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Transnational Corporations’ Social License to Operate—The Third Facet of Corporate Governance

In: Code of Conduct on Transnational Corporations

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  • Indrajit Dube

    (Indian Institute of Technology)

Abstract

The seamless integration of national economies within the global order has increased the transnational movement of TNCs from all economic blocks. To date, it is widely accepted that no economy can prosper in isolation. Therefore, the regulatory focus has shifted towards ‘Social Licence to Operate’ (SLO). The majority of countries, utilising either soft or hard laws, ensure that the community’s preferences are considered in corporate policy—and decision-making. To achieve this, some countries impose positive responsibility on company directors, and others mandate spending of a percentage of corporate profit on the development of social infrastructure. This mandatory spending may be imposed on classes of corporations with specific net worth or financial turnover. The SLO has developed as the third facet of governance for TNCs by means of this formal arrangement. This governance arrangement empowers society to determine the extent, and types of social benefit TNCs need to extend to the community.

Suggested Citation

  • Indrajit Dube, 2019. "Transnational Corporations’ Social License to Operate—The Third Facet of Corporate Governance," CSR, Sustainability, Ethics & Governance, in: Mia Mahmudur Rahim (ed.), Code of Conduct on Transnational Corporations, pages 111-130, Springer.
    • Handle: RePEc:spr:csrchp:978-3-030-10816-8_6
    DOI: 10.1007/978-3-030-10816-8_6
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