Opposing perspectives of trans-national corporate citizenship

BSP Lecture Notes
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200158 Business, Society & Policy
Week 9
THE BSP TRIANGLE IN THE GLOBAL CONTEXT
Content of this lecture:
• Introduction
• A distinctive form of capitalism
• B-S-G in the global arena
• Business in the global arena
• Government in the global arena
• Impacts from global corporations
• Opposing perspectives of trans-national corporate citizenship
Introduction
This week we are beginning Module 3; the module in which we will analyse different issues in the
relationship between business, society and government in contemporary society. In this lecture
for this week, we will focus on the frame for our research on these issues: our frame will be the
contemporary conditions of capitalism and the impacts of corporations. In this week’s tutorial we
will explore the research aspects of this part of the unit, which will be the guiding principles of our
work in this module. In that sense, these Learning Notes for this week are intended to support the
development of the topics that students will be researching. Thus, these Notes and the Learning
Notes for subsequent weeks will constitute the beginning of a path for students to follow in the
subsequent weeks.
To understand the positive and negative impacts of business, it is important to identify the specific
conditions in which the characteristics of contemporary capitalism, as a context, have produced
changes in the way businesses operate, the way stakeholders interact with business and the new
roles that governments play in this interaction. We will explore the characteristics of what can be
seen as a distinctive form of capitalism associated with what has been called the Information Age
or the Network Society. This represents the frame in which business impacts occur, and in which
society and government respond to those impacts. This context includes the understanding of BG-S relations in the global arena, and this contains the emergence of social movements against
the globalisation of capitalism. These movements demand business accountability, in particular
with respect to the impacts from Transnational Corporations (TNCs).
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With the social pressures for increasing the social responsibility of business, we will explore the
emergence of global initiatives for global governance and, in that context, the role of what has
been called Transnational Corporate Citizenship (as a form of legitimation for the demands of
social responsibility placed on business). From the acknowledgement of beneficial impacts and
threats to society and the environment, the Transnational Corporate Citizenship approach looks
at some responses from business in the area of Corporate Social Responsibility (CSR)
(Rondinelli, D.A. (2002) ‘Transnational Corporations: International Citizens or New Sovereigns?’
Business and Society Review104:4 391-413).
Being part of the world economy, businesses continually encounter changeable conditions that
affect their operations as well as shifts in how society and the economy operate. These changes
demand transformations in the way business functions. It does not mean that every organisation
is suddenly changing to respond to those changes, but if businesses ignore the changing
conditions then they may miss some opportunities or may find themselves facing some threats.
Some of those changes include growth in flexible working arrangements, increased numbers of
women in management positions, increasing levels of education, workplace diversity and a higher
demand for ethical and socially responsible behaviour. The existence of such changes implies the
possibility of new perspectives and needs. That is to say, the impact of the emergent global
economy characterised by multiple dimensions and heterogeneity has generated new tendencies
in which business either thrive or fail, and in which their behaviours are subject to social and
government scrutiny.
A distinctive form of capitalism
The transformation of forms of capitalism into more flexible models is (as with other forms of the
development of capitalism) related to the innovation created by new technologies which
transformed the relations between production and labour. Transformation of the capitalist system
has always been associated with technological innovation, brought about by the specific
conditions of societies. In this case, technological change has come about as a result of the
emergence of electronic networks which were considered a technological revolution.
Contemporary society is characterised by new information technologies which have transformed
the capitalist mode of production, the manner in which different players interact in the global
marketplace and how the Nation-states are governed. Consequently, this has characterised how
society is shaped by those conditions.
Among the changes we can mention, for example, is the existence of flexible systems of
production to adapt products to different markets (rather than sell to mass markets) and the
availability of unrestricted flows of information. These are important elements which are identified
with what can be called a flexible form of capitalism. Some of the conditions that have changed
the contemporary situation are related to the emergence of what is called the Information Age.
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The Information Age (also called Post-industrialism) is a form of development based on
information or knowledge management. The source of productivity lies in the technology of
knowledge generation, information processing and symbol communication, which are organised
through the accumulation of knowledge and higher complexity in the processing of information.
As a result of technological development in the Information Age, knowledge and information is
central to the generation of communication devices, which represent the basis for the global
restructuring of capitalism. Innovation became the basis for the reproduction of the logic of
capitalism, by the creation of new needs for the expansion of products and services. In this
process, the role of electronic communication by the Internet is crucial. The Internet allows
multiple and horizontal instantaneous global communication, through the use of its digital
language (a code enabling the instantaneous transfer of messages to distant places) and the
networking logic of the communication system (multiple links in different directions without a
central control).
Through this logic, the new technologies have transformed the way the economy and society
develop and produce new forms of interaction between nations, business and society groups and
individuals. These interactions are undertaken in ways that increase their interdependency on
each other. Thus, impacts in some countries in the global economy are likely to affect other
countries and groups. This interdependence is obvious for example in the stock market.
Interdependency and the worldwide effects of localised situations can be associated with the
growing consciousness of globalism in which citizenship rights and obligations are not limited to
the Nation-States.
The changes that characterised the Information Age are considered to have triggered the
emergence of what Castells (2000 The Rise of the Network Society, Oxford: Blackwell) calls the
Network society. According to him, ‘Networks constitute the new social morphology of our
societies and the diffusion of networking logic substantially modifies the operation and outcomes
in processes of production, experience, power and culture’ (p. 500). This society is characterised
by a Global-Network-Informational form of Capitalism which produces a society that is, in its
various institutional expressions, a new form of what is still a capitalist society. ‘Furthermore, for
the first time in history, the capitalist mode of production shapes social relationships over the
entire planet’ (p. 502).
This type of capitalism (which is based on the network logic) can be found in the forms of
organisation in which different sectors of society link with others, in order to achieve outcomes
from common interests. Some examples of how business operates using the network logic can
be seen in how global businesses constitute a global community, through interlocking boards of
directors. This can be seen as a form of governance control, but it is also considered an alliance
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which increases the power of corporations and the business communities that engage in them.
We can also consider the ways in which corporations seek to operate in concert with each other,
for example through Trade Advisory affiliations of corporations or by the overlapping of
memberships among corporations in Business Advocacy Organisations. (By way of example, the
following diagram shows the networks developed by 30 U.S. corporations.)
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The transformations created by technological changes and the logic that attaches to it allow us to
consider the existence of a new distinctive form of capitalism that operates globally. It is
distinctive, for example, because capitalists those who own the instruments and mode of
production, are located in multiple places. This system of capitalism is also less stable; one
‘owner’ of capital assets today might be different tomorrow. Consequently, profits are
redistributed through financial movements in the global stock market. The profit from one
company in Australia might become capital in another business in China, and it can also be
invested in any sector of activity: information industries, media industries, advanced services,
agricultural production, health, education, technology, old and new manufacturing, transportation,
trade, tourism, culture, environmental management, real state etc.
In that sense capitalists are no longer the “owners of the means of production” in the Marxian
sense. Also, there is not a unified “global capitalist class” but different groups of capitalists
(Castells: 505). They can be corporate managers; families of any nationality; bankers; self-made
geniuses-turned-entrepreneurs; global tycoons; public corporations; rogue corporatists. This does
not mean that workers have disappeared. Rather, there are more jobs and employed people than
in any other time in history, and that might also have been influenced by the inclusion of women
into the workforce. However, the nature of their work and their relationship with employers are
changing dramatically. These aspects depend less on the specific location of the labour.
Another distinction refers to business investment, which is structured around a network of flows of
financial capital in which whatever is extracted as profit is reverted back to the network of
financial flows. This New Economy is represented by ‘The internationalisation of services,
intelligent manufacturing systems and the knowledge based economy is sustained by constant
advances in networking capability that freely allows intra-company and inter-company flows of
information and communications, co-ordinations and decision making’ (Clarke, T. & Clegg S.
Changing Paradigms. The Transformation of Management Knowledge for the 21st Century.
Harper Collins Business, London. 1998:183). An economy organised around global networks of
capital, management and information establishes the access to technological know-how as the
roots of productivity and competitiveness.
The network logic has also reached the forms in which society is organized. The ‘Network society
represents a qualitative change in the human experience’ (Castells 2002:508) and in that society
Information is fundamental to our social organisation and in the ways that meanings are
communicated in the messages and images flowing through the networks. One important
element in this distinctive form of capitalism and its impact on social organisation is the
constitution of new social relationships of production, which have been changed with capital and
labour existing in different spaces and times (eg, in a global supply chain in which one product or
service is jointly produced, marketed, distributed and sold in different countries). In that sense, it
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is possible to state that in the new form of capitalism, social relationships of production have been
physically disconnected through the management of flexibility, outsourcing and decentralisation.
The form of labour organisation which used to be collective is now substituted by the growing
tendency for an infinite variation of individuals (eg, individual agreements under Australian ‘Work
Choice’ and political attacks on the union movement).
The globalisation of the economy and its impacts on different countries have generated the need
for New Multi-National organisations (which are not the same than Multinational corporations
MNCs/TNCs) in which business, society and governments participate together in trying to
negotiate conflicting interests that are not able to be managed at the national level.
B-G-S in the global arena
The characteristics of the new global interdependent economy, with its increasing uncertainty and
ambiguity, generate new challenges which have transformed the way B-S-G interact. Some of
those challenges come from contradictions which are inherent ni the information age: what
creates power might also be used against that power. As in any era, the information one
possesses has its own contradictions and at the same time business and the economy are
continually increasing their influence on society and positions of power. The same networking
logic provides other sectors with the opportunity to develop new forms of counteracting that
influence and that power. Many groups in society have begun to construct alliances around the
world in order to be able to exert pressure against powerful corporations. In that sense, existing
social networks are expanded through technology and new social networks are formed by the use
of technology.
The Internet has fulfilled contradictory roles. While it can be used to expand and sustain the
capitalist system, it can also provide its critics with a way to organise against how the system
operates and to question the impacts on society. Some of the benefits of access to this
technology are associated with the potential spread of ideas and influences across spaces and
cultural borders. This can be called the informationalisation of society. The knowledge from which
information is generated in multiple locations and with multiple perspectives can be used to raise
social consciousness. This, it can become a global tool against global capitalism and the
increasing global power of some business corporations.
Today, it is possible to identify the emergence of global stakeholders which consider the globe to
be their space of action, and the impacts of business everywhere as their direct interest. In that
sense, the Internet even if it can be used as an instrument of capitalism, can also be considered
to some degree a democratic tool which has provided other groups with alternative ways of
organizing to empower themselves for the defence of their interests. Under this option, local and
global social movements can be considered new stakeholders of business. Among these groups
we can include militant organisations which explicitly oppose the new global order. They can act
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as defensive movements (associational revolution), and can exert other forms of citizen activism
that empowers minorities and different sectors in developing countries against the actions of
corporations from developed countries.
With increasing communication from critics in different countries, the demands for social
responsibility to be shown by all sectors of business, society and governments have been
increasing. In that sense, the use of the networking logic of the information age is extended to the
whole of society, generating NET Activism as a form of pressure on corporations to respond to
stakeholders in a global context. From this process it is possible to identify a new form of social
organization based on associational politics between groups worldwide against corporate
globalisation. This form of associational politics includes cooperative alliances between non
governmental organisations (NGOs) concerned about human rights, the environment, the impacts
of globalisation, the fight against corporate power, the power of international economic
organisations, and against the impacts of trade liberalisation.
From the exchange of those concerns globally, there is a kind of activism that acts to pressure
different international bodies (through demonstrations against World organisations in which
governments and business meet) to negotiate the future of the planet. According to Castells the
movements that are potentially most promising are those that use the Net as a form of organising
and a form of activism. Net activism has become an important threat to business operations since
it operates to spread public expressions against Neo-liberal globalisation. Net activism represents
a new form of social organization which organises people in different places, which are
interconnected by the Internet. The Net is used as a tool of activism. An example is the
demonstrations against the Asia Pacific Economic Cooperation (APEC) meetings in Sydney in
September 2007.
Business in the global arena
From the emergence of global capitalism and the transformation of nations into interdependent
economies in the global market, we can see that the relationships between B-S-G follow patterns
that are similar to the national level, but on a larger scale. It is possible to say that the
relationships of the 3 sectors at the national level have some similarities in the global arena.
Remember that the characteristics of contemporary global capitalism are based in the expanding
ideological economic model of Neo-liberalism and free markets and, as such, most countries
have been transformed into economic systems in which their public functions have been
substituted by their private operations. In that sense, the role of government has become more of
a facilitator, rather than being truly in charge of the economy. Of course, this has impacts on
society and its relationships with governments. Many see government to be in a legitimation crisis.
Under this view, some sectors of society have lost trust in government and in its role of caring for
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people’s interests. On this perspective, government is more likely to support the interests of
powerful business.
In this context big businesses compete with each other for global markets, and they expand
abroad, with the support of Neo-liberal governments. Governments interfere less and less in the
management of the economy, except for facilitating foreign investment; global expansion and
trade. As a counter perspective, global Social Movements organise and act to mitigate the
negative impacts of global business on society and the environment.
When considering business in the global arena, it is possible to state that the global economic
system is run by a small number of transnational/multinational corporations. These dominate
world markets for oil, minerals, foods, agricultural products, as well as manufacturing and
services. Their huge capital demands and cash surpluses have made them key players in
international financial markets. Although they do not have direct ownership, but contractual
relationships with host countries (eg, through the outsourcing of production), these corporations
still exercise increasing influence on commerce and public policy around the world. As such,
there is the perspective that, with the global benefits derived by corporations from different parts
of the world, they also acquire responsibilities and, as such, they can be considered a kind of
global or transnational corporate ‘citizen’.
According to Rondinelli (2002), Transnational Corporate Citizenship involves those activities that
ensure compliance with laws and regulations, as well as those that maintain ethical behaviour,
contribute to social and economic welfare and generate profits that provide a fair return to
investors. The relevance of seeing corporations as citizens is crucial if we understand citizenship
as conferring responsibilities, obligations and rights. In that way transnational citizenship entail
responsibilities, obligations and rights not just in the country of the corporation’s headquarters,
but also in other nations in which the corporation operates. From this perspective, the
responsibilities and privileges are de-nationalised, implying that fundamental human rights, social
responsibility and ethical behaviour transcend national borders and, therefore, have to be
respected anywhere. Consequently, the number of stakeholders of a business can be seen to
expand outside of the national home context of a corporation. At the same time Transnational
Corporate Citizens come within the scope of transnational political regimes that under the
collaboration of different governments and different global political or civil groups create principles,
norms, rules and decision-making procedures in international relations. They are subjected to a
framework of legal liability; new modes of international cooperation and regulation for “global
issues” (eg, environmental degradation and exploitation).
Government in the global arena
The need for global governance emerged especially as globalisation gained momentum in the
post-WW2 period, when a new political order began to emerge from the influence of Western
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commerce, trade and political organisation which gave rise to new forms of involvement in other
territories. In this context, it is claimed that sovereign states lose control over a globalised local
market and, as such, they are forced to become involved in the international agencies which take
control of global governance. Clearly, the process of globalisation has not created a global
government. However, there has been a transformation from government to governance. Aspects
of global affairs are the jurisdiction of international regulation under a new infrastructure for
transnational management and control of economic, social and cultural processes. Thus there
developed a kind of “multilayered governance”, constituted by networks of sectors from national
governments, business groups and from civil society.
The notion of governance, instead of government control, involves a more diffused control in
which many parties are engaged in providing directions and/or specific legislation about the way
different economies (countries or corporations) operate in the global economy. For example,
transnational governmental organisations define what are acceptable transnational practices and
networks of exchange in different industries, including banking, information and communication,
travel and cultural interchange. This form of governance, more than a universal form of behaviour,
represents a set of guidelines and regulations to create a ‘fair’ game for the competitive arena in
the global market and fair treatment for all the parties involved.
It is possible to identify in the global arena an increasing involvement of TNCs with international
agencies and non governmental organisations, with the aim of influencing policies and
administrative decisions by governments. Under this global governance, political decisions or
actions in one part of the world can rapidly have worldwide ramifications.
Some examples of global governance institutions that are key socio-economic agencies are the
United Nations Development Program (UNDP), the UN Conference on Trade and Development
(UNCTAD), the World Food Program (WFP), the UN Children’s Fund (UNICEF), the UN High
Commission for Refugees (UNHCR), the UN Fund for Population Activities (UNFPA), the UN
Environmental Programme (UNEP), the UN Industrial Development Organization (UNIDO). Other
organizations that are legally separated from global governance programs include the Food &
Agriculture Organization (FAO), the International Labour Organisation (ILO), the UN Educational,
Scientific, & Cultural Organization (UNESCO), the World Health Organisation (WHO), the
International Development Association (IDA), the International Telecommunications Union, the
World Bank, the International Monetary fund (IMF) the World Trade Organization (WTO). Some of
these agencies have their branches in the various countries which have an important influence on
the policies and regulations generated by the national government. For example in the case of
Australian Government and the UN there is a Permanent Mission to the United Nations in New
York.
Impacts from global corporations
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It is now important to consider the impacts of global corporations, which is the main area of
research for this module. We have mentioned before that global corporations are powerful entities
operating in multiple countries and, therefore, they influence policies in the nations in which are
operate. They impact workplace conditions through their organisational culture and they create
needs through their product offerings. That is to say they have positive and negative impacts on
the economy through their investment, and in their values and ideologies represented in their
codes of conduct and practices. Armed with foreign aid and their own perspectives, global
corporations contribute to the setting of international standards. The outcome of their influence is
not simple to evaluate. Some impacts can be considered positive on one assessment, but
negative when they affect the interests of other groups. Thus, when we talk about the impact of
TNCs we need to be aware of the multiple stakeholder perspectives involved.
Being critical (ie, reflective) about business practices allows us to see both the intended and
unintended impacts as well as the ideologies that are behind the legitimation of their actions, and
those behind the views of their critics. From a business perspective, it is possible to see their
practices as favouring their own interests, In addition, if they affect some stakeholders, they will
try to legitimise their actions through taken for granted views emanating from their ideology (ie,
the capitalist and Neo-liberal ideology). The perspective of business critics will probably be the
opposite, but they will still argue from their own ideological perspectives, which are opposed to
those of business. In these controversial issues, there is much distrust of opponents, and both
groups can be expected to ignore important aspects of the arguments for and against the social
responsibility of global corporations.
Opposing perspectives of transnational corporate citizenship
To conclude, we will address some different perspectives of the social responsibility of
transnational corporate citizenship (Rondinelli 2002). In your research you will be able to explore
these issues, by focussing on one case and one problematic area in which companies are
required to respond to the global demands.
BENEFICIAL
TNC involvement in Social
Responsibility
THREATS
Self-interested motivations of TNCs
disguised as SR; or voluntary
implementation of codes of ethics
SR leverages financial and human
resources
Shifts liability and risks from TNC:
thus undermines national criminal
law and sovereignty
Returns are made to society Involvement in aid is biased towards
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through assistance; and being
models for local business
the perspectives of the sponsoring
interests
TNC changing behaviour is through
their involvement in development
activities
Self enforcement of ethical codes is
questionable – but they can reduce
accountability
Use of private resources are made
more efficient and faster for solving
problems – TNCs provide
managerial expertise to social
problem solving
TNCs exert bias in the influence of
public policies
SR represents a type of self
regulation that cannot be imposed
by governments
Displaces governmental regulatory
responsibilities
TNCs act in concert to improve
their behaviour (eg, in global labour
standards)
Lack of transparency of T/MNCs’
influence on policy making
SR, Philanthropy and Privatization
of public resources save poor
governments money
Displacement of public roles into
private ignoring public interest

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