4. So it could encom-
pass what is elsewhere described as private law in this book. But as sug-
gested by Kingsbury et al., (2005), this has led to an accountability deficit in
connection to transnational regulatory authority resulting in two respon-
sive trends: ‘ . . . first the attempted extension of domestic administrative
law to intergovernmental regulatory decisions that affect the nation; and
second, to the development of new mechanisms of administrative law at
the global level to address decisions and rules made within intergovern-
mental regimes’ (p. 16) (e.g. as in the case of BITs discussed below).
Of course this immediately opens up a further field of problems
associated with the consistency of domestic decision-making set within
diverse national contexts, and a common body of law directed at the
accountability of intergovernmental administrative regimes and com-
pliance to its standards and mechanisms. While transparency, participa-
tion, reasoned decision, and legality are all required for effective review,
there need not necessarily be any shared sense of what constitutes
appropriate administrative action, where competing (national or sec-
tional) interest prevails, and where disputes over jurisdictional compe-
tence can often surface.
Treaties are the primary instrument for establishing regulatory regimes
and they usually specify some dispute resolution mechanism between
states or other disputing parties (the World Trade Organization (WTO)
being a prime example, discussed in Chapter 2). Along with the trade
policy reviews of member states by the WTO secretariat, the disputes
resolution mechanism can perform important regulatory oversight
unctions in their episodic judgements but they do not, of themselves,
provide on-going, continuous, or routinized scrutiny of the standards
and rules adopted by a range of subsidiary bodies. The ‘global adminis-
trative space’ (Kingsbury et al., 2005) is occupied by multiple institutions
decisions so that: ‘ . . . the principle of legality might be considered as a constitutional principle,

one that will make more explicit the essential constitutional nature of administrative law’ (p. 6,
italics added). In this way, they tie administrative law directly to the idea of constitutiona-
lization. But their concept of constitutionalism is closer to the political constitutionalism
discussed in Chapter 2 where the legislature is given a legitimate role in both determining
constitutional values and in deciding when such values can be overridden or changed. It is a
feature of English common law countries in particular, with the exception of the United
States.
137
of governance, like the OECD system of committees, the Basel Commit-

tee on international banking, the WTO as just mentioned, the Inter-
national Monetary Fund (IMF), and a myriad of lesser bodies associated
with financial regulation, antitrust cooperation, taxation, and working
conditions (like the ILO, for instance) (Zaring, 1998; Barr and Miller,
2006). Clearly, the subjects of international administrative law are
not just states: a lot of them are also private and quasi-private actors
(e.g. the ISO—a body that claims a public power but which is for all other
intents and purpose still a private organization).
The development of GAL thus involves institutional procedures, prin-
ciples of operation, and remedies that build another piece into the
quasi-constitutional puzzle—allocating powers and determining rights
(or claims) and responsibilities in respect to regulatory bodies in this
instance. But is this also building something close to a global civic
sphere or ‘global democracy’? Although Cohen and Sable (2006) remain
ambivalent about the present state of affairs in this regard—they point
out that these developments might have destabilizing effects on demo-
cratic accountability in the first instance—they provide a strong norma-
tive argument for its evolution along these lines (see also, the
conclusions to this chapter). As will be discussed in the following chap-
ter, the idea that emergent administrative law in particular fields or
functional areas can be scaled-up to the global level is an attractive
one for cosmopolitan intellectuals, but one fraught with contradictions
and dilemmas as will be further elaborated in Chapter 6. And as Stewart
(2005) has perhaps unwittingly drawn attention to, it is US adminis-
trative law that could easily emerge as the model for the global equiva-
lent as interstate competition over rules and standards leads to the
powerful players determining the course of events once again.3
For the rest of this chapter, we take two exemplary instances of GAL at
work to explore their consequences for global constitutionalization.
These are the OECD and BITs, respectively. Both of these deal with
international investment matters. Thus, here we are extending the
discussion beyond international trade and the role of the WTO. But as
Chapter 2 demonstrated, the WTO is itself a central mechanism of GAL,
though it is also a body recognized in international law since it is the
result of a multilateral treaty. It is a crucial part of the global consti-
tutional arrangements that are now threatening to engulf the world
economy, incorporating it into a quasi-legally driven order very much
3
However, see Thompson (2005b) for an argument as to why a supranational regional
regulatory framework might emerge instead of a global one based upon any one particular
country’s model.
138
of its own making and without as much public consideration as perhaps

should be the case given its importance (Weiler, 2000; Cass, 2001; Cass,
2005). This we pursue in the final chapter.
5.3. The OECD as an Agent of GAL
The OECD is an important institution in global governance but it is also

an ambiguous one. This is because the OECD—unlike the UN—is not a
body fully recognized in international law; thus, its activities do not
have the ‘force of law’ but are only customarily legitimized and given
authority via ‘voluntary’ compliance from governments and other
actors like corporations. The OECD was founded by a Convention
signed by the originating member states in 1960 (Convention on the
Organisation of Economic Co-operation and Development, 14 December
1960). Article 5 of that convention provides for the member states,
acting through the OECD Council of Ministers, to take three types of
quasi-legal action: Recommendations, Decisions, and Agreements. Rec-
ommendations usually involve policy advice but are non-binding on
members. Decisions are binding but not mandatory since they have to
be implemented at the domestic level for which there is no requirement
and they often are not.4 Agreements are just that: a commitment to
work together on a particular problem, usually through transnational
networks, and to make recommendations. The position of the OECD as
the outcome of a Convention puts it into a different legal position—with
lower status and less binding consequences—than institutional out-
comes arising from a Treaty (Salzman, 2005: 192–3).
The OECD is an intergovernmental body; it is multilateral in the sense
that it relies on negotiation, consensus building, and agreement between
its member governments, but these represent only a limited number of
the possible set of all states in the world, namely the thirty-four (as of
2011) of what are broadly termed the ‘high-income liberal economies’.5
It is an example of what is categorized as elite multilateralism in
4
A notable exception to this was the Recommendations on Bribery and Corruption in the
1990s. After the final Recommendation was issued in 1999, anti-bribery legislation was
gradually introduced in the OECD member states over the following decade. This was
extended to included public officials in 2009 (Recommendation for Further Combating Bribery
of Foreign Public Officials). The success of these conventions is often pointed to as an example
of how an initial international ‘voluntary’ pact can be transformed into hard law. Whether
this is widely generalizable remains at issue.
5
In many activities, however, the OECD includes non-member countries who occupy a
sort of ex officio status. This is part of the OECD’s mission to expand its domain of influence
and draw in other states to encourage liberal market economic activity.
139
Chapter 6 (after Haass, 2010). Ostensibly, the OECD is a kind of think

tank for these countries: a forum providing a platform to compare policy
experiences, seek answers to common problems, identify good practices,
and coordinate domestic and international policies of its members. But it
also operates as a practical mechanism of governance for a wide range of
economic and other matters. It supports a dense array of committees and
networks which straddle the space between international and national
regulation, and which involve complex issues of implementation.
5.3.1 Operational Characteristics

The OECD is viewed as one of a number of international organizations
that are centrally involved in GAL (Zaring, 1998; Cohen and Sabel,
2005; Salzman, 2005; Barr and Miller, 2006). An interesting feature of
its sponsoring of the Guidelines is that this acutely raises issues of proced-
ural legitimacy as a key aspect of GAL. The OECD’s attempt to develop
the MIA in the 1990s was widely criticized by civil society actors and
developing countries for the lack of their involvement and this process
collapsed in 1998. In its wake, the OECD turned to revamping its
Guidelines (which had originally been conceived in the late 1970s). In
2000, a revised version of these was issued which contained a new
emphasis on procedural matters: decisional transparency, access to
information, consultation, reasoned deliberation, participation, and
review were all heavily stressed. These are seen as a manifestation of
the ‘informal legality’ that pervades the organization’s activities. And
similar considerations pervade the other institutions of global adminis-
trative governance mentioned above.
GAL is above all pragmatic and normative in character. The pragmatic
element in the case of the OECD’s Guidelines is demonstrated by the
pluralism in participation. The activities associated with the Guidelines
formally come under the internal authority of the OECD’s Investment
Committee. But the day-to-day operations are associated with a tripar-
tite forum involving government representatives, business organiza-
tions, the ILO, and other NGOs.6 This meets at least once a year where
the activity associated with the Guidelines are reviewed and new initia-
tives discussed—the outcomes of this meeting are then reported back to
6
At the meetings of this forum attended in 2008, there were not only representatives from
the OECD member states (and other accredited participants) but also several ‘visitor repre-
sentatives’ from non-OECD member states. This was seen as an attempt to widen the appeal
of the Guidelines (and of the OECD), particularly among emerging market economies. As of
2011, there were forty-three countries adhering to the Guidelines.
140
the Investment Committee. This is a standing committee made up of

subject-matter experts from member and non-member governments.
The Committee oversees all the work of the theme and its members
then relay the conclusions back to their ministries and capitals.
The normative side of the Guidelines can be seen in terms of it being a
set of recommendations for responsible business conduct, addressed by
governments to multinational enterprises operating in or from the
adhering countries. As discussed in previous chapters, businesses have
developed their own codes of responsible conduct and there are a
myriad of organizations dealing with CSR/GCC. So the Guidelines offer
another layer to an already crowded field of social responsibility scru-
tiny.7 But the OECD Guidelines are the only multilaterally endorsed and
comprehensive code that governments are committed to promoting.
And it is towards this element of government promotion that we now
turn.
5.3.2 National Contact Points and Domestic Promotion

A unique feature of the Guidelines process—which itself is a relatively
neglected mechanism in the general debate about global corporate
citizenship and responsibility—is that each participating country is
required to set up a National Contract Point (NCP) to ‘promote’ the
principles embodied in the guidelines: they are charged with ‘encour-
aging the adoption’ of the principles amongst the MNCs originating
from their jurisdiction. So, from the point of view of ‘successful out-
comes’, a lot would turn on the notion of promotion operating here.
The Guidelines are a voluntary code, like most of the other codes of
conduct in these matters discussed in previous chapters.
The NCP as a delegated agency is usually located in a government
office (in the United Kingdom, currently the Department for Business,
Innovation and Skills).8 In addition to its general responsibility for
promoting the Guidelines’ principles, the NCPs can hear complaints
7
A flavour of this can be gleaned from another associated document, the OECD Principles
of Corporate Governance, which was absorbed into the 2000 Guidelines: ‘The corporate gov-
ernance framework should recognize the rights of stakeholders as established by law and
encourage active co-operation between corporations and stakeholders in creating wealth,
jobs, and the sustainability of financially sound enterprise’ (OECD, 1999: 22). The OECD is
an active presence in debates about corporate governance through its Principles of Corporate
Governance which give specific guidance on legislative and regulatory matters to its members,
who are expected to reflect this in their domestic corporate governance measures.
8
When undertaking the research for this part of the chapter in 2008/9, there were just
three UK civil servants involved in NCP business, one of whom was part time. Similar
numbers were typical for other countries.
141
against companies initiated by a number of actors, including accredited

trade union bodies, employee associations, and NGOs. However, com-
panies cannot be sanctioned because, rather like the principles of the
Global Compact and as just mentioned above, the OECD principles are
also voluntary. They only involve moral suasion. The NCPs can, how-
ever, call for arbitration, and such processes (sometimes involving meet-
ings between the parties in dispute) are conducted in a quasi-legal
manner. And although lawyers are not directly involved in the actual
process, lawyers are involved in the run up to any arbitration, providing
advice and suggestions for strategy and tactics. So once again this con-
firms a quasi-legal aspect of the arbitration.
The key on-going forum for conducting Guidelines business is the
yearly two-day meeting in Paris when all the parties assemble. Each
OECD country is represented by one or two NCP representatives. In
2008, the employers organizations were present in the form of two
representatives (one from the CBI in the United Kingdom—who was
there as a representative of all European employer’s groups—and one
from the US equivalent body—who also stood in as a general North
American representative). Then there were representatives from several
NGOs including the ILO which has semi-official status in the forum.
The other NGOs are those with special interests in investment and
employment.9 The forum was chaired by the chair of the sponsoring
Investment Committee.
The forum really represents an opportunity for a review of the oper-
ations of the NCPs over the previous year but in addition to that the
2008 meeting had three main items on its agenda: supply chain man-
agement, the ‘Heilgendam process’ (see below), and a presentation by
John Ruggie of his ‘Protect, Respect and Remedy: a Framework for
Business and Human Rights’ Report which was discussed extensively
in the previous chapter (Ruggie, 2008). This latter item attracted the
most attention and was enthusiastically embraced by all parties present.
An interesting feature of the meeting was the attitude of the employer’s
representatives, which one might think would be cautious and even
hostile to a lot of what was going on. In fact, the two representatives
were as enthusiastic as everyone else with the Ruggie presentation and
seemed most accommodating to the other issues that were discussed.
Whether this attitude is one that characterizes these representatives
9
Formally, it is the Business and Industry Advisory Committee (BIAC), and the Trade
Union Advisory Committee (TUAC), along with ‘OECD Watch’ that have the recognized
status as ‘stakeholders’ in the Guidelines process, so these representatives are cross-delegated
for these organizations.
142
when back on their home territory is another matter, but it may be that
the OECD Guidelines process has a lasting effect on ‘softening’ attitudes
all round, given its very overt tripartite and participatory character.
Discussion of supply chain management did not throw up any sur-
prises; hence, it was the so-called ‘Heilgendam process’ that was more
interesting. This arose from the 2007 G8 Summit meeting held in
Heiligendam (Germany). There the leaders of the G8 countries under-
lined their commitment CSR with the following declaration:
With respect to strengthening the principles of Corporate Social Responsi-

bility, we commit ourselves to promote actively internationally agreed cor-
porate social responsibility and labour standards (such as the OECD
Guidelines for Multinational Enterprises and ILO Tripartite Declaration)10, high
environmental standards and better governance through OECD Guidelines’
National Contact Points. We call on private corporations and business organ-
izations to adhere to the principles in the OECD Guidelines for Multinational
Enterprises. We encourage the emerging economies as well as developing
countries to associate themselves with the values and standards contained
in these guidelines and we will invite major emerging economies to a High
Level Dialogue on corporate social responsibility issues using the OECD as a
platform.
So began the ‘Heiligendam process’: an international programme to

push a revitalized CSR agenda into the mainstream of global governance
led by the OECD, and following on very closely from the Ruggie Report
(which had been circulated at Heiligendam on the basis of an early
draft). The OECD meeting was very excited about all of this. And clearly
it does represent a serious-looking initiative if pushed vigorously
enough. Along with the Ruggie Report to the UN, as of 2008–9, global
CSR/GCC seemed to be getting a very high profile official endorsement.
Indeed, in 2011, a further revision of the Guidelines was issued which
included a section on human rights largely reflecting the Ruggie Report,
and something on exercising responsible due diligence in supply chain
management.11 However, the attention of world leaders may have been
diverted by the subsequent financial crisis.
The Paris NCP meeting also presented an opportunity for national
representatives to discuss their own day-to-day activities. It was clear
10
This refers to ILO Tripartite Declaration of Principles Concerning Multinational Enterprises
and Social Policy (1977, amended 2000 and 2006).
11
For the 2011 revised document, see <http://www.oecd.org/dataoecd/43/29/48004323.
pdf> (accessed on 26 September 2011). In addition, the 2011 edition of the UNCTAD’s
influential World Investment Report devoted a long section to CSR in its review of global
policy developments, see <http://www.unctad-docs.org/files/UNCTAD-WIR2011-Full-en.
pdf> (accessed 26 September 2011).
143
from this that certain national offices were very much active than others
in pursuing their promotional mandate. Some representatives never
uttered an official word over the two days, whereas those from Canada,
Holland, the United Kingdom, Denmark, and Sweden were very active.
It was generally agreed that the ‘best practice’ and most innovative
offices were to be found in Holland and the United Kingdom.12 But
this raises the whole assessment of what the NCPs are doing and what is
the point of them.
5.3.3 Assessing NCP Activities

The NCPs are clearly the ‘business end’ of the Guidelines. This is where
the nuts and bolts of promotion take place and apart from general
publicity activity, the NCPs are the site for consideration of specific
instances of infringements brought to their attention by concerned
and aggrieved parties. As mentioned above, it is the job of the NCP to
investigate these complaints or ‘requests’. Not all of these are considered
to be within the ambit of the Guidelines, so these are not pursued further.
Of those remaining, the NCP examines the circumstances of the case
and attempts to engage the parties in a mediation and reconciliation.
Sometimes this is successful, a ‘Final Statement’ is issued, and the case
is closed. Sometime it is not and the case remains open and without
a resolution. As signalled in the Report of the Chair of the 2010
NCP Meeting (http://www.oecd.org/dataoecd/15/23/46385752.pdf),
the number of ‘cases’ brought to the attention of the forty-two adhering
country NCPs remains quite small:13
[Between June 2009 and June 2010] 174 new specific instances were accepted
for consideration by NCPs. A total of 10 Final Statements were issued by 6
NCPs. With 17 new cases raised, the total number of requests since the 2000
Review exceeds the 2,005 mark. Of these, 1,606 have been accepted for
12
This was mainly in terms of having their activities independently monitored by
third parties. ‘Since 2007, a Steering Board has been established to monitor the work of the
UK NCP and provide it with strategic guidance. The Steering Board meets regularly and is
composed of representatives of relevant Government Departments and four external
members nominated by the Trades Union Congress, the Confederation of British Industry,
the All Party Parliamentary Group on the Great Lakes Region of Africa, and the NGO
community’ (HM Government, 2009: 3–4). This is one of the procedural mechanisms
used to ensure non-conflict of interests. The UK Civil Service, under whose auspice the
NCP exists, is governed by an elaborate system of administrative law (for a summary, see
<http://www.nadr.co.uk/articles/published/ConstitutionalLaw/Chapter011Administrative-
Law.pdf>; accessed 28 September 2011).
13
As well as the thirty-five OECD member countries, there are a further eight whose
governments also adhere to the Guidelines: Argentina, Brazil, Egypt, Latvia, Lithuania,
Morocco, Peru, and Romania.
144
consideration and 138 have been concluded or closed. While a majority of

the new cases continue to relate to employment and industrial relations
under Chapter IV of the Guidelines, a growing number have come to involve
Chapter II, as it pertains to Human Rights, as well as environmental issues
covered by Chapter V. . . . The rise of specific instances in non-OECD adher-
ing countries has also continued. However, the most noticeable development
during the reporting period was the increased recourse through mediation as
a means for resolving specific instances. 9 specific instances were managed
through mediation during this time frame, and in a majority of cases,
resulted in positive outcomes for all parties involved. (p. 2)
If things were distributed equally this would mean approximately five

requests made per NCP office per year since the 2000 Review, with four
considerations per year taken up for further action. Clearly, not a par-
ticularly burdensome workload, though the distribution of requests and
considerations is not even. And as just indicated in the quote, only nine
cases overall were managed through to mediation in 2009–10. Many
NCPs have never received a request or a consideration, while the Bel-
gium, Netherlands, UK, and US office have taken by far the largest
number.14 Even so, it has to be noted that this particular mechanism
for raising and resolving disputes is probably severely under-recognized,
a point often made by critics. Despite all the administrative activity,
either MNCs from the forty-three countries are being particularly dili-
gent in conforming to the Guidelines or the mechanisms are not widely
known or they are ignored. There was some discussion at the 2008
meeting about ‘forum shopping’ by potential complainants looking
for the most likely arena for a successful prosecution of their case, and
the OECD may be low down on the list. It looks cumbersome, takes a
long time, can be expensive, and there is no guarantee of a resolution
one way or another at the end.
Thus, is the OECD NCP process one-fit-for purpose (RAID, 2008;
OECD Watch, 2010)? The NCPs are not judicial bodies so they are
not in the business of establishing firm civil or criminal liability. The
guardians of the process are the sponsoring governments, which in
most cases liaise closely with other stakeholders, and this provides the
process with its legitimacy. In fact, procedures vary enormously between
14
As of June 2009, of all the NCP cases reported to the OECD, these four countries
accounted for 70 of the 167 (42 per cent) (Specific Instances Considered by National Contact
Points, OECD October 2009 <http://www.oecd.org/dataoecd/15/43/33914891.pdf>;
accessed 27 September 2011). OECD Watch (2010) has a slightly different total for each
country (see the table on page 10 of OECD Watch, 2010). It should be noted that not all cases
considered are reported: there is provision in the Guidelines for confidentiality if this
‘ . . . would be in the best interests of effective implementation of the Guidelines’. So there
is no complete transparency.
145
governments which are the sources of some confusion: some govern-

ments remain ambivalent about the whole process and its aims despite
being signatories to its agenda. Thus, as outlined above, we still have a
double process operating around GAL in the case of the Guidelines. First,
there is the procedural dimension fostered and directed by the OECD in
the light of its status under the founding Convention. Secondly, this is
then thrust upon domestic customary and administrative law, which
varies considerably between OECD countries. So GLA in this instance is
far from unified, and probably never will be.
The effectiveness of the Guidelines in encouraging better practice by
MNCs is the subject of constant discussion but it is very difficult to tie
this down with any hard evidence (OECD Watch, 2010). Enforcement is
missing, thus the ‘Remedy’ part of the Ruggie proposals remains the
weakest point of the process; so there are inherent limitations to its
effectiveness. However, the Guidelines remain the only government-
endorsed instrument at the international level which addresses a com-
prehensive range of corporate practices and offers a means of raising a
complaint. Some recognition of its positive contribution in selected
specific instances should be acknowledged, but like so many initiatives
in the area of international CSR/GCC, the voluntary character of things
puts an inherent limitation on its comprehensiveness and usefulness.
5.4 Bilateral Investment Treaties (BITs) as Instruments of GAL
It was pointed out above that the signing of BITs accelerated in the
1990s (Frank, 2004/5, 2007/8). As the attempt to develop a multilateral
agreement faltered, governments turned to other mechanisms to shore
up confidence in international investment activities, which is what BITs
do, at least for the rich countries. They provide an international legal
framework for securing contractual obligations, resolving disputes, and,
crucially, seeking compensation. Whilst only some contract breaches
are covered by these treaties, despite this they offer a widespread level of
protection independent of national law.
Figures 5.1, 5.2, and 5.3 provide data on the numbers and trends in
BIT agreements.
It is clear from Figure 5.1 that the growth in BITs took place during the
1990s. It may have peaked in the early 2000s as the possibility of yet
more purely bilateral arrangements were exhausted, though this might
also have something to do with a change in sentiment in respect to BITs
as discussed below. But as of 2010, United National Commission on
146
2,500
2,000
Number of BITs
1,500
1,000
500
0
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
Figure 5.1 Total number of active bilateral investment treaties, 1980–2007

Source: Global Development Horizons (2011). Multipolarity: The New Global Economy, World
Bank (2011: 106, figure 2.23).
BITs and BIT-claims

(1959–2009)
300 450
250 375
200 300
150 225
100 150
50 75
0 0
1959 1969 1979 1989 1999 2009
Non-European BITs European BITs
Cummulative BIT claims (2nd axis)
Figure 5.2 Number of bilateral investment treaties signed and claims made in
respect to them, 1958–2009
Source: UNCTAD, www.worldbank.org/icsid, http://ita.law.uvic.ca, and www.iareporter.com
Trade and Development (UNCTAD) estimates that there were 2,807 BIT
agreements in operation (UNCTAD, 2011: 100).
And as can be seen from Figure 5.2, a similar trend emerges in terms of
numbers, though this also gives important information on claims made
against the treaties for redress and compensation which have continued
to rise. The information on between whom BITs were negotiated and
signed contained in Figure 5.2 is developed in Figure 5.3.
Figure 5.2 indicates the importance of European and non-European
BITs, while Figure 5.3 shows with whom the main advanced countries
147
Germany
Switzerland
Netherlands
France
United Kingdom
Italy
Belgium-Luxembourg
Sweden
Austria
Finland
Spain
United States
Portugal
Denmark
Slovak Republic
Greece
Slovenia
Canada
Malta
Australia
Norway
Cyprus
Japan
0 20 40 60 80 100 120 140 160
signed with emerging market countries
signed with advanced economy countries
Figure 5.3 Number of bilateral investment treaties signed by advanced countries,

as of 2007
Source: Global Development Horizons (2011). Multipolarity: The New Global Economy, World
Bank (2011: 106, figure 2.24).
have been making their agreements. It demonstrates that the vast bulk
of these have been with developing or emerging market economies.
Additional evidence on this is provided by information on US BITs in
operation in 2009 as shown in Table 5.1.
A close inspection of this table reveals an interesting feature. The
United States has only signed such deals with small developing econ-
omies. And although not a central issue for this chapter, a similar
observation can be made in respect to the Free Trade Agreements
(FTAs) the United States has concluded, as shown in Figure 5.4.15
Other than the North American Free Trade Agreement (NAFTA), US
15
On the relationship between BITs and FTAs, see Tobin and Busch (2010). According to
their analysis, the existence of a BIT increases the likelihood of concluding an FTA; so these
148
Table 5.1 Total number of US BITs concluded by 1 June 2009
Reported partner Date of signature Date of entry into force
Albania 11-Jan-95 4-Jan-98

Argentine 14-Nov-91 20-Oct-94
Armenia 23-Sep-93 29-Mar-95
Azerbaijan 01-Aug-97 02-Aug-01
Bahrain 29-Sep-99 30-May-01
Bangladesh 12-Mar-86 25-Jun-89
Belarus 15-Jan-94 –
Bolivia 17-Apr-98 6-Jun-01
Bulgaria 23-Sep-92 02-Jun-94
Cameroon 26-Feb-86 06-Apr-89
Congo 12-Feb-90 13-Aug-94
Congo, Democratic Republic 05-Aug-84 28 Jul-89
Croatia 13-Jul-96 20-Jun-01
Czech Republic 26-Oct-91 19-Dec-92
Ecuador 27-Aug-93 11-May-97
Egypt 11-Mar-86 27-Jun-92
El Salvador 10-Mar-99 –
Estonia 19-Apr-94 16-Feb-97
Georgia 7-Mar-94 10-Aug-99
Grenada 24-May-86 03-Mar-89
Haiti 13-Dec-83 –
Honduras 01-Jul-95 11-Jul-01
Jamaica 02-Jul-97 12-Jun-03
Kazakhstan 19-May-92 12-Jan-94
Kyrgyzstan 19-Jan-93 11-Jan-94
Latvia 13-Jan-95 26-Dec-96
Lithuania 14-Jan-98 22-Nov-01
Moldova, Republic of 21-Apr-93 25-Nov-94
Mongolia 6-Oct-94 04-Jan-97
Mozambique 01-Dec-98 03-Mar-05
Nicaragua 01-Jul-96 –
Panama 27-Oct-82 30-May-91
Poland 21-Mar-90 30-May-91
Romania 28-May-92 14-Jan-94
Russian Federation 14-Jun-92 –
Rwanda 19-Feb-08 –
Senegal 06-Dec-89 25-Oct-90
Slovakia 22-Oct-91 19-Dec-92
Sri Lanka 20-Sep-91 01-May-93
Trinidad and Tobago 26-Sep-94 26-Dec-96
Tunisia 15-May-90 07-Feb-93
Turkey 03-Dec-85 18-May-90
Ukraine 04-Mar-94 16-Nov-96
Uruguay 04-Nov-05 01-Nov-06
Uzbekistan 16-Dec-94 –
Source : Compiled from 2010 US Trade Compliance Centre (<htttp://tcc.export.gov/Trade_Agreements/
Bilateral_Investment_Treaties/index.asp>; accessed 25 September 2011).
two instruments of economic governance are closely correlated. However, this connection is
forcefully challenged by Poulsen (2010c).
149
Trans-Pacific Partnership
Malaysia
Korea
Oman
Panama
Colombia
Poru
Bahrain
Australia
CAFTA-DR/Dominican Rep.
CAFTA-DR/Costa Rica
CAFTA-DR/Honduras
CAFTA-DR/Nicaragua
CAFTA-DR/Guatemala
CAFTA-DR/EI Salvador
Morocco
Singapore
Chilo
Jordan
NAFTA
Israel
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Note: U.S. FTAs with Costa Rica and Oman entered into force on 1 January, 2009.
Source: Office of the United States Trade Representative.
Under negotiation Signed but not approved

Approved but not in force In force
Figure 5.4 US Free Trade Agreements: progress, 2000–9

Source: Economic Report of the President 2009, Chart 4.2, p. 133. US Government Printing Office.
FTAs have mainly been made with small players in the international
trading system.
So what is going on?
Perhaps the United States does not need to sign trade and investment
agreements with large nations. However, this is unlikely in the case of
emerging market economies such as China, Brazil, Indonesia, India, and
South Africa, all of which are absent from these figures and the table. On
the other hand, it may mean that these governments do not wish to sign
such agreements with the United States, or see no need to do so. It
always takes ‘two to tango’, and these countries may see no need to
dance since, for all intents and purposes, the United States is already an
open enough economy from their point of view. But then why would
smaller economies sign such agreements? In the case of BITs, the United
States is relatively unimportant, but also the United States has been
surprisingly open and honest about what BITs might deliver in terms
of enhanced foreign direct investment (FDI)—which is not very much—
and they have often wanted to tie this to quite far-reaching domestic
liberalization and RoL enhancement, which developing country gov-
ernments have resisted and thus decided not to make such agreements
with the United States (Poulsen, 2010b).
150
5.4.1 The BITs Regime in Detail 16

BITs are a form of law, ostensibly designed to encourage investment
because the rights of foreign investors are protected. They promise
transparency, substantive protection against discrimination, no restric-
tions on capital transfer or direct and indirect expropriation by host
governments, or contractual breaches, and they provide certain guaran-
tees against losses due to civil war, as well as provide a minimum
international standard of fair and equitable treatment.17 AQ1
But the key element in any BIT is the dispute resolution mechanism.18
This allows private investors to submit claims against governments to an
international tribunal—the International Centre for the Settlement of
Investment Disputes (ICSID) (or, as indicated in footnote 18, via UN
Commission on International Trade Law (UNCITRAL), but we leave this
aside for the moment)—whose judgement is binding and final. There is
no provision for appeal.19 This is in direct contrast to the WTO which
only allows governments to bring claims and where there is a right to
16
This section owes much to Poulsen (2010a, 2010b), and various ICSID Annual Reports
(http://icsid.worldbank.org/ICSID/FrontServlet?requestType=ICSIDPublicationsRH&action-
Val= ViewAnnualReports&year=2011_Eng).
17
In effect, these extend to investment the two key features of trade regimes typifying the
WTO: the Most Favoured Nation (MFN) and the National Treatment (NT) principle. Under
the MFN rule, host countries must extend to investors from one foreign country treatment
no less favourable than they accord to investors from any other foreign country; and,
according to the NT principle, the host country is required to treat the foreign investor
and its investment operating in the territory in the same or comparable way as a domestic
investor or investment. In addition to these relative treatment standards, however, BITs also
extend ‘objective’ standards to investors: they establish clear limits on the expropriation of
investments and provide for payment of compensation when expropriation takes place; and
they restrict the imposition of performance requirements, such as local content targets or
export quotas, as a condition for the establishment, acquisition, expansion, management,
conduct, or operation of an investment. However, some treaties exclude certain sectors. The
United States, for example, does not give a right to establish investments on NT basis in
certain sensitive sectors such as airlines and broadcasting. Of course, many developing
countries have not shown the same degree of consideration when it comes to excluding
delicate sectors, either because of capacity limitations or ignorance of the consequences—see
below. And other than the United States, most BITs do not include explicit liberalization
clauses—giving the right of establishment—as part of the agreements.
18
Any disputes are enforceable within the terms of either the 1958 New York Convention on
the Recognition and Enforcement of Foreign Arbitral Awards or the 1965 Washington Convention
on the Settlement of International Investment Disputes. Slightly different rules apply to each of
these and there are two bodies that can actually conduct the arbitration: the International
Centre for the Settlement of Investment Disputes (ICSID) and the United Nations Commission on
International Trade Law (UNCITRAL) Arbitration Rules. Again, these two bodies go about
conducting their business in slightly different ways. In the main text, we concentrate
upon the Washington Convention and the ICSID.
19
Though The Convention does allow the parties to request a supplementary decision or
rectification of the award, or to seek the post-award remedies of annulment, interpretation,
or revision, these are essentially clarificatory procedures, however.
151
appeal against judgements (see Chapter 2). If host governments refuse

to pay the compensation in the case of adverse judgements over invest-
ments—the scope of which is very wide and can include both tangible
and intangible investments, such as intellectual property, bonds, shares,
and concessions—BITs give the right to the complaining party to appeal
to the Conventions referred to above (and in footnote 18), to confiscate
the governments commercial property around the world. And claims
here have been both frequent and substantial (Stiglitz, 2008), and whilst
the rules differ slightly between the arbitration bodies, there is no
universal provision for all the claims and their value to be made public.
So the BIT regime provides a comprehensive and substantial power to
the ICSID.
The ICSID was set up in 1965 at the behest of the World Bank (WB). It is
the result of a multilateral treaty charged with removing the impediments
to the free international flow of private investment (the Washington
Convention just mentioned). By 2011, it had 157 signatories (though
only 147 of these were formally Contracting States who had deposited
their instruments of ratification, acceptance, or approval to the ICSID).
The structure of the ICSID consists of an Administrative Council and a
Secretariat.20 The President of the World Bank is ex officio Chairman of
the ICSID Administrative Council, which indicates its close connection
to the WB. Indeed, the Council meets once a year at the same time as the
WB/IMF annual meeting, and the WB meets the Council’s and the
Secretariat’s administrative costs (though the cost of any proceedings
are met by the disputing parties). It is made up of a representative of
each of the signatory nations. The principal functions of the Adminis-
trative Council are the election of the Secretary-General and the Deputy
Secretary-General, the adoption of regulations and rules for the insti-
tution and conduct of ICSID proceedings, the adoption of the Centre’s
budget, and the approval of the annual report on the operation of the
Centre.
It is the Secretariat that carries out the day-to-day activities of the
ICSID. Apart from supporting the Council in various ways, this is the
body responsible for organizing the conciliation and arbitration panels
and those who will sit on them. It maintains the ICSID Panels of
Conciliators and of Arbitrators to which each contracting state may
designate four persons and the Chairman of the Administrative Council
may designate ten persons. In 2011, there were 526 accredited Panelists.
20
The following information comes from <http://icsid.worldbank.org/ICSID/
FrontServlet?requestType=CasesRH&actionVal=RightFrame&FromPage=Organization%
20and%20Structure&pageName=Organization> (accessed 1 October 2011).
152
200
150 159
100
50 63
0
FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011
Figure 5.5 ISCID cases administered by the Secretariat, 2003–11 (each fiscal year,
FY)
Source: ICSID Annual Report 2011, p. 26.
The Centre itself does not conciliate or arbitrate disputes; rather, it

provides the institutional and procedural framework for independent
Conciliation Commissions, arbitral tribunals, and ad hoc Committees
constituted in each case to resolve the dispute. Two sets of procedural
rules govern the initiation and conduct of cases under the Centre’s
auspices. These are the Convention, Regulations, and Rules or the Add-
itional Facility Rules. These cover disputes between private investors and
contracting states and between private investors and non-contracting
states, respectively. In 2011, 89 per cent of cases were considered under
the first set of rules. The Centre can also consider cases brought about
under other agency rules and treaties, for example, contract claims and
claims pursuant to domestic investment laws and (though rarely) the
UNCITRAL mentioned above. In most instances, the tribunals consist of
three arbitrators: one arbitrator appointed by each party, and the third,
presiding, arbitrator appointed by agreement of the parties or by their
party-appointed arbitrators. The Centre assists in all of this with advice
and potential panelists. The number of disputes between 2003 and 2011
considered by the ICSID are shown in Figure 5.5.
It is important to note that of the thirty-two new cases that came before
the Centre in 2011, twenty-five were the result of BIT disputes. The other
seven arose from other sources of international and domestic law arbitra-
tion. So the ICSID process discussed above is not exclusive to BITs, and
not all BITs use the Centre for their particular dispute resolutions.
153
It is clear that the ICSID has a close relationship with the WB but it is
also part of a dense network of other international organizations (in
particular, UNCTAD, UNCITRAL, and the OECD) and private arbitration
bodies with which it is attempting to develop partnership arrange-
ments. And this web of international investment arbitration is matched
by the web of bodies that were instrumental in developing the BIT
regime itself, to which we now turn.
5.5. The Development of BITs and the Rule of International

Administrative Law
Why have countries signed BITs? As pointed out above, the main arena
of application has been investment relations between rich countries and
relatively small developing economies, though through the auspices of
UNCTAD this has been extended to encouraging ‘south–south’ treaties.
Initially, this was sold to the developing countries on the basis that it
would stimulate FDI. Careful analysis has shown, however, that this has
had only very limited impact (Poulsen, 2010b). But once the process got
going, it was difficult for developing countries to resist or back out. They
were pressured by a powerful network of international governance
organizations to join the process, otherwise they would be disadvan-
taged. UNCTAD and the WB were the leading advocates, closely
followed by the OECD, the EU, and other regional forums, all operating
under the auspices of an investor-State dispute settlement system (ISDS)
heavily promoted by these rich countries (Van Harten and Loughlin,
2006; Schneiderman, 2008; Stiglitz, 2008). Often, developing countries
did not understand the full implications of such treaties, and it was left
to relatively lowly officials to ‘negotiate’ and agree to the terms of the
treaties, effectively passing sovereign acts to these minor officials (Poul-
sen, 2010a). From the advanced countries point of view, pressure from
their MNCs to get involved was evident and they seemed to be in a win-
win situation in terms of protection and compensation. The over-
whelming majority of the 390 BIT claims have been initiated by MNC
investors from the developed countries, though not all of these have
been successful.
The key aspect of the investment treaty arbitration is its hybrid form:
it transplants a private adjudicative model derived from the commercial
sphere into the public realm of government, thereby giving privately
contracted arbitrators the authority to make what are essentially gov-
ernmental decisions, but dressed in a judicial form. Essentially, this
activity deals with a special, internationalized form of judicial review
154
that is more akin to the judicial control of governmental action pro-

vided by national administrative and constitutional law than to either
classic interstate dispute resolution or international commercial arbitra-
tion (Van Harten and Loughlin, 2006: 128). What is more, these treaties
tie the host country into an arbitration process encompassing future
disputes that involve an indeterminate class of potential claimants in
relation to a very broad range of governmental activity (potentially
involving taxation, corporate governance, environmental protection,
regulating technology use, establishing product standards, controlling
land use, social policy and delivering social services, and more besides).
So they compensate foreign businesses for ‘regulatory takings’ that
decrease the value of an asset (of an ongoing business, or, in some
cases, of a potential new business) (Stiglitz, 2008: 515). This also ‘fixes’
regulation, establishing pre-conditions for compliance by putting
restrictions on the freedom of governments to adapt to changing cir-
cumstances and preferences. In addition, they give protections to for-
eign investors that are not necessarily afforded domestic ones, thereby
creating an uneven playing field, with perverse incentives. It might even
be the case that BITs introduce an element of reverse discrimination:
foreign firms are treated more favourably, with greater protections, than
domestic firms. As a result of all of this, a wide range of regulatory
disputes between investors and the state has become subject to control
through international arbitration at the behest of individual private
investors.21
The arbitrators in the process are private commercial lawyers appointed
by the parties themselves from the pool maintained by the ICSID.
But arbitrators are not barred from representing investors in similar
cases—even at the same time. It is not uncommon for instance, for an
important arbitrator to be simultaneously sitting as an arbitrator in one
case, representing an investor or state in another, and generally advising
other clients on investment law. So the informal jurisprudence operating
in this field is potentially full of conflict of interests.
21
‘Individualized damages claims are very rare in international law. Outside of the Euro-
pean Union, no international regime allows individuals to seek damages through inter-
national adjudication in response to a state’s alleged violation of international law. For
instance, individual claims were ruled out in the case of the WTO and non-investment
chapters of NAFTA, which limit the dispute resolution process to inter-state adjudication
based on the remedies of a declaration of illegality and the prospective suspension of trade
concessions’ (Van Harten and Loughlin, 2006: 131). There are, however, some exceptions to
this in the case of human rights abuses, though the system of award enforcement in the case
of international investment regimes gives this a coercive force beyond that of other forms of
international adjudication in the public sphere, including human rights.
155
Because they lack institutional safeguards of independence, investment

arbitrators are vulnerable to inappropriate influence by private actors that
have clout in the arbitration industry and by the states or business entities
that dominate voting and appoint officials in key appointing authorities. The
appointing authorities are central to the system because they have the power
to decide the make-up of the tribunals, the content of the arbitration rules,
and the conduct of the process by which awards are reviewed. (Van Harten,
2010b: 58)
Whilst customary international law has traditionally adopted the

presumption that the resolution of a regulatory dispute involving a
foreign national is, in the first instance, a matter of domestic law of
the state in whose territory the dispute arose, this ‘exhausting of local
remedies’ is bypassed in the case of ICSID arbitration because this
capacity has been waived: the resort to domestic courts as a first attempt
at a solution to a dispute is instead transferred directly to the inter-
national tribunal.
This highlights one of the main criticisms of these agreements—they
are, in their nature, not democratic and that, indeed, may be their main
rationale: to circumvent normal democratic processes and get protec-
tions for investors that would be otherwise unattainable had there been
an open and public debate. The process of negotiating and securing the
BITs looked clumsy and unfair. Differences in the political or economic
powers of the parties involved in negotiations and in their ability to
ensure enforcement, or in their ability to use political powers to extract
further favourable terms in another context are obvious and telling. The
resulting BITs are one sided and unbalanced. They stack the cards very
much in favour of private wealthy individual investors and MNCs from
the developed countries. They invoke inherently ambiguous terms (‘fair
and equitable treatment’); the adjudication process often invokes stand-
ards of commercial secrecy, even though one of the parties to the suit is a
public entity in which there should be high standards of transparency;
different arbitration panels can come to opposite conclusions in almost
identical cases; they use arbitration courts, designed to settle commer-
cial disputes, to enforce an agreement where a sovereign is a party. The
processes often lack the openness and transparency that has come to be
expected from judicial proceedings in a democratic society and have
shown little regard of broader societal concerns, as they focus exclu-
sively on the rights of investors.
But in the case of BITs, there is a very indirect form of accountability
operating. The Council of the ICSID is a weak representative part of
the arbitration process. Each signatory country gets one representative
156
on the Council, which in turn supervises the Secretariat.22 It is the

procedural mechanisms of the Secretariat where the main problems
lie, which are non-transparent, arbitrary, and self-serving. And as we
have seen, it is with appropriate procedural processes that administra-
tive law most importantly engages; so if this is unfair or wrong, legitim-
acy is severely undermined. The remote accountability offered by the
weak representativeness of the overall organization structure cannot
compensate for this lack.23 As Van Harten (2010a) has noted in the
case of GAL, concerns over the RoL pertain mainly to its procedural
aspects rather than its substantive aspects, though these latter substan-
tive aspects remain a concern from the point of view of this book, which
is dealing with the overall constitutionalization of the system (see
Chapters 2 and 6).
In the light of these comments, what might be done to redress some of
these shortcomings? One thing would be to press domestic incorpor-
ation on MNC operations in the developing countries as an alternative
to treaty arbitration so as to subject that activity to domestic law. It
would seem a legitimate prerogative of governments to require that
those wishing to engage in business within their borders be incorpor-
ated there as a subsidiary. The subsidiaries would be governed by the
laws within the country. But as it stands, this is complicated because by
establishing a holding or subsidiary company in one state party to an
investment treaty, a multinational enterprise can acquire the national-
ity of that state, and thus obtain protection under the treaty for its assets
in other states’ party to the treaty. So even if incorporated in host states
through joint ventures or otherwise, foreign investors—including
minority shareholders—would still be covered by BIT protections.
This is why both Stiglitz (2008) and Van Harten (2008) have argued
for a formal international commercial court to deal with investment
disputes. This could consist of full-time international judges, without
any commercial attachments, and not subject to the kinds of conflicts of
interests for which the arbitration processes under current BIT arrange-
ments have been criticized. It would adjudicate cross-border disputes
and enforce cross-border contracts and regulations. Such a court would
be governed by the usual standards of due process, including full trans-
parency, and there should also be appeal processes. Whether this could
22
And the ICSID’s political sponsor, the WB, also operates a form of indirect accountabil-
ity in that it is an intergovernmental organization subject to some control by member states.
23
Indeed, this obscurity is even more telling in the case of UNCINTAL arbitration: claims
pursued under its rules are rarely made public, for instance, which means it is often not
known whether an UNCITRAL claim has been brought and by whom.
157
ever get off the ground in the current climate is questionable, however,
since there is a definite trend against yet further formalized global and
multilateral treaty negotiations as other chapters have demonstrated.
Finally, there is renegotiation or abrogation of the treaties as a remedy,
the course a number of populist Andean countries have already taken,
and one that we might expect to gather momentum in the aftermath of
the global recession. After all, this is a course the advanced nations have
themselves in effect resorted to in the case of their obligations in respect
to many international treaty obligations dealing with financial matter,
as discussed in Chapter 2.
5.6 Conclusions
The OECD’s engagement with MNCs through its Guidelines process

represents a milder form of GAL than does the BIT/ICSID process just
described. But if we understand administrative law to be a form of law
that subjects the regulatory conduct of state activity to a juridical review
(or quasi-judicial review), then both these forms of activity implicate
GAL in one way or another.
The OECD Guidelines process sets up a body of networked procedural
arrangements and an instrument of promotion of the Guidelines in the
domestic regulatory structure of member states, notably the NCPs.
These then become part of the civil service apparatus of those states
and are thus in part guided by administrative law pertinent to that
activity at the domestic level and partly by the terms of the Convention
setting up the OECD and subsequent Recommendations, Decisions, and
Agreements and that have emerged as protocols from its activity. And
although these protocols do not have the binding character of treaty
clauses, they operate nonetheless as mechanisms for regulatory over-
sight of MNCs’ sustainability and corporate social responsibility
agendas. And the way these protocols have evolved is in many ways
more democratic in character than how the BIT/ICSID has conducted its
complementary activity in regulating international investment. The
OECD has been more sensitive to transparency and inclusion, and
more careful in its presentation of GAL.
Perhaps the BIT/ICSID process offers a more paradigmatic illustration
of GLA, however, despite its non-democratic (or less democratic) charac-
teristics.24 It is precisely because of the potential of these internationally
24
And this in even more the case with non-ICSID dispute resolution such as that con-
ducted under UNCINTAL rules.
158
generated adjudicative norms and mechanisms to exert a strong discip-

linary influence over domestic administrative programmes that invest-
ment arbitration should be seen to constitute a powerful form of
GAL. Investment arbitration is constituted by a sovereign act of the
state (in signing the treaty and committing to arbitration)—as opposed
to a private act which would constitute commercial arbitration—and this
makes investment arbitration more closely analogous to domestic jurid-
ical review of the regulatory conduct of the state. However, while directly
removed from the domestic legal system of the respondent state, it is
uniquely integrated into the domestic enforcement structures of many
other states. Of course, even with respect to commercial (private) arbitra-
tion, the state does exercise some public authority in relation to that
arbitration, since commercial arbitration depends on the authority of the
state to give final force to any awards, though in general states have taken
a back seat in this activity and left it to ‘customary enforcement’. The
state may ‘consent’ to this delegation of powers but it does not completely
devolve them (see Chapter 4).25 However, the state’s decision to delegate
adjudicative authority to international tribunals, and ultimately to for-
eign courts, is a major policy decision in its own right. By authorizing the
use of investment arbitration, this special method of decision-making is
incorporated into the governing apparatus of the state, and by default
becomes part of its own administrative law. In this way, we see how
domestic administrative law and GAL can be quite closely linked in the
case of BITs.
But neither BITs nor the OECD Guidelines are ‘universal’ mechanisms.
They only affect a subset of all nations, though they do set a certain
tone that those not immediately involved tend to take cognizance of the
conduct of their own independent activities. Chapter 6 develops
this theme further. It will argue that BITs and the Guidelines processes
are part of a wider move—one that is increasingly and informally
constitutionalizing the corporate sphere as a whole, where international
investment activity is just a single part of the overall jigsaw (e.g. Schnei-
derman, 2008).
25
And, of course, the state can act in a private capacity at times, for example, when a
public official enters into a contract with a private party under the conditions of ordinary
commercial law.
159
Author Queries:
AQ:1 Please check the first sentence ’these extend to investment the two
key features...’, which is confusing.
Consequences of Quasi-
Constitutionalization for the Global
Regulatory Agenda and the Fate of the
Rule of Law
6.1 Introduction
There is no definitive way of establishing whether global corporate quasi-

constitutionalization has happened or is happening. We lack both the
analytical and empirical tools to establish this clearly and with any
precision one way or another. Rather, we are left with a set of arguments
backed by evidence drawn from many sources. This evidence has been
marshalled in the context of reviewing the state of play in various arenas
of corporate activity that impinge on key aspects of the constitutional-
ism discourse—theoretical demarcations, methodological approaches,
illustrative resources, seemingly marginal aspects which might prove
illuminating, pertinent facts and figures, and the like (in the termin-
ology of Chapter 1, a discursive ‘assemblage’). Of course, some of this
evidence is empirical in a traditional sense but other illustrative material
is purely argumentative. Indeed, at one level, all argument is evidential.
But we need to remain wary of any decisive conclusions, not so much
because of a wish to remain neutral and sit on the fence, but because the
nature of the object of analysis is itself—as we have seen—ambiguously
constituted. There will always be qualifications. And in an uncertain
field of fast-moving developments, any deep structural transformations
will still take a long time to mature. This is also informed by a certain
hesitancy in respect to epochal changes: it would be rash to jump to a
premature conclusion that everything has changed and we are now
embarking on a completely new era of global societal governance. So it
160
Consequences of Quasi-Constitutionalization for the Global Regulatory
may be that mundane continuities are more important than dramatic

changes.
Nevertheless, this warning will not absolve the chapter of making an
argument about the dominant trends, though it will hedge this in
various ways. It is only fitting that a conclusion be drawn which sums
up the weight of the arguments presented in the previous chapters. In
addition, there is a normative dimension to this exercise. Many of the
trends analysed in the previous chapters speak of developments that are
disturbing and with unsettling consequences. Rather than disguising
this under a veneer of objective neutrality, what is elaborated below will
sum up on a lingering disquiet in respect to these developments. As far
as possible, however, the presentation will be an honest and even-
handed one.
We begin by picking up several key threads in the analyses above,
particularly in the context of constitutionality, the role of law, of sover-
eignty, and of governance.
6.2 Summarizing Some Important Points:

Constitutionalization and its Meaning
Specifying and understanding the process of constitutionalization is

made doubly difficult by the fact that there is no single stable concep-
tion of what it means or how it operates. The working definition
adopted here was that, broadly speaking, it can be viewed as those social
practices that constrain economic and political behaviour and give AQ1
substance to civic duties and obligations (thus, directly implicating
‘acts’ and ‘statuses’ as discussed in Chapter 3). We can sum up the formal
features of constitutionality in terms of certain common characteristics
necessarily present if it is to be described as a constitution—all of which
have been the subject of extensive reflection in previous chapters. First,
it must involve some notion of a political community in respect to which
the constitution is established or which it addresses (how the ‘multi-
tude’ or ‘natural man’ are rendered into governable subjects, Chapter 2).
Second, it must feature a participatory process of deliberative law making,
though, given the discussion above about the definition of the law,
this leaves quite a wide opening for the kinds of deliberation and
laws that are involved in this part of the process (Chapters 2, 3, and 5,
and below). Thirdly, it (re)arranges or (re)aligns relationships of power
amongst the parties to the constitution, specifying their respective
domains of authority and the limits to these (what or who has komp-
tenz-kompetenz—Chapters 3, 4, and 5). Fourthly, it must command at
161
least some minimal level of social acceptance and legitimacy, not only
amongst the parties immediately involved but also in the eyes of those
outside of the process (Chapter 4). Fifth, constitutions usually involve
the establishment of a new fundamental norm (Grundnorm), which
founds the system, underpins it operational characteristics, and estab-
lishes its typical functional style (what was described in Chapter 2 as the
‘primary scene’ of constitutional politics). And finally, the overall point
of any constitution is to establish behavioural constraints on parties, to
establish a kind of ‘order’ (Cass, 2005).
And in addition to these features, we can discern several approaches to
constitutionalization or areas where it is newly invoked in the global
context. They include institutional and managerial rule making, rights-
based constitutionalism, judicial norm generation, and transnational or
transformational constitutionalization. All these emergent fields are
readily identifiable in the case of international commercial activity.
Clearly, any such constitution building in the corporate or any other area
would implicate ‘citizenly activities’ of a sort. Indeed, one of the important
points to emerge from the investigations in Chapters 3 and 4 is that acts and
statuses can be appropriately discussed in this context. However, there are
good reasons to remain sceptical of the whole acts approach to citizenship
leading instead to a stress on the fundamental importance of status as the
basis of citizenship. Why is status of such fundamental importance? It is
because status citizenship as conferred by law is very difficult to undermine.
It provides security against its easy denial. Acts citizenship, on the other
hand, is much easier to undermine since it is transitory and ultimately
amounts to a claim only: it can be simply denied or ignored (of course, this
also makes it easier to invoke). In part, this scepticism is also due to the
rather loose way citizenship is discussed in the context of sociological and
cultural approaches to citizenship.1
On the other hand, in the realm of law, there is a strong tradition that
emphasizes behavioural acts (which we come to in the following text),
and this is the basis of a critique of the whole international constitutio-
nalization process from those hostile to it. For instance, Rabkin (2004)
offers a polemical neoconservative riposte to this trend which, despite its
provenance—or, perhaps, precisely because of it—provides some telling
1
For example, see Ong (1999) and Lowenhaupt Tsing (2005), both of whom take an
explicitly ethnographic approach to identifying ‘cultural citizenship’: diasporas and emi-
grant communities spread across the globe creating multiple identities. But the dominant
approach in this cultural context is still to overemphasize acts and to neglect statuses.
Whether it is possible for genuinely citizenly statuses to be conferred other than by law—
through various cultural mechanisms perhaps—remains a question for further reflection and
research, though it was briefly addressed in the Appendix to Chapter 3.
162
arguments against the notion of international constitutionalization

(and the ‘pooling of sovereignty’ idea which is associated with it in his
mind) which on the surface at least seem quite compelling.2
A question this raises is what is the status and role of law in the global
constitutionalization debate. In the list of features of constitutionaliza-
tion just outlined above, the idea of a Grundnorm was introduced, which
is most closely associated with a form of legal positivism—the pure
theory of law—originally advanced by Hans Kelsen (1945). This pro-
vides a more theoretically telling account of the possible relationships
between acts and statuses in relationship to citizenship. Kelsen
developed his approach in the 1920s, very much in a civil law context,
though in his 1945 book, he argues this could be extended to a common
law environment. In a long section entitled Nomodynamics, he discusses
the notion of ‘norm’ as a key constituent in the construction of a
positive legal order (pp. 111–78). On page 149, he suggests ‘The judicial
decision may also create a general norm.’ This introduces a section on
the role of judicial acts in creating law (decisions)—and hence also
statuses. For Kelsen, there is the original act of the constitution which
creates the realm of the Basic Norm (Grundnorm), and then there are
various ‘subsequent’ judicial acts involving lawyering and decisions by
judges which create what are called ‘general norms’. These general
norms then constitute precedents for subsequent legal decisions.3 But
this kind of judicial act of creating a new individual (but of necessity also
general) norm operates by applying a previously established and higher
level norm. In so doing, the judge must establish the presence of the
conditions of the general norm within the concrete situation being
adjudicated, ascertain the facts that condition and sanction, and stipu-
late the penalties. In this way, these judicial acts are constitutive (of law),
rather than simply clarificatory (of already existing law), or declaratory (of
verdicts and sentences, for instance). And here legal ‘acts’ are the hand-
maiden of legal ‘statuses’, which thereby could provide a rigorous way of
reconciling the two aspects of citizenship if pursued further. Of course,
this also makes (legal) ‘acts’ the progenitor of ‘statuses’. But it should be
noted that this discussion of norms has nothing necessarily to do with
‘ethical norms’. And the acts at stake here are not truly citizenly ones
2
However, Rabkin’s riposte is founded on the nostalgic and outdated notion of ‘American
exceptionalism’. The normative consequence of this—that the United States should forget
about international constitutionalization and once again unilaterally lead the global order
with a new ‘coalition of the willing’ in its wake—remains a completely impossible dream.
3
Hence the very hierarchical character of Kelsen’s notion of international law. See Weiler
and Paulus (1997), Koskenniemi (1997), and Salcedo (1997).
163
(since citizenship has ‘yet’ to be fully established in this process) but

rather are forceful juridical acts of will.4
Indeed, Kelsen’s development of his ‘pure theory’ approach was
designed to precisely avoid introducing ‘moral’ issues into the founda-
tion of law. Normativity for him is a matter of the law specifying what
should be done (an ‘ought’ process) but one grounded in the validity
and legitimacy of certain authorities to ‘will’ such an activity, not one
grounded in their ethical proclivities or convictions. Of course, this is
the site of a long dispute, and Kelsen was less than consistently clear as
to how this is organized and its meaning.5
In contrast to Kelsen’s positive law, we have natural law and custom-
ary law as the foundational underpinnings of international law
(Benson, 1990; Perreau-Saussine and Murphy, 2007). Customary law
involves spontaneously evolved rules emerging through private dispute
adjudication (Ellickson, 1991). For supporters of this perspective, cus-
tomary law provides a sensible process for discovering natural law
because a spontaneously evolved and voluntarily followed custom is
more likely to result in mutual advantages to the involved parties than a
rule imposed by some powerful group (authoritarian Law). As a result,
customary law is less likely to require adjudication, it is suggested.
Natural law is the general body of rules of right conduct and justice
common to all persons: the immutable standard to which man-made
laws must correspond in order to gain legitimacy. Analogously, a
common law system in which law arises via judicial precedent is better
than a system in which courts and judges merely apply positive laws
enacted by a legislative body. This kind of law is essentially discovered,
not made. Law is a systematic discovery process involving the historical
experiences of successive generations. Such laws are less likely to be
violated than enacted authoritarian laws, it is claimed, because they
require voluntary acceptance by individuals in recognition of reciprocal
benefits received. Customary law, as a good shortcut, takes less time
than authoritarian law to reach the same (or oftentimes preferred) end.
4
Throughout this book, an attempt has been made to avoid speaking the language of
‘power’. Instead, it is notions of ‘force’ and ‘will’ that stand as substitutes for this. Power is too
closely associated with something located somewhere and held by a subject. Force and will,
on the other hand, speak to a more dispersed and dynamic context in which authority is
always in play and flexible. Of course, it is impossible to avoid the language of power
completely. But where it is used (as below in the main text), this is for convenience to
connect to existing debates and conventional formulations, rather than as a shorthand for
the idea of will and force.
5
For a representative introduction to the state of the debate, see Paulson and Paulson
(1998). For more recent contributions that follow up on the issues of the role of language acts
in constituting law, and their relationship to statuses originally conferred by the Grundnorm
(an ‘is/ought’ event), see Bindreiter (2001), van Roermund (2002), and Conklin (2006).
164
As should have become clear by now, the analysis in this book is not at
all sympathetic to the Natural Law tradition. It harks back to the issues
raised in respect to spontaneity in terms of Hayek’s analysis of law and
constitutionalism discussed and criticized in Chapter 2. And it invokes a
basic moralism associated with human nature, so it offers another
reductionism for the analysis of law. But as we move into an explicit
international context, we should recognize the difficulty of holding to a
strict positive law position—which will be discussed more fully below.
Indeed, at one level, all international law is customary law by virtue of
the fact that there is no single strong authorizing authority that could
(as yet) impose legal sanction and decisively organize coercive enforce-
ment of international law. International Treaties and Conventions are
‘customary’ mechanisms, ones recognized in the context of a system of
states that has no final adjudicatory authority. Or so it could be argued.
It involves all those ‘beyond the state’ practices—extensively analysed
in previous chapters—associated with private tribunals and arbitration,
and the establishment of voluntary codes, standards, and norms associ-
ated with international regimes of order and governance. Obviously,
this could be considered as a particular conception of constitutional law,
one largely developed outside the framework of written constitutions
but allocating powers among various institutions that enact authorita-
tive rules and reach decisions that are regarded as properly binding on
those affected by them (as exemplified with Teubner’s position, dis-
cussed at length in Chapter 3). But the basic commitment to the positive
law approach taken in this book means that this scenario is exactly
where the disquiet and unease emerge in the context of the fate of the
RoL in an international context.
As will be discussed later, there is a possible way out of this problem
via the idea of quasi-constitutionalization. But before taking up this
route and as a prelude to its discussion, we need to examine further
the role of law and particularly the issue of the RoL, as this abuts the
international realm.
6.3 Role of Law and Rule of Law in the International Realm
Throughout this book, we have tried to maintain a distinction between

the rule of law (RoL) and the rule by law (RbL). These are not the same
thing.
Traditionally, the concept of the RoL has been defined in rather
abstract terms: government bound by law, equality before the law, and
predictable and efficient rulings. Fallon (1997: 8) suggests it is typified
165
by several main features: (a) the capacity of legal rules, standards,

or principles to guide people in the conduct of their affairs; (b) the
effectivenss of law in actually guiding conduct; (c) stability and consistency
so as to facilitate planning and coordinated action over time; (d) suprem-
acy of legal authority so as to rule officials as well as ordinary citizens,
and finally; (e) impatiality so as to enforce the law and employ fair
procedures.
6.3.1 ‘Thin’ Theories of RoL

These five features have become the widely recognized characteristics of
what is often termed thin theories of the RoL, associated with liberal
democracies in particular, though not exclusively as indicated in the
following text (Peerenboom, 2004; Tamanaha, 2004). No one can be
punished except for a breach of the law, and no one can be convicted of
breaching the law except in the manner set forth by the law itself. The
RoL stands in contrast to the idea that leaders or officials are above the
law. So thin RoL’s central aspiration is the subjection of public power to
controls that ensure it is exercised in the interests of those affected by it.
Thin theories emphasize the formal or instrumental aspects of a legal
system—those features that any legal system allegedly must possess to
function effectively as a system of laws, regardless of whether the legal
system is part of a democratic or non-democratic society, capitalist or
socialist, liberal or theocratic, and indeed regardless of whether the legal
system is judged a good one or a bad one.
6.3.2 ‘Thick’ Theories of RoL

In contrast to thin theories of RoL are thick theories emphasizing features
where normative concerns associated with political efficacy and expedi-
ency enter the picture. Some favour a substantive understanding that
incorporates particular economic arrangements, forms of government,
or conceptions of human rights in the RoL. And these theories can be
further subdivided according to the particular substantive elements that
are favoured. Thus, one could distinguish between a liberal and a social-
ist thick RoL. Liberals would incorporate free market capitalism (subject
to qualifications that would allow various degrees of ‘legitimate’ govern-
ment regulation of the market); multiparty democracy in which citizens
may choose their representatives at all levels of government; and a
liberal interpretation of human rights that gives priority to first-gener-
ation civil and political rights over second- and third-generation eco-
nomic, social, cultural, and collective or group rights.
166
A socialist rule of law would incorporate a socialist form of economy,

which might be a centrally planned economy with all or most assets
publicly owned, or in the case of China today, an increasingly market-
based economy but one in which public ownership still plays a some-
what larger role than in other such economies; involve a non-democratic
system in which the Party plays a leading role; and an interpretation
of rights that emphasizes stability, collective rights over individual
rights, and sustenance as the basic right as opposed to civil and political
rights.6
Still another version of a non-liberal thick theory might be called the
‘Asian values’ version built on market capitalism, perhaps with a some-
what greater degree of government intervention than in the liberal
version; some genuine form of multiparty democracy in which citizens
choose their representatives at all levels of government; plus an ‘Asian
values’ interpretation of rights that gives relatively greater weight to the
interests of the majority and collective rights over individual civil and
political rights.7
In Chapters 2 and 5, the RoL was described in slightly different terms that
cut across this division between thin and thick versions of the RoL, even
though it uses some of the same terminology. There the difference between
the substantive and procedural aspect of the RoL was emphasized. Its sub-
stantive dimensions embrace several aspects of both thin and thick theories,
such as an independent judiciary and a RoL in terms of the features stressed
by Fallon (1997) mentioned above, and including the separation
of powers, the contestation, and compromise over political outcomes,
a free media, etc. On the other hand are procedural aspects which would
stress the existence of participatory forums and deliberative norms such as
transparency, due process, the representativeness of participants, etc.8
6.3.3 Rule of Law and Rule by Law

And here is where a difference between the RoL and the RbL comes more
sharply into focus, which can be illustrated by my encounters with
6
China’s elaborate legal code is described as a ‘socialist system of laws with Chinese
characteristic’ (‘Rule of law fully founded’, China Daily, 4 November 2011, p. 8). For a
sympathetic review of the RoL in China, see Backer (2001). For a more sceptical view, see
Brown (2011), and the main text.
7
I leave aside issues of Islamic law (sharia) and the RoL. This is driven by theocratic
considerations and customary rules that are based upon readings of the Quran (Zubaida,
2005; Krawietz and Reifeld, 2008).
8
Mutz (2006) draws attention to the potential tension between deliberation and partici-
pation. Deliberation requires a quiet politics of careful assessment of arguments and pos-
itions; participation is often an angry politics of protest and confrontation.
167
academic members of the Chinese Communist Party in the late 1990s.

My experiences in China suggested that procedural matters were para-
mount there to delivering democracy. It was argued with great cogency
that democracy was alive and well in China, and my informants pointed
to the thick layers of deliberation and participation that could be found
in Chinese political life (see Gastil and Levine, 2005; Leib and Baogang,
2006; The Centre for Deliberative Democracy, 2008). In addition, they
stressed that China had a highly developed and elaborate legal code, and
an effective constitution that protected citizens’ rights. So during our
conversations, it became clear to me that for Chinese officialdom, the
procedural dimensions to democracy and the RoL (fa zhi) were of central
importance. But its substantive dimensions as outlined above were
beyond consideration. As long as certain deliberative norms were in
place, the activity of such forums could, in the Chinese view, deliver
the RoL and democracy. But, I would suggest, this is a case of RbL not
RoL. Indeed, this difference was made explicitly by Chinese law profes-
sor Li Shuguang in 1995: ‘Chinese leaders want rule by law, not rule of
law’ (quote in Tamanaha, 2004: 3).
Why is this distinction so important for the argument here? It is
because in the international realm characterized by quasi-constitutio-
nalization, the RoL is rapidly being replaced by the RbL in so many areas
of commercial life, and beyond. Because the traditional RoL is so diffi-
cult to establish and enforce in such an arena—indeed it could be one of
the defining features of international quasi-constitutionalization that
there is no strong version of the RoL that can be made effective and
enforced—there is an increasing resort to the rule by other means,
namely the RbL—and particularly rule by private law (RbPriL). And
this takes several subsidiary forms. First, there is the rule by lawyers
and law firms, who are in part making the rules as they go along in the
international arena—what could be termed the establishment of a new
self-appointed ‘guild of lawyers’ (those inhabiting the ICSID arbitration
panels for instance, as discussed in Chapter 5). And secondly (and per-
haps more worryingly), there is the rule by aging judges and law profes-
sors who are the ones populating the various institutions of private law
making and networks of rule making that is substituting for the RoL in
the international domain and which could be termed the establishment
of a new aristocratic ‘clerisy of judges and law professors’. None of these
options—RbL, the new guilds of lawyers, or a clerisy of judges and
law professors—is particularly appealing, I would suggest. What is
happening to democratic accountability under these circumstances?
At least the RoL provides some semblance of transparency and a
restraint on the arbitrary exercise of public and private powers. As it
168
stands, the RoL is threatening to be given away to a largely unaccount-

able RbL of private rule makers.
Clearly, it would be wrong to exaggerate these trends—even if they
exist in a stable form. As has been demonstrated in pervious chapters, a
good deal of this has received official sanction by public authorities and
is—in various ways—still loosely governed by them (Chapters 3, 4, and
5). On the other hand, it does capture a definite moment in the current
global context as state authorities either delegate, devolve, or abandon
the public regulation of international corporate affairs, or see them
seized by private parties (Chapter 2). The question it raises is what
exactly are the modalities of this process and what could be done—if
anything—to recover some of it so as to reinstall, perhaps, a modicum of
the RoL. To discuss this is the task set for the rest of this chapter. As we
will see, some of these developments are favourable, some unfavourable.
6.4 Current Developments in International Corporate

Governance Supporting the RoL
International corporate activity is not completely divorced from legal

means of redress or necessarily beyond the public law. Law is being used
to put pressure on companies in many ways. For instance, in the case of
CSR and GCC, there are a number of examples of how law is being used
to foster and enforce social and environmental sustainability policies
and practices within businesses (Zerk, 2006; McBarnet et al., 2007—and
Chapter 4 above). The most obvious examples of this involve private
contract law where compensation is sought via international arbitration
tribunals and courts, initiated by private parties—what McBarnett has
called ‘contractual control’. Both business and governments are using
contract to enforce CSR/GCC policies on business, though, as Chapter 5
demonstrated, this is not always benign.
But as we have seen, this legal intervention is not necessarily conven-
tional state regulation and it is not even necessarily state initiated. As
analysed in pervious chapters, it is a new type of governance, deploying
a complex range of subtle innovative uses of law, multiple forms of law,
and a multiplicity of parties initiating the use of law. But we are witness-
ing indirect fostering by governments at the same time as they are
arguing this has been left as a voluntary matter for business. And, of
course, there are significant on-going developments in international AQ2
human rights law which may lead to increasing international legal
impact in terms of demands on companies.
169
But whilst in the first instance, this involves governmental fostering

rather than legislating, it can lead to more formal legislation. This has
operated through company law revision committees and commissions,
and new domestic legislation, which have placed legal demands and
duties on companies to widen governance to include broader issues like
stakeholder involvement, environmental considerations, worker rights,
etc. For instance, in 2004, the UK government introduced legislation for
UK pension funds which required that they disclose in their annual
reports whether or not they paid attention to the social environmental
and ethical policies of the companies invested in. Whilst initially this
was merely a requirement to disclose and not a necessary requirement to
pay any actual attention to the se&ev (social, environmental, and eth-
ical values) practices and policies of the companies, nonetheless no
pension fund was enthusiastic about ticking the box that said they did
not care about these policies. Therefore, in order to be able to show they
were concerned, it provided incentives to put pressure on companies
they were investing in to produce codes of conduct, CSR reports, etc. So
accounting for the flourishing of these phenomena needs to be set in
the context of a change of investment legislation which fostered this
outcome, even as it did not initially legally require it. Sociolegally, it
became mandatory to do so because in terms of social and market
reputation, the pension funds did not want to indicate that they were
not interested in these issues. And as Britain did this, there was a kind of
knock-on effect into other jurisdictions: according to McBarnet, Ger-
many, Australia, and Belgium followed and now have the same kind of
disclosure requirements. This is an indirect fostering by government—
something which is still being left voluntary in name but in practice it is
very difficult to resist the legal pressure to actually adopt such policies.
Secondly, the European Union (EU) has introduced various directives
that affect European business.9 Amongst other things, these require
companies in their annual statements and statutory reports to discuss
the principle risks and uncertainties they are facing including non-
financial factors such as the environment and consideration of working
conditions. These provisions now form part of European law. And in the
United Kingdom, it was announced in June 2010 that the Operating and
Financial Review (OFR)—first introduced by the 2006 Companies
Act10—was to be reformed, so as ‘to ensure that directors’ social and
9
Corporate Governance Directive, 2007; Business Service Directive, 2009.
10
On the tortuous history of the OFR in the United Kingdom, see Corporate Responsibility
<http://corporate-responsibility.org/wp/wp-content/uploads/2011/03/reporting_timeline.
pdf> (accessed 23 November 2011).
170
environmental duties have to be covered’ (emphasis added).11 It also

committed to investigate further ways to improve corporate account-
ability and transparency. In effect, then, this goes further than existing
EU directives.
Therefore, in practice, the law is leading to a situation where
reporting that attention is being paid to environmental issues and
employee issues is being done that is even beyond formal legal require-
ments. In France, this kind of social environmental reporting has in fact
been legally mandatory for some time before this EU law came into
operation. And in the United States, the Fortune 500 companies have
codes of business principles on ethics which again are not entirely
without a legal foundation. This is because in the wake of the Enron
scandal, the judiciary produced a set of sentencing guidelines for action
against companies. These admitted—as a mitigating factor in any
action—company codes which showed the company to be trying to
install business ethics in its corporate culture and evidence that it is
implementing this. As a result, companies quickly introduced such
codes and established compliance officers, set up training on ethics
and compliance, etc. Thus, whilst there was no legal obligation to do
this, there were indirect incentives. It became counterproductive to
resist. And indeed this has to some extent become a legal obligation
in that in the state of Delaware where, because of the beneficial com-
pany and tax law advantages, some 58 per cent of the US Fortune 500
companies are actually registered, the courts have taken these senten-
cing guidelines further and made it the duty of boards to implement
codes, guidelines, and training in ethics and compliance. So this has
effectively become a legal requirement for more than half of the US
Fortune 500 companies. And what happens in Delaware is significant
for what happens in America more generally.
These are all rather subtle methods of law intervening but they are
legal interventions nonetheless. The obligations have become part of
the director’s duty of care: the directors are liable if they fail to carry
through these issues. But is this RoL or RbL? And how far does it stretch
into the international arena where jurisdiction limitations are obvious.
6.4.1 Regimes and Standards

Another arena where the RoL might be at least partially operative in the
international sphere involves regimes established by intergovernmental
11
This formed part of the Coalition governments’ agreement (HM Government, ‘The
Coalition: our programme for government’, May 2010, p. 10).
171
agreements. These are particularly prevalent in areas associated with

conservation, sustainability, and climate change of which the 1997
Kyoto Protocol is probably the best known.12
These agreements are supplemented by what are often termed global
action networks which bring together corporations to voluntarily
make commitments to push the boundaries of enhancing environ-
mental, social, and economic outcomes (many of these were examined
in Chapter 4—see also below). Examples of this would be the Forest
Stewardship Council and Marine Stewardship Council.13 Even the UN
Global Compact discussed extensively in Chapter 4 could be included
within this category. The ISEAL Alliance is the overall global association
for social and environmental standard setting bodies.14 ISEAL works
with established and emerging voluntary standard systems to develop
guidance and help strengthen the effectiveness and impact of these
standards. In part, these initiatives promote either a theoretical frame-
work of principles about how things should be done or generalize from
current social practices to create rules to which affiliated participants
agree to comply. Until recently, rules were in decline as principles-
based regulation took centre stage. As pointed out in Chapter 4, this
was part of the wider process of substituting regulation and enforce-
ment with voluntary codes, norms, and standards. Rules (which have
to be ‘obeyed’ and often have the sanction of legal enforcement) had
been in decline relative to principles—towards which agents need only
‘aspire’. But have things begun to change in the very recent period? We
come back to rules- vs principles-based regulation in the following text.
First, we need to consider whether there are further advantages to be
had from standard setting in a regime-type context (Ponte et al., 2011).
We can profitably examine this by referring to what Utting (2005)
calls ‘articulated regulation’, a term used to illustrate the coming
together of different regulatory approaches in ways that are comple-
mentary and synergistic, or less contradictory. There are several forms
this can take. The first involves forging complementarities between
different forms of private and non-governmental authority. This is par-
ticularly important in relation to trade unions and non-governmental
organizations (NGOs). There is still considerable tension between NGOs
and trade unions, particularly in developing countries. This is because
NGOs are seen as non-accountable. But dialogue and collaboration via
certain multi-stakeholder and other initiatives, amongst those working
12
<http://unfccc.int/kyotoprotocol/items/2830.php> (accessed 20 November 2011).
13
<http://www.fsc.org/>; <http://www.msc.org/> (both accessed 20 November 2011).
14
<http://www.isealalliance.org/content/about-us> (accessed 20 November 2011).
172
with companies to promote labour standards and rights for instance, is

on the rise. A second articulated regulatory arrangement involves
strengthening more ‘intensive’ approaches involving various forms of
complaints procedures or complaints-based systems of regulation.
Rather than trying to span a broad spectrum of MNC activities, com-
plaints procedures enable different types of stakeholders and entities to
identify specific abuses or instances of malpractice. A third type of
articulation involves the interface between formal non-governmental
regulatory systems involving standard setting and related operational
activities, and the informal realm of social activism or ‘street regulation’.
The dynamism and effectiveness of particular CSR/GCC initiatives is
often linked to this dual presence of ‘collaboration’ and ‘confrontation’,
which can strengthen institutions like the Forest Stewardship Council
mentioned above. A fourth way is to encourage the interaction of
voluntary and legalistic approaches via public policy. This combines
‘soft law’ approaches to standard setting with ‘harder’ legal moves to
improve corporate governance for instance, or to bring environmental,
labour, and social considerations into the listing procedures demanded
by various stock exchanges, as discussed above and more extensively in
Chapter 4.
But none of this overcomes what Abbott and Sindal (2009) have
termed the ‘orchestration deficit’. They champion a ‘New Transnational
Governance’ being forged by the mechanisms discussed above but rec-
ognize that:
. . . its development will be politically contested, in part because actors have

real differences over the content of standards: firms and NGOs differ over the
desired stringency of labor and environmental standards, as do developed
and developing states. The international system lacks well-developed legal and
political institutions in which to reconcile such differences, so the specter of power
looms large, as always in international politics. (Abbott and Sindal, 2009:
578, emphasis added)
The orchestrator is missing, and this is just the problem confronting all
those worthy but wishful-thinking exponents of some form of new
global governance based upon a partnership, cooperation, or collabor-
ation between essentially private civil society actors and corporate
entities. It is not that these are unimportant, or that they cannot
produce genuine positive outcomes under certain circumstances and
at certain times. It is that they lack the ultimate sanction of the law
and it restraining impulse. Perhaps, then, can a new restraining impulse
be discerned from the recent resurgence of rule-based regulatory
mechanisms?
173
6.4.2 Rule versus Principles

A second area where things are changing—possibly to the advantage of a
revival of RoL considerations in the international context—stems from
subtle changes in the sentiment of regulation associated with ‘rules
versus principles’ as the mechanism of governance. In this section, we
examine a number of examples of this trend, mainly in the context of
financial regulation since this is where the revival of rules is most
obvious. In the wake of the 2008/9 financial crisis (and its on-going
aftermath), turmoil in the international realm has led to a reappraisal of
exactly how to regain some control over financial markets. But as we will
see, a rules-based regime for international financial regulation was grad-
ually developing some time before the mid-2000 crash, though it was
accelerated by that event.
6.4.2.1 BASEL III

In 1988, the bank-capital regulations of the G10 countries were harmon-
ized by guidelines agreed upon at the Bank for International Settle-
ments’ Basel Committee on Banking Supervision. The first set of these
Basel accords (known as Basel I) were subsequently replaced by a new set
of much more detailed and complex recommendations (Basel II) in
2004. The Bank for International Settlements has no authority to impose
its recommendations on anyone, however, and each country introduces
them in its own fashion. In the United States, Basel I did not take effect
until 1992, and Basel II never was implemented.15 Basel II took effect in
various other countries on different dates and to different degrees in the
years 2004–8 (Blundell-Wignall and Atkinson, 2008).
After the financial crisis, a new initiative was launched by the Basel
Committee known as Basel III (see Chapter 1). This will require banks to
hold 4.5 per cent of common equity (up from 2 per cent in Basel II) and 7
per cent of Tier I capital (up from 4 per cent in Basel II) of risk-weighted
assets. Basel III also introduces additional capital buffers: (a) a manda-
tory capital conservation buffer of 2.5 per cent and (b) a discretionary
countercyclical buffer, which allows national regulators to require up to
15
In the United States, it is the Federal Reserve Board, the Federal Deposit Insurance
Corporation, the Office of the Comptroller of the Currency, and the Office of Thrift Supervi-
sion that had responsibility for supervising financial institutions. They jointly introduced
very complex rules for assessing risks associated with different classes of financial assets and
financial institutions in connection to Basel I (colloquially known as the ‘Recourse rule’,
which took effect on 1 January 2002). But it is highly possible that these rules added to
systemic risks and fuelled the credit expansion that preceded the crisis of 2008–9. (‘Arguably,
then, without the Recourse rule, there would have been no financial crisis and no Worldwide
recession.’ (Kraus, 2011: 161)).
174
another 2.5 per cent of capital during periods of high credit growth. In
addition, Basel III introduces a minimum 3 per cent leverage ratio and
two required liquidity ratios. The Liquidity Coverage Ratio requires a
bank to hold sufficient high-quality liquid assets to cover its total net
cash flows over thirty days; the Net Stable Funding Ratio requires the
available amount of stable funding to exceed the required amount of
stable funding over a one-year period of extended stress.
Whilst it in not clear whether these requirements for capital adequacy
and liquidity for international banking will necessarily be implemented
or adhered to,16 the Basel process does indicate to a move towards a
more extensive rules-based regime, at least in its proposed form. And
this is matched in other arenas of financial regulation.
6.4.2.2 THE VOLCKER RULE AND DODD–FRANK ACT (USA)

This proposal specifically prohibits a US bank or institution that owns a
bank from engaging in proprietary trading that is not at the behest of its
clients, and from owning or investing in a hedge fund or private equity
fund, as well as limiting the liabilities that the largest banks could hold.
Although the Volcker Rule was first publicly endorsed by President
Obama in January 2010, it remains unimplemented, though a some-
what watered-down version of it was included in the Dodd–Frank Wall
Street Reform and Consumer Protection Act signed into law in July 2011.
This Act represents a significant change in the American financial regu-
latory environment affecting all Federal financial regulatory agencies
and almost every aspect of the nation’s financial services industry. But
the Volcker Rule was passed only in the Senate bill, and the joint
Congressional Conference Committee weakened this, allowing banks
to invest up to 3 per cent of their Tier 1 capital in private equity and
hedge funds as well as to trade for hedging purposes. But by one law
firm’s account, the Dodd–Frank Act, which is categorized into sixteen
titles, requires that regulators create 243 new rules.
6.4.2.3 VICKERS REPORT (UK)

In September 2011, the UK Independent Commission on Banking
issued its final report known as the Vickers Report (ICB, 2011). This
was the conclusion of an investigation into the plight of the UK banking
industry (its ‘competitiveness and stability’). Essentially designed to
supplement the Basel III process at the domestic level, this report
made many proposals that differ from the Basel recommendations in
16
The recommendation is for these measures not to be fully implemented until 2019,
which is not an auspicious start.
175
terms of capital adequacy and liquidity. But they follow the same trajec-
tory in terms of these being rules, not principles. The report also sug-
gested a structural separation between domestic retail banking services
and global wholesale and investment banking operations, so these
would be largely ring-fenced from each other.17 This is designed to
insulate retail banking from external financial shocks, including dimin-
ishing problems arising from global interconnectedness and contagion.
This is of particular significance for the United Kingdom in view of the
large and complex international exposures that UK banks now have.
A whole plethora of complex rules was proposed to execute and comple-
ment this ring-fencing idea (e.g. UK retail banks should have equity
capital of at least 10 per cent of risk-weighted assets, UK banking groups
should have primary loss-absorbing capacity of at least 17–20 per cent,
various quantifiable depositor preference for deposits should be intro-
duced, and much more besides).
Whilst the UK Coalition government endorsed the report’s recom-
mendations in principle and promised to reform financial governance
accordingly, as usual ‘the devil is in the detail’ and extensive lobbying
and negotiation continue over the final form this would take.
6.4.2.4 THE EUROPEAN COMMISSION

On 20 July 2011, the European Commission published a draft legislative
proposal known as the ‘Capital Requirements Directive IV’ (CRD IV).
This legislation is designed to implement the Basel III rules on capital
and liquidity standards for the EU as a whole. It also addresses other
issues, including corporate governance, reliance on credit ratings, and
collaboration and information sharing among national supervisors (in
November 2011, the legislation was still in draft form). It will be subject
to further negotiation and must be approved by both the Council of the
European Union and the European Parliament before it comes into
force. Accompanying technical standards, which provide detail to the
legislation, will also need to be drafted and ratified.
The proposals are far reaching and include suggestions for an EU
Regulation which will set a single set of harmonized prudential rules
directly applicable to all banks in the EU. This Regulation will be ‘max-
imum harmonized’. In other words, it will not be possible for member
states to demand stricter requirements except in limited cases. Of par-
ticular potential significance to the Commission’s proposals are the draft
17
The Commission backed away from full organizational separation and bank break-ups.
176
CRD IV proposals on capital, leverage, and liquidity, which will be

closely monitored.
To sum up, what all these initiatives provide is evidence of a move
towards rule-based regimes of domestic and international governance.
And since US and UK financial institutions are so heavily implicated in
international transactions, even the domestic-orientated measures in
these countries are likely to have international implications for how
their banks operate and the characteristics of the global financial system
overall. The importance of these developments is that rules implicate
the law much more strongly than do principles. All the initiatives
outlined in this section will have the force of law if and when they are
eventually implemented and enacted (if they ever are, of course). This
may not be strictly international law (other than in the case within the
EU)—so it does not directly address the issue of the RoL in the context of
global corporate quasi-constitutionalization, but it adds another piece
into that puzzle. These are RbL moves, and ones that look to be
attempting to retrieve some of the authority previously handed to, or
grasped by, private financial agents and markets.
So this enables us to clarify something important. Although this
chapter has so far been principally concerned with RoL issues, and has
been rather critical of RbL—particularly as these are often collapsed into
one another—publically driven RbL is clearly preferable to RbRriL in
terms of the overall issue of RoL in an international context. Rule by
public law (RbPubL) is a possible step towards a new order of global RoL
and a formalization of global corporate quasi-constitutionalization. In
the next section, we pursue this issue in the context of some possible
principles for thinking about the way the RoL might be approached
more formally in an international context. Of necessity, this is going
to be somewhat more speculative than the discussion so far conducted
in the chapter.
6.5 The Possibility of Introducing More Formal

Constitutional Principles into Debates about
Corporate Quasi-Constitutionalization
Initially, this section makes a slightly odd move to consider and reflect
on a lively debate in the United Kingdom about the nature of the British
Constitution (BC).18 It then uses this discussion to highlight certain
18
The following paragraphs draw heavily and liberally on Loughlin (2005, 2006, 2008a,
2008b), Crane (2005), Law (1995), and Tomkins (2005).
177
parallels with the characteristics of the international constitutional

order. And in this context it suggests it might be possible to use the
features of that BC to fruitfully organize a framework discussion that
works towards an international constitutional settlement. Although this
might seem a parochial concern, it is argued that it offers a rich language
and conceptual resource for investigating the international sphere in
this regard. As just suggested, however, this is a somewhat speculative
discussion.
One advantage of the British constitutional debate is that it does not
start from any preconceived ideal ‘model’ of what a constitution should
look like, or of an emergent order (as does Teubner or the Freiberg
School, for instance, which were discussed in Chapter 2). But, rather, is
based upon British pragmatism and an investigation of the immanent
practices of the British Constitution.
The debate in the United Kingdom is orientated around two differ-
ent conceptions of the BC: a ‘Republican’ version that argues there is
already in place a semi-written and republican constitution based upon
documents initiated after the Civil War in the 1640s–70s (Coronation
Oath Act 1668, Bill of Rights 1669, Act of Settlement 1701, Act of
Union 1707); and secondly, a ‘Common Law’ version that maintains
the constitution is not a written one, but rather the result of a continu-
ally evolving set of acts and decisions made in a court-led environ-
ment. For the purposes of the remarks here, we concentrate on
the Common Law version. Why is this? It will be argued that the
image it presents of the BC is very much like the international quasi-
constitutional process discussed so far: it is an assemblage of practices
rather than a set of fundamental laws; it is a political constitution,
based upon an evolving political compromise, rather than a legal
constitutional settlement based upon a firm written document; it
involves a combination and coordination of public and private rule
making designed so as to preserve both the social autonomy and the
public interest; and finally it represents a structural coupling between
diverse and fragmented social discourses. Is this not a reasonable
description of the international constitutional arena as well? Does it
not share many the same features?
A second advantage of this British debate is that it mostly concerned
with the nature and role of the RoL in this context. It is not quite so
ready to give up a strong notion of the RoL as many seem to be in the
context of the global constitution making discussed so far in this book.
Here, there has been a too easy conceding of the RoL.
Many might suggest that this is all very worthy, but how can these
sentiments be rendered into principles that ensure legitimacy of this
178
British evolving system, or the possible global one beyond? Here, it is

the ‘Diplock Principles’ that are appealed to (named after Lord Justice
Diplock who developed these in the 1970s). The principles have mainly
to do with administrative law but they also have general significance
beyond that (Diplock, 1974—and several of his judgements; Wilber-
force, 1986). We mention just the four most important of these:
1. Proportionality: the idea that actions should be proportional to the

offence, harm done, or possible consequences or outcomes. This is
also a criterion that is invoked in the case of armed conflict.
2. Reasonableness: the idea that there should be good reasons for
things, and that the authorities should not act unreasonably. This
is sometimes termed a ‘rationality’ criterion.
3. Procedural fairness: this idea is most pertinent in the context of
administrative and regulatory law. It speaks against unfairness on
the part of the authorities. But it has nothing necessarily to do with
participatory farness, though it is often confused with this.
4. Due process: this is the idea that there is a ‘duty to hear the other
side’ and thereby allow some disputation.
All these criteria are argued not only to allow discretionary decision
making but also to constitute ethical ideals as to the virtuous conduct
of the courts, policing, statute making, and the state’s affairs; they create
a prudential moral force for the control of public affairs. I would like to
suggest that they could offer an effective set of criteria to be imported
into the arena of international quasi-constitutionalization so as to open
up a discussion of the legitimacy of that rule making and its power
distribution system.
6.6 Examining the Framework for a Global Constitutional

Order
Bearing these points in mind for the moment, the rest of the analysis
of this chapter is organized around Figure 6.1 which summarizes a
framework for considering various forms of what are termed governance
regimes for global legal order.
There are two dimensions in play. Along the horizontal axis are shown
two types of democratic organization: ‘popular’ refers to a situation
typified by political parties, parliamentary activity, and direct political
engagement, while ‘constitutional/republican’ refers to a more proced-
ural emphasis on the proper division of powers, judicial oversight, and a
179
TYPE OF
DEMOCRACY
Constitutional/
Popular
Republican
Representative WORLD INTERGOVERN-

GOVERNMENT MENTALISM/
MULTILATERALISM
(Deliberative, law
making constitutional
CHARACTER OF (WTO)
assembly to develop
INSTITUTIONALIZED
and authorize new
POLITICS
international legal
order)
Governmental STAKEHOLDING SUPRA-

(INGOs) NATIONAL
NETWORKS OF
ELITES
Figure 6.1 Governance regimes for global legal order
space for various collective actors (‘civil partners’) to affect outcomes.

Along the vertical axis are the institutional characteristics of politics: the
‘representative’ form invokes parliamentarianism, while the ‘govern-
mental’ emphasizes the role of interest groups and social partners.
Within the cells marked out by this matrix, several forms of legal gov-
ernmental orders can be found.
The ‘popular-representative’ category operating at the global level
would invoke a comprehensive representative assembly of some kind,
deliberative law making with constitutional backing, to develop and
authorize a new international legal order. This could only be instrumen-
talized through some form of world government. The nearest we have to
this is probably the UN system. Deepening this is the cosmopolitan
answer to the quasi-constitutional configuration discussed in this
180
book. It clearly meets many of the features of a global constitution

described in the early part of this chapter (indeed, probably all of them).
The ‘popular governmental’ category is designated here as a form of
stakeholding democracy, where INGO-type groups and other civil
actors, combining with private interests and representative organiza-
tion, take the lead in setting up the governmental structure, all playing
a key role in negotiating and securing a global legal order. Public author-
ities might take some part in this but they would be considered just
another stakeholder, though they would probably have a clearer role in
enforcing such a pluralistic legal order.
The ‘representative-constitutional/republican’ version is here described
as an intergovernmental/multilateralist system, the illustrative example of
which is the World Trade Organization (WTO). But invoking the WTO is
in no way to necessarily endorse that organization as presently con-
structed or run (which was discussed an criticized in Chapter 1); it is
merely to use it as an illustrative example. But what this category does is
raise in a concrete sense two well-established mechanisms for organizing
an international regime of governance: namely intergovernmentalism
and multilateralism.19 Although operating in an indirect manner, there
is some democratic accountability associated with this option since the
delegated powers residing in these kinds of institutions are subject to some
domestic scrutiny in a national political context (see Centre for Studies on
Federalism, 2011). So in its way, this also involves a legal order, if a modest
and limited one. It could be relatively easily extended to additional func-
tional areas and even to the international system as a whole (see below).
For the purposes of this analysis, the ‘governmental-constitutional/
republican’ option is associated with networks: namely supranational
networks of elites. To a large extent, these elites escape democratic
accountability, and often they are not transparent either. These net-
works can take very heterogeneous forms. They are typified by the
kinds of agencies making and adjudicating on arbitration and private
law (as analysed and criticized by Cutler, 2003, and in Chapter 5). They
may also comprise corporate networks of interlocking directorates or
ownership structures (e.g. Vitali et al., 2011). But they can also involve
public officials with particular types of expertise (as analysed and cele-
brated by Slaughter, 2004). In the EU context, these networks are what
support ‘comitology’ and ‘open systems of coordination’ as a policy-
19
Here, we run together intergovernmentalism with multilateralism. These are not the
same but are similar. Intergovernmentalism is an integrationist project, multilateralism a
cooperationalist one. But both emphasize the key role of national sates in forging agree-
ments. For convenience of exposition, they are treated together in this discussion.
181
making process, though here there is some semblance of accountability

(if not always representativity).20 This network form of governance has
come under recent consideration in a global constitutional setting via its
sustained examination by Gunter Teubner and his co-authors (Amstuts
and Teubner, 2009; Teubner, 2010—see also Kjaer et al., 2011).
These authors stress the notion of connected contracts and functional
differentiation as the key to an understanding of global networks of
governance (Gulati et al., 2000). This approach is not quite the same as
the ‘new economics of the firm/nexus of contracts’ approach discussed
and criticized in Chapters 3 and 4, though it shares many of their
concerns with the primacy of contracts and contracting. The difference
arises with respect to the way contracting is conceived: very much in
relational terms rather than in individualist ones. From this societal
perspective (Chapter 2), global networks of contracts are themselves
forms of a new constitutional structure, but one very much driven by
private law making in the absence of effective state capacities in the new
global era. So these networks presuppose surpassing the methodological
territorialism of the international. However, the webs of interconnected
nodes that characterize the network are deterritorialized in a way that
precludes referring to them as properly ‘global’ (even if they are ‘global-
ized’). Indeed, one of the key epistemological entailments of the net-
work is that it structures though in a deterritorialized, non-linear
fashion that is constitutive of a spatiality at odds with the classical
territorial orders that have dominated thinking about international or
global politics. As both a description of empirical dynamics and an
explanatory category, the network has been seen as apt for a critical
reappraisal of the contemporary period precisely because of the manner
in which it seemingly surpasses the classical territorial orders of the real.
In addition, in its Teubernesque guise, this has the added advantage
that, at the same time, it provides a new principle for a constitutional-
izing dynamic suited to the present global order.
The suggestions in Figure 6.1 provide a framework of different global
governance orders. A question would be whether they are at all amen-
able to the shadow of the Diplock principles being cast over them,
thereby ensuring some semblance of the RoL? If the global governance
order is to be recast into a clear constitutional framework, then this—or
something like it—would surely become a necessary component. The
alternative is to continue along the path of a less-than-satisfactory RbL,
and particularly an RbPriL. The Diplock Principles—insofar as they are
20
On ‘comitology’, see <http://europa.eu/legislation_summaries/glossary/comitology_en.
htm> (accessed 23 November 2011).
182
recognizable within the existing configuration of RbL at the inter-

national level and in respect to commercial matters—would be closer
to ensuring RbPubL, which is, in effect a step towards RoL in the terms
sketched out here. And this is not altogether beyond the bounds of
credibility since, as demonstrated in Chapter 5, there is already some
operational public administrative law principles in play in the context
of international organizational activity associated with bodies like the
OECD. And this extends to other institutions of international economic
governance.
Each reader could all have a particular favourite amongst those mech-
anisms outlined in Figure 6.1. For fairly obvious reasons associated with
the analysis undertaken in the previous chapters, it is the intergovern-
mentalism/multilateralism option that appeals from the point of view
of this book. In many respects, this is the ‘poor cousin’ of governance
modes in the contemporary debate about global governance. As the
forces of globalization are thought to have swept away the pertinence
of nation states as effective orchestrators of governance, it is the other
three governance mechanisms specified in Figure 6.1 that receive most
of the attention. They represent the global future without strong
national regulatory capacities. But if public regulatory capacities are to
be re-emphasized as a central aspect of global constitutionalization,
then a reorganizational strengthening, widening, and deepening along
multilateralist lines is the one that at least offers some semblance of
feasible democratic control.
But there are several types of multilateralism—it is not one thing
(Haass, 2010).
6.6.1 Multilateralisms
First, we have classic ‘democratic’ multilateralism, where all the parties to
the regime have a more or less equal say in decision-making. So there is a
formal equality of partners, who organize ‘consent’ through negotiation
and bargaining between themselves to reach collective agreements.
These outcomes are then ‘self-policed’ by the parties so as to maintain
an ordered relationship between them.21 Of course, whilst there may be
a formal equality involved, this is not necessarily the actual way things
work out. Some parties might have more opportunities to press their
agenda than others, more leverage and authority to determine events.
21
Such self-policing has the great advantage that this form of multilateralism (and the
others described in a moment) is very cheap to run. Thus, countries are unlikely to give up
the security this delivers easily.
183
And this leads us to several other forms of multilateralism which

embody these differences between parties.
Instead of the classic democratic form, for instance, ‘elite’ multilateral-
ism involves just a small subsection of the entire set, usually the more
powerful and important. The G7/8 is a classic example, where the largest
advanced economies meet to determine outcomes between themselves.
Thus, whilst there might be a formal equality between these partners,
they deliberate and negotiate to suit themselves possibly at the expense
of those not included. The G20 is a more recent example of this type of
multilateralism, but this spills over into the third type, which is ‘func-
tional’ multilateralism.
Functional multilateralism is one organized around a function area of
governance like trade, investment or finance, environmental sustain-
ability, etc. The classic examples of this are the WTO regime in the case
of trade or the newly emergent G20 in its capacity as the forum for
global financial regulation. These bodies take a functional slice through
the multilateral terrain and deal with this as a limited aspect of overall
governance. The WTO includes a comprehensive list of countries (153
in 2010), while the G20 is much more restrictive in terms of who are
included.
A slightly different variation on this type is ‘ad-hoc’ multilateralism.
This is an informal multilateralism again dealing with a specific area of
governance but which is not a standing body with legal status in inter-
national law or one that has a certain entrenched continuity. The Basel
Committee on international banking discussed above would be such a
body, though this also shares some of the characteristics of functional
multilateralism.
Somewhat different is ‘supranational regional’ multilateralism. This
involves organizations like the EU, MERCUSR, ASEAN; various Asia
Pacific initiatives, like ASEAN + 3 (China, Japan, Korea) + 3 (Australia,
New Zealand, India); APEC; the Gulf Economic Cooperation Council,
etc. These organizations address a particular supranational regional
space within which multilateral-type negotiations take place.
Finally, there is what Haass terms ‘messy’ multilateralism, which for
him operates as a term to sum up all these other forms of multilateralism
in their overlapping complexity. Because of the growth of a multiplicity
of organizational governance forms at the international level, we have a
complex pattern with possibly hybrid forums emerging. Other terms
sometimes used to express this are spaghetti-bowl or noodle-bowl multi-
lateralism, indicating to the intertwined and interrelatedness of rela-
tionship, existing at various levels and occupying various spaces.
184
6.6.2 The EU as an Exemplary Instance: Federalism and Confederalism

Returning to Figure 6.1, collectively all the forms of governance high-
lighted there mark out the range of possibilities.
And these possibilities can be most clearly recognized in the case of
the EU: all four elements of the matrix are present there along with their
associated governmental forms. This has encouraged several authors to
argue that the EU represents a feasible model for global governance
beyond just the EU itself. Its mechanisms and procedures should be
scaled up to the global level (Zaring, 2005; Cohen and Sable, 2006). AQ3
This is to argue that fundamentally we should give up on the language
of constitutionalization and instead adopt the language of governance: or
perhaps better put, to develop constitutionality from governance. Very
much drawing on a reflection from the EU and its internal governance
practices, this position stresses the role of multilevel governance, open
methods of coordination, comitology, and the like. Given the well-
known difficulty of the EU in developing a formal constitution of its
own, the idea is to give up on this and go for a different conceptual
language. Constitutionalism is a language of state making in particular;
it is therefore unsuited for the new ear of globalization, or the EU.
Several difficulties arise with this line of argument. Clearly, the EU is
not a state, so in this respect the argument is well taken. But what, then,
exactly is the EU? If it is not a unitary state, then is it a federal state in the
making? If it were, this might make questions of its formal constitutio-
nalization more pertinent for the scaling-up argument. However, the
argument here is that the EU is actually nearer to a form of ‘confederal
public power’ than it is to a federal (or any other) state. And this has
important consequences from the lessons that might be drawn from the
EU as a model for the wider arena of global governance.
There are two key differences between federal and confederal political
formations which can illustrate this point.
With federal structures, the federees concede sovereignty to the fed-
eral power in a single act. From then on it is the federal authority that
exercises decisive power over the federees: although the federated states
may retain some residual powers, it is the federal authority that can
constrain those powers and ultimately override them. In addition—and
as a consequence of this—there is no way to legally leave a federation:
federations only break up after a war (usually) or as a consequence of
constitutional crisis that destroys the federation and founds a new
Grundnorm for the parties in dispute.
On the other hand, confederations are limited by the treaties that
establish them and continually adapt them. With confederations, the
185
confederees only concede limited powers to the confederal authority,

and they do this on an issue-by-issue basis as a result of a series of
treaties. Each time there is a rearrangement of powers between the
confederees and the confederal authority, a new treaty is negotiated.
Thus, fundamentally the confederees retain the ultimate power over the
confederation, and they also retain the legal power to leave the confed-
eration if they so wish.
This confederal-type structure can be readily seen in operation in the
case of the EU. The key treaties have been those of Rome (1957), Maas-
tricht (1992), and Lisbon (2007), which have each seceded only a
limited range of powers to the EU. The Maastricht Treaty set up the
existing economic and monetary unions via the single-market pro-
gramme. And the Lisbon Treaty contains an explicit clause giving the
right of it signatories to leave the EU if they wish. But the Maastricht
Treaty commits all members of the Union to eventually join the Euro-
zone, other than those three countries (the United Kingdom, Denmark,
and Sweden) that negotiated an opt-out from this obligation.22 Thus,
any existing Eurozone member country cannot leave the Eurozone
without also leaving the EU at the same time.23 There is no separate
legal provision for leaving the Eurozone.
Note that the claim here is not that the EU is a confederal state, but that
it is a confederal public power with only limited authoritative powers,
themselves granted as a consequence of the treaties signed by the partici-
pants. Of course, the EU is an incredibly complex legal, institutional, and
organizational entity, not all of which can be readily captured by the
single idea of a confederal public power. But this captures enough of its
basic characteristics for us to draw clear lessons for the imagery of the
global system beyond. This is not one to be based upon its internal
governance mechanisms however, but as a confederal form of power
itself. The international commercial system is more like a version of this
confederal public power than it is as an EU governance structure. And this
more appropriate imagery is bolstered by another key point about the EU.
A further difficulty with the ratcheting-up approach from the EU
conceived as a governance structure to its equivalent global level is
22
Sweden’s op-out is based upon a technicality. It has not joined the ERMII system
(a prerequisite for full Eurozone membership). It has a de facto opt-out as a consequence.
23
This created a cruel dilemma for Greece as the Eurozone sovereign debt crisis unfolded
in 2011. It would probably have been sensible for Greece to have left the Eurozone during
that crisis, but it could not do this without leaving the EU as well. And once out of the EU,
Greece would never have been readmitted. In addition, as the United Kingdom vetoed the
creation of a new treaty to develop a ‘proto-fiscal union’ to address the Eurozone crisis in
early December 2011, the other EU countries embarked on such a route themselves to
negotiate another treaty, though that promises to be a hazardous legal journey.
186
that the EU is already a deeply specified public legal order. But this is
precisely not the case with the global arena. The RoL already operates
effectively in the case of the EU, so its administrative laws and proced-
ures are subject to this constraint and have to operate within that Rule.
At a more general level, much of the analysis of global administrative
law and the globalization of the RoL itself is couched in terms of its
compatibility with or complementarity to existing international law
(e.g. Zaring, 1998; Dyzenhaus, 2005; Salzman, 2005; Zifcak, 2005). But
this is not the main problem. The issues highlighted here is one where
there is no competent international public law (unlike in the case of the
EU): how do we ensure at least some elementary conformity to the RoL
in a system where there is no competent authority with the means to
enforce whatever quasi-constitutionalized ‘administrative law’ there
may be in the making?
Thus, drawing appropriate lessons from the EU for any scaling up to a
global level is not as simple as it might at first seem. If there remains an
issue with the RoL at the global level, then the EU does not provide the
appropriate model or imagery.
6.7 Where Does this Finally Leave Us?
If we take the messy multilateralism alternative sketched above as

emblematic of the current international commercial system, we might
profitably re-describe the situation it is addressing as a durable disorder
of sorts. Such a durable economic disorder represents a particular form
of governance regime which demonstrates certain stability characteris-
tics and continuity despite the fact that it is ‘disorder’. What are its
operational characteristics? First, it describes a situation of multipolarity
of economic powers. So there is no single dominant economic power
but a range of fairly equal but competing powers. This means there are
few genuine ‘global’ public goods provided because disagreement is rife
and collective endeavours minimal or lacking. Additionally, this leads to
a patchwork of overlapping, often competitive, jurisdictions. Conse-
quently, there is a prevalence for ad-hoc economic interventions involv-
ing fire-fighting when crises break out followed by prudentialist
responses to try to ensure against a repeat occurrence. But longer term
and deeper involvement is ruled out.24
24
For example, this is well illustrated by the financial system in the last twenty years
where each time a crisis has hit, short-term emergency lending has grown while reliance on
long-term debt restructuring has declined (Barkbu et al., 2011).
187
A further feature of this regime is the ‘enclavization’ of social and

economic life and the emergence of a ‘leopard-spot’ economy. This
means economic success and wealth cluster together, so that patches
of prosperity and efficiency are set within a wider landscape of inequal-
ity, relative deprivation, and poverty.
So nothing argued above should lead us to feel comfortable about the
way the international commercial system is evolving in terms of its
governance or its quasi-constitutionalization. The strong RoL is effect-
ively being given away and there seems little that can be done at present
to prevent this. At best some procedural principles of democracy are still
in play but substantive concerns are necessarily on the back foot. In this
environment, to defend a strong version of democracy, citizenship or
constitutional practice is difficult. Figure 6.1 summed up the govern-
ance regimes for global legal order which still embody a concern that
this should retain a grounding of the international commercial sphere
in a public legal order.
All in all, this could best be described as an agonal public space: a
space of ‘unity-in-difference’ or ‘unity-in-disagreement’. Agonal con-
jures up several features: a disputed and conflictual state of affairs, one
which is uncomfortable, distressing, and which produces a sense of
severe unease. Nevertheless, it demonstrates durability despite these
somewhat ‘negative’ attributes as far as governance and order are con-
cerned, and it is something that it is possible to learn to cope with—it
still demonstrates many of the attributes of RbL, for instance. If it were
to degenerate into a non-durable disorder, then a much more uncom-
fortable future would be in store for the international commercial
system, and for all of us who are part of it.
Clearly, not all of those aspects associated with constitutions outlined
in the earlier part of this chapter pertain to global corporate constitu-
tionalization in a strong sense, though there are elements and aspects of
all of them present in the current international commercial sphere. For
instance, the rearrangement or realignment of powers and behavioural
constraints are strongly present; a fully participatory process of deliber-
ation and a new Grundnorm are hardly involved; whereas a political
community and some social acceptance and legitimacy are there in
part. As it stands, therefore, we do not have a formal global corporate
constitution in the making: there is not as yet much aggregated and
fully informed constitution building going on in this arena. It is with
the notion of quasi-constitutionalization that this list of features more
readily chimes or describes. Thus, the international commercial system
remains at the level of quasi-juridicalization and informal constitution
building, operating in several particular functional fields. Whether this
188
should or could all be put on a more secure and formal footing is the issue.
All this hints at the source of a genuine residual disquiet and anxiety for
this arena. Without an international RoL—and with something
approaching a quasi-constitutionalization at best only half in place—
the possibilities for a less durable international economic and political
order remain a real prospect. It does not bode well for either expansive
freedom through the law or equality before the law.
Author Queries:
AQ:1 Please check whether the intended meaning has been retained.
AQ:2 Please check whether the meaning has been retained.
AQ:3 Reference citation "Zaring 2005" is not listed in the reference list.
Please provide bibliographic details for this reference or delete
from the text.
189

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The Constitutionalization of the Global Corporate Sphere

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Corporate Governance in Contention View project

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The Constitutionalization of the Global

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OUP UNCORRECTED PROOF – FIRST PROOF, 6/6/2012, SPi

Grahame F. Thompson AQ1

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OUP UNCORRECTED PROOF – FIRST PROOF, 6/6/2012, SPi

For: Merija Ritta Kristina Thompson

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OUP UNCORRECTED PROOF – FIRST PROOF, 6/6/2012, SPi

This book develops several themes of my research over many years. In

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Acknowledgements (to follow) AQ3

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1. Setting the Scene 1

4. The Politics of the ‘Citizenly Company’ and Global Corporate

5. Global Administrative Law, the OECD, and International

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1.1 Net equity issues, US non-financial corporations,

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3.1 Industrial distribution and country weightings for

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ICGN International Corporate Governance Network

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Setting the Scene

1.1 Corporate Disquiet and Uncertainty

In the wake of the 2007/8 financial crisis, productive corporations and

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The Constitutionalization of the Global Corporate Sphere?

themselves ‘politically’ to combat the potential plundering of their

1.2 Sources of Corporate Vulnerabilities and Nervousness

Of course, this uncertainty and nervousness on the part of the business

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Setting the Scene

encountering in its day-to-day operations and the responses to it that

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The Constitutionalization of the Global Corporate Sphere?

Fourthly, we have issues of finance, ownership, and control about

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Setting the Scene

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The Constitutionalization of the Global Corporate Sphere?

Figure 1.2 Capital ratios of US and UK banks

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Setting the Scene

‘off-balance sheet’ items on the other—both of which, in a period of

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The Constitutionalization of the Global Corporate Sphere?

settled (Boyer, 2006; Ireland, 2010). However, this is closely associated

Thus, we have a highly novel mixture of features that in the aggregate, it

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Setting the Scene

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The Constitutionalization of the Global Corporate Sphere?

1.4 The Book in Outline

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Setting the Scene