Corporations: Political or Economic Actors

Are corporations political or economic actors

It's an important question to ask when thinking about the interaction of corporations, private actors, and states or organizations, public actors. Professor Jackson talks about this interaction, but here is  a piece that in my mind needs addressing that I think is missing in the readings and the lecture about corporations: their inherently political nature.

Corporations exist almost solely for the purpose acquiring money. This point cannot be argued. What I feel is overlooked, however, is the means by which corporations, contending with political actors on an international scale, go about achieving their ends. Some would argue that corporations are primarily economic actors and I cannot stress enough how incorrect that assertion is. When corporations grow beyond the borders of a single state they inherently become political. In order to continue maximizing profits in the international realm inherently means acquiring political power. Corporations simply cannot conduct operations without interacting with political bodies. Therefore it is by necessity that these corporations are not just economic actors, but also political actors.

This is an important point to underscore especially when discussing the accountability of corporations vs states. Corporations are less constrained than many states because they are not accountable to anyone but their shareholders and the law. As long as corporations don't carry out heinous breaches of human rights or break international laws, shareholders are more than content if the money flows in. Because they are unconstrained and can essentially go where states cannot, coporations should be considered very potent political actors, as well.

Week 10 Post-class Tech-nationalization

There is a growing trend in the field of cyber security known as tech nationalization which can be summarized by the notion of utilizing solely domestically production software and technology to avoid any potential security threats associated with internationally manufactured technology. The rational for this is that over-reliance on foreign produced technology creates a vulnerability which can be exploited by the producer of the technology, and since the United States primary producer of innovative technology they are seen as the primary threat. There is also the threat that governments can use tech corporations as political leverage depending on the political climate as a sort of exercise of soft power. One example of this is when the Crimean peninsula was annexed by Russia, Google and Apple stopped providing services to the peninsula and to the South of Russia as a part of a series of sanctions imposed on the country. This is not even to mention how certain technology is required to have backdoors which can be accessible to foreign law enforcement agencies for legal compliance related issues. For example in order for Kaspersky Labs to comply with Russian regulations on software companies they must provide the federal police access to the information on their servers, which in turn can be used to examine the contents on devices of Kaspersky customers.

In order to develop technological autonomy, countries are investing in R&D firms and supporting what are called "digital economy" initiatives which aim at fostering the development of tech companies domestically. Many countries have created legislation which requires industries of strategic importance to utilize purely domestically produced software to avoid backdoor entrances for hackers or any other cyber attacks. Some have even began to undergo the type of internet segmentation like China and create their own sovereign internet segments. Overall, countries are beginning to worry about the soft power nations can employ on tech companies and what kind of implications they can have on the international stage, and combatting this potential threat by focusing on developing their own domestic capabilities.

Global corporations and sovereignty

The presence of global corporations has a distinct affect on the sovereignty of nations in terms of how they navigate legislation of a state. They control the means of production and have an impact on the division of labor within a national market, yet they themselves are not subjegated to any legal jurisdiction as they are borderless entities. As borderless entities, they can avoid particular legal jurisdiction in one country by moving certain operations to other countries with less strict legislation. Professor Jackson used the example of a global corporation selling goods to a rich market that has strict laws regarding workers’ rights but creating the goods for that product in a country which may have more lax regulation in the matter and exploit individual workers’s rights for the sake of expediency or efficiency in production. Countries which have more regulations regarding the environmental impact of production would also face a similar situation.

These global corporations also yield significant political power as well. These corporations have the capabilities to support one candidate over another in certain elections through campaign financial contributions and through lobbying. This type of influence has an impact on legislation that is passed and the extent to which it is enforced, and limits a state’s capacity to make decisions autonomously. 

Corporations and Their Lack of Accountability

While watching the online lecture, one question really stuck with me. How do we hold corporations accountable? Seeing as corporations are private actors, is it even possible to hold them accountable? I believe that it is extremely difficult to hold corporations accountable without a central institution of which all corporations are a part of. With the absence of such a central institution, it is up to consumers, and sometimes states, to hold these corporations accountable, even with what limited ability they may have.

One small way they can be held accountable is by states. If a corporation over steps its authority, or if it increases the costs of its goods and services, the state can then decide to impose sanctions on that corporation through tariffs, or by simply not choosing to import or use goods from that company. Instead, the state could look into the production of the goods within its borders. However, I do not think this is likely in the current environment as this could cause prices to increase, and negatively affect the state's economy.  Therefore, I find that it is difficult to hold these corporations accountable in the current state of globalization.

It should be noted that there is an organization that seeks to promote fair trade, the World Trade Organization, but this institution holds states accountable on an intergovernmental level for their policies, not corporations. In addition, the WTO can also benefit corporations by the host country taking up its case if another state imposes tough restrictions on that company's products, that would increase the cost of the product. This does occur, it appears now more than ever, if a country's economy relies on the export of the company's goods. This process is only truly holding countries accountable, and not corporations, therefore making it a poor argument for the existence of corporation accountability.

The only way a corporation can truly be held accountable is by its customers. If a corporation participates in appalling actions such as raising prices exponentially, unhumanitarian processes, or even environmentally damaging practices, consumers can decide not to purchase goods from that corporation. If enough consumers boycott the corporation, this could then force it to change its practices. This strategy will not always prove effective however, because there is often a domination of one corporation in a particular market, leaving consumers no choice but to continue to buy goods from that corporation.

https://auisgroup1summer18.blogspot.com/2018/07/corporations-and-their-lack-of.html

Corporate Accountability: a role for shareholders and consumers

As we began to see this week, private corporations play a tricky role in global governance. They gather authority collectively and act as an influential presence in the international realm but are, unlike states, controlled by legal jurisdiction. In cases of domestic policy, corporate law is more straightforward, but in the face of international companies dominating globalization, how are we to hold them accountable?

In recent years there has been an increasing prevalence of social movements with the aim to make businesses and business institutions more accountable to their shareholders and stakeholders. Concepts like B-Corporations have taken hold and even influenced policymakers to create Benefit Corporations. Benefit Corporations have a double bottom line to hold them accountable to both their shareholders and to consumers. When a company becomes a Benefit Corporation they adopt governance practices that require them to meet higher standards of transparency and accountability. Additionally, these corporations all work to provide a responsible and socially beneficial product or service. Benefit Corporation legislation has been passed in 33 states and the District of Columbia and the concept is gaining traction in other regions.

In Benefit Corporations, both shareholder and stakeholders have a role to play in influencing corporate governance but these aren’t the only companies being held accountable by their shareholders. There has been an up-tick in the past decade in the use of shareholder resolutions being passed at corporations, large and small, to advance an idea or goal. This year, after the U.S. withdrawal from the Paris Climate Agreement, shareholders stepped in at many corporations to push the adoption of policies to mitigate climate change, most beginning with an assessment and disclosure on the climate change risks of the company. As of March, 66 investors had submitted resolutions about climate change in the 2018 proxy season. According to ISS, “of that total, 17 are seeking risk assessments based on the 2-degree scenario embedded in the U.N.’s Paris Agreement, which aims to limit the average rise in temperatures to below 2-degrees Celsius of pre-industrial levels. There were 18 2-degree scenario proposals for all of 2017, eight in 2016, one in 2015,” said Institutional Shareholder Services (ISS) (Stein 2018).

Sure, the sum of 66 investors is but a drop in the bucket in comparison to the profile of global corporations, but the increase in the number of resolutions passed by citizens as shareholders in response to a state decision shows that there is an increase in the number shareholders willing to hold companies accountable in addressing global issues.

Stein, Lemos Mara. “More Shareholder Proposals Spotlight Climate Change.” Wall Street Journal, February 8, 2018. https://blogs.wsj.com/riskandcompliance/2018/02/08/more-shareholder-proposals-spotlight-climate-change/.

“What is a Benefit Corporation,” Benefit Corporation, last modified 2018, http://benefitcorp.net/.