January 24, 2010
Global Corporate Citizenship - A Trend to Watch*
Posted by Rachel Anderson

Global Corporate Citizenship  ("GCC") emerged in management and business scholarship in the 1990s.  GCC posits that corporations have rights and obligations in society similar to citizens.  It addresses the ethical responsibilities of companies operating in a global market and the values that should guide corporations' engagement with society.   In effect, GCC requires that corporations engage with both financial and societal stakeholders as well as acting as stakeholders themselves. 

GCC is closely related to corporate citizenship (without the “global”).  Corporate citizenship is a business strategy, a voluntary model for business practice that is believed to incorporate core values while simultaneously supporting the pursuit of financial goals.  According to the Boston College Center for Corporate Citizenship, there are four key principles of corporate citizenship: (1) minimize harm, (2) maximize benefit, (3) accountability and responsiveness to key stakeholders, and (4) support strong financial results. 

Theories of GCC infuse the discussion of the role of corporations in society with questions of ethics, morality, and societal values, which are substantially lacking in the scholarly lineage that followed Berle’s line of argument.  (See my earlier Conglomerate post on Corporate Purpose.)  It is inherently interdisciplinary and draws from several fields such as management studies, political philosophy, international relations, sociology, and legal studies.  GCC already plays an important role in the actual business practices of transnational corporations ("TNCs"), goals and agendas of international institutions, and theoretical advancements in academic fields such as management, business, and economics.  

The underlying values of GCC are recognized by an increasing number of corporations and business leaders and many TNCs have incorporated GCC into their business goals and policies.  For example, in 2003 CEOs of numerous TNCs published a joint statement with the World Economic Forum ("WEF").  This statement set out a framework for the implementation of GCC principles in the business context.  Since that time, the integration of GCC into the policies of TNCs has moved beyond the group of companies and CEOs associated with the joint statement.  For example, TNCs have begun including GCC in the portfolios of their in-house counsel and corporations are becoming increasingly engaged in promoting GCC.  

In addition to its integration into business policy and practice, GCC is also becoming institutionalized at the international level and an increasing number of non-governmental organizations are supporting GCC.  For example, GCC is being promoted by international institutions such as the United Nations Global Compact ("Global Compact") and the WEF.   The Global Compact is a public-private initiative that seeks to promote ten principals that focus on human rights, labor standards, the environment, and anti-corruption.  The WEF is a Swiss non-profit foundation that focuses on the equality of values and rules in shaping corporate governance and ensuring that economic progress and social development go hand-in-hand.  Both organizations support the creation of a framework that incorporates values and morals into corporate governance and operations while taking the interests of both financial and societal stakeholders simultaneously into consideration – key elements of GCC.

A body of scholarship on GCC has developed in some academic fields, for example, management and business theory.   In 1997, good GCC was defined as "meeting, within reason, the expectations of all its societal stakeholders to maximize the company's positive impact and minimize the negative impact on its social and physical environment, while providing a competitive return to its financial stakeholders" in a publication funded by the Hitachi Foundation.  Over the past decade GCC has continued to be discussed in the management and business literature.  In the management literature, GCC is used at times as an umbrella to include a range of corporate social responsibility and corporate social accountability initiatives.  The stakeholder model rather than a shareholder model for corporate responsibility has played and continues to play an important role in the management literature.  Recent articles argue that corporations are citizen-stakeholders in the global society and, therefore, they should play a more direct role in the advancement of society.

However, although the question of shareholder versus stakeholder models continues to be debated by legal scholars, GCC theory has received only minimal resonance in the U.S. legal discourse.  GCC has been mentioned briefly in several international law articles in connection with descriptions or discussions of the Global Compact and the Millennium Development Goals.  While some legal articles mention GCC in discussions of Corporate Social Responsibility and human rights, others go further and contemplate the definition a good global corporate citizen or propose regulating accountability for GCC.  A few legal articles briefly mention GCC in discussing how NGOs can strengthen their international roles and the role of NGOs in building global democracy.   Still others briefly mention the role that policymakers have in promoting GCC and how the tax advice of law firms and accounting firms may undermine GCC.  Despite brief acknowledgement of GCC in a handful of legal articles since 2000, there has not yet been an attempt to develop a theoretical framework for GCC in the legal context.

I believe that GCC offers a useful theoretical framework with which to integrate and analyze the interests of both financial and societal stakeholders in this age of globalization and my current scholarship focuses on exploring ways that GCC can inform legal theory and corporate, international, and human rights law.   Voluntary measures are an important way to create and realize behavior that is influenced by societal morals and values.  However, reliance on voluntary initiatives is insufficient to assure the protection of key human rights and societal values.  Although the body of scholarship that has developed in the business and management fields is a promising starting point, I believe that developing a legal theory of GCC offers another perspective from which to approach and, hopefully, make a useful contribution to discussions about how to regulate and govern corporations.   

*The main body of this post is excerpted from my article entitled Toward Global Corporate Citizenship: Reframing Foreign Direct Investment Law, 18 Mich. St. J. Int'l L. 1 (2009), which is available on SSRN here.

Business Organizations, Corporate Governance, Corporate Law, Globalization/Trade, Junior Scholars, Law & Society, Legal Scholarship, Legal Theory, Social Responsibility | Bookmark

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