Barnali Choudhury

Corporate Governance that ‘Works for Everyone’: Promoting Public Policies through Corporate Governance Mechanisms

ABSTRACT Corporate governance mechanisms are traditionally seen as devices for reducing agency costs between shareholders and managers in the context of private ordering. More recently, however, the UK and other governments have embraced regulations in the field of corporate governance as tools through which to impose public responsibilities on corporations. Among others, corporate governance mechanisms have been relied on to equalise wealth distribution, promote equality in the labour force, and pursue environmental goals. This article assesses the justification, utility, and efficacy of using corporate governance to promote public aims. It finds that while it may be appropriate for corporate governance mechanisms to include public goals, the current overreliance on disclosure requirements and on indirect regulation to address societal issues is misguided. Instead, the article suggests that governments should view corporate governance mechanisms with public policy goals as complementary strategies, and not as substitutes, to direct external regulation.

Hardening Soft Law Initiatives in Business and Human Rights

In the wake of the Rana Plaza disaster as well as ongoing human rights abuses perpetuated by multinational corporations, the impetus for the business and human rights (BHR) movement continues to gain momentum. Business and human rights issues are no longer considered two distinct realms operating in isolation from one another but are rather seen as intertwined and in need of being holistically addressed. Nevertheless, despite the growing recognition of the importance for corporations to address human rights issues, responsibilities for corporations in this area have mainly been at the voluntary level. That is, corporate human rights obligations tend to be phrased in permissive rather than mandatory language, and enforcement of these voluntary obligations is either weak or, more likely, non-existent. For that reason, corporate human rights obligations are often termed ‘soft’ law. Recently, however, there have been attempts to ‘harden’ corporate human rights obligations. Several countries are currently negotiating a binding Business and Human Rights treaty which, on completion, would impose legally binding human rights obligations on multinational corporations. Efforts have also been made at the domestic level to harden business and human rights, with notable examples in the UK and France.

International Investment Law as a Global Public Good

The key characteristic of a public good is that it serves the well-being of the public. Today, however, individual well-being is often conditioned not only on the receipt of state public goods, but also on the receipt of global public goods. In part, this is because the rise of globalization has resulted in complex interconnections between states. For this reason, global public goods can bestow benefits on much of the world’s population.The system of international investment law (IIL) is slowly arising as one type of a global public good. Principally, the system of IIL meets the two characteristics of public goods: non-rivalrous and non-excludable. First, it is non-rival in that use of IIL by one state or one foreign investor does not detract from the system’s utility for other users. Second, with the adoption of over 3,000 international investment agreements (IIA), the system of IIL is becoming less of a club good and more of a system of law whose benefits are non-excludable. The standardization of many of the agreements’ provisions has resulted in commonalties despite the lack of a multilateral agreement and some have even argued that aspects of IIL have reached the status of customary international law. As a result, many of the benefits of IIAs transcend the individual agreements to be available to more than just signatories and their nationals.In this sense, the system of IIL – the actual standards of protection, the meaning of those standards and the behavioral expectations they entail – has resulted in a type of global public good that benefits the world at large. These benefits include first, the provision of an overarching legal framework that guides foreign direct investment (FDI) activity and enhances its predictability and, second, the creation of a system that ensures that FDI benefits both states and investors alike.The system of ILL, however, is failing to bestow both of its benefits. First, the system is exhibiting failures in indicators of legitimacy – for example by producing incoherent jurisprudence and using indeterminate rules – thereby limiting the system’s ability to establish an overarching framework for FDI activity. Second, a failure by arbitral tribunals to recognize the role of FDI in promoting a state’s development is hindering its ability to ensure that FDI benefits both investors and states. Viewing the system of ILL through a global public good lens thus highlights the system’s shortcomings, allowing for correction of these issues, and allows the system of ILL to attain the status of global public good that it deserves.