Legal control of multinational corporations

The greatest evil is not now done in those sordid "dens of crime" that Dickens loved to paint. It is not done even in concentration camps and labour camps. In those we see its final result. But it is conceived and ordered (moved, seconded, carried and minuted) in clean, carpeted, warmed and well-lighted offices, by quiet men with white collars and cut fingernails, and smooth-shaven cheeks who do not need to raise their voices. (C. S. Lewis, The Screwtape Letters) As the name "Multinational" suggests, today's corporate giants are no longer shackled by the constraints of international borders.

Previously the bulk of world production occurred within national boundaries, but in recent decades trade and production has become increasingly globalised, and corporate activity has diversified and multiplied. The market is now global, as is capacity for production. Legal and political framework is traditionally based on the nation state, however economic activity is no longer such, and it is this mobility of capital that threatens to undermine the power of national governments to deal with traditional economic and social issues1.

Critics charge that the ability of multinationals to manage production on a global scale and leap national borders in search of lower costs and higher profits now threatens democracy itself2. These monoliths are less attached than ever to their country of origin, they operate without territorial loyalty or connection, and as their loyalty fades so does any ultimate responsibility for their actions. There has been a growing voice from various quarters calling for a delimitation of the responsibilities of multinational corporations (MNCs) to reflect their increasing influence in society3.

It is argued that corporations, though formed primarily to maximise profit, should be under more strenuous legal – as well as a moral – obligation to respect and promote national laws and social standards. Given this argument is not always accepted or enacted 'in spirit', nor reflected internally by all corporations, there appears a real need to bolster regulation of those corporate activities that have the potential to impinge upon national interests and human rights.

Such a need is most apparent in the case of MNCs simply because their organisational structure, modus operandi and sheer influence make them practically immune to conventional methods of regulation4. Individually, the corporation is a formidable institution. For example General Electric – the world's largest MNC – is a network of some eighty corporations, of which sixty operate outside the U.

S (GE's home economy), with total assets in excess of 229 billion dollars, net sales exceeding131 billion dollars and an employment base of 315 thousand people. Other corporations, such as Ford and Vodafone, have over half their assets outside their home economy, and do more than half their selling abroad5. These are major international players, often operating with impunity. In 2002, of the world's 100 largest economies, 51 were MNCs, and the sales of the top 200 MNCs were equivalent to more than one quarter of world economic activity6.

Walmart had the nineteenth largest economy in the world, with a higher GDP than Sweden, Austria, Norway and Poland7. In the year 2000 global FDI grew by 18 per cent, to reach a staggering $1. 3 trillion, driven by more than 60,000 MNCs with over 800,000 affiliates abroad. MNCs are highly effective and swift machines, particularly in comparison to the governments, beset with malfunctioning bureaucracy and conflicting goals, and the legal rules, limited in scope and slow to evolve, with which it must deal8.

Economic power is challenging political power – and winning. Nevertheless, according to Human Rights commentator Sir Geoffery Chandler, it is not too late for a balance to be struck: "The myth that companies are more powerful than governments is still a myth, and is something we should ensure remains a myth. Company influence is indeed growing, but we cannot afford to live in a world in which companies have greater power than the political power of governments"