May 14, 2014
Transnational Business and Governance Challenges
Posted by Kish Vinayagamoorthy

Last week, I blogged about the problem with enforcing labor standards for firms that have distributed their functions across a variety of actors in several different countries.  Transnational business raises other governance challenges and here are two interesting proposals on how to deal with these governance gaps.

Restorative Justice & MNCs?

In his forthcoming article, Andy Spalding (Richmond) examines the issue of overseas crime and challenges conventional wisdom regarding the value of deterrence theory.  According to Spalding, deterrence theory is ill-equipped to deal with the challenges of international commerce.  The primary weakness of deterrence theory is that it will tend to increase, rather than decrease, net levels of corporate crime in developing countries.  So, if deterrence is out, what are we left with? Spalding proposes restorative justice.  Many of you may be familiar with restorative justice from its application in the South Africa context and other transitional justice situations.  You may not have expected calls for its application in the business context, but Spalding makes a persuasive case for it in his article.   Spalding’s primary argument is that by involving the perpetrator, victim, and community in the sentencing process, restorative justice does not merely punish the wrongdoer but remedies the harm caused by the crime, prevents future harm, and reintegrates the defendant into the very community it violated. 

In case you think that the application of restorative justice to corporate conduct is too aspirational, Spalding points out that the U.S. Constitution and Sentencing Guidelines already authorize corporate sentencing practices rooted in restorative justice principles.  According to Spalding, for two decades the U.S. Department of Justice has quietly been implementing restorative justice principles in domestic white-collar environmental sentencing.  Drawing on those precedents, Spalding’s article builds a model for extraterritorial white-collar criminal punishment that overcomes the limitations of deterrence theory.

Individual vs. Institutional Liability for Human Rights Violations

In another interesting article, Pam Saunders (Drexel) looks at ways to improve accountability for businesses that are involved in human rights violations abroad.  Saunders focuses on how to make human rights litigation more effective.  In her article, she challenges the view that corporate entities, rather than individual corporate officers or employees, are the optimal targets of regulatory litigation. She develops a typology of goals underlying corporate human rights litigation and then “matches” these goals to the benefits and drawbacks of individual versus institutional liability. She concludes that, while pursuing a mix of institutional and individual claims is likely the ideal approach, it is a close question. In the specific context of international human rights claims, there are significant but overlooked benefits to naming individual corporate actors as defendants for plaintiffs whose goals are not limited to compensation and deterrence but instead (or in addition) are searching for a way to have their day in court, create an official and accurate record of the events surrounding the violation, or pursue other goals associated with transnational human rights claims.



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