Minding Our Business: Corporate Social Responsibility Pressures and the Failure to Develop Universal Global Rules to Govern Investors and States

The most famous economist of the 20th century, John Maynard Keynes, had an evocative image of capitalism. He believed that markets were propelled by animal spirits. These spirits could yield growth, but at times must be domesticated to ensure that the law of the jungle-eat or be eaten--does not apply. Lord Keynes led the British postwar planners, who worked with their U.S. counterparts on the initial design of policies and institutions to shape global markets for goods and capital. Their plans became the World Bank, IMF and the GATT/WTO. These institutions have served global capitalism well. But there is one yawning gap where the animal spirits can run wild. There are no global rules governing the rights and responsibilities of international investors and recipient states. While most companies maintain high social and environmental standards wherever they locate, some companies take advantage of nations with inadequate governance to locate their plants. This article will examine that gap in international rules and explain how it has been an important factor in growing public pressure on business to act in a globally a responsible manner. This article begins with the failed history of international investment agreements. Policymakers in the developed and developing world have not been able to find common ground on the rights and responsibilities of investors and nations at the multilateral level. They recognize such rules could yield global economic efficiencies and cheaper more plentiful capital. But they also understand that global rules could limit the power of governments to shape investment flows. I will argue that the absence of international accepted investment rules have led to a wide range of ad hoc attempts to regulate the behavior of corporations across borders. These a soft law strategies include codes of conduct; voluntary corporate reporting of environmental and social performance; and corporate philanthropy partnerships with governments and international institutions. At the same time however, the sheer number of such strategies is leading business executives (as well as civil society activists) to call for a wide range of public policies to promote CSR at the multinational levelBor to put it differently, to encourage uniform adherence to globally responsible behavior.