Multinational Corporations' Activities and Accountability

Multinational Corporations' Accountability

Legal Status of Corporations

  • Corporations are not ordinary business partnerships.
  • They are joint stock companies:
    • Capital fund with freely transferable shares.
    • Shares owned by a large, fluctuating body of members.
  • Corporations are legal fictions:
    • Legal personalities separate from management or shareholders.
    • Have the rights of individuals.
    • Shareholders have limited to no liability.

Accountability Challenges

  • Who should be held accountable for a multinational corporation's actions?
  • How do you hold a legal fiction accountable?
  • What responsibility should individuals in positions of authority bear?
  • What if the company shuts down?
  • Who is responsible for local effects of MNC activities?
  • In the Bhopal case:
    • Should Union Carbide (parent company) or Union Carbide of India Limited (subsidiary) be held responsible?
  • Should MNCs be held accountable in their home country?
    • Example: Should Dow Chemicals (parent of Union Carbide) be tried in the US?

Jurisdiction and Accountability

  • Home Country:
    • Benefits:
      • Stronger legal infrastructure and resources.
    • Problems:
      • May be more convenient for the case to be heard elsewhere.
  • Local Country (where harm occurred):
    • Benefits:
      • Convenience (e.g., enabling victims to give evidence).
    • Problems:
      • Local laws may not offer sufficient protection.
      • Local governments may lack political will or resources.
      • Local government may be complicit in prioritizing profits over health.
  • International Forum:
    • Benefits:
      • Might serve as a neutral arbiter.
    • Problems:
      • International legal system focuses on states and individuals, not well-set up to prosecute corporations.

Mechanisms for Holding MNCs Accountable

  • Voluntary Codes of Conduct:
    • Encourage corporations to take responsibility.
    • Corporations could lose business if consumers are unimpressed with their human rights or environmental track record.
      • Example: Global boycotts of Nike for sweatshop activities.
    • Corporate Social Responsibility (CSR):
      • Corporations should have obligations to:
        • Shareholders.
        • Environment.
        • Societies in which they operate.
      • Act as a good corporate citizen.
      • Companies voluntarily integrate social and environmental concerns into operations.
        • Examples:
          • Chocolate companies (Cadbury, Nestle) establishing fair trade lines.
          • Corporations running community programs or sponsoring events.
          • Pokey's companies running gambling hotlines.

Genuine Altruism vs. Public Relations

  • Are corporate actions genuine altruism, or PR stunts?
  • Opportunity for companies to:
    • Tell consumers they're a good corporate citizen.
    • Improve reputation.
    • Sell more products.
  • Critical engagement is needed to assess whether actions genuinely care on the environment.
  • To what extent does it raises profits for the corporation's management and shareholders.
  • Mandatory Regulations:
    • Regulations that are monitored and enforced.