‘The The political problem facing humanity is to combine three things: economic efficiency, social justice and individual freedom, ”wrote John Maynard Keynes in his essay on liberalism and work 95 years ago. Before, and especially since then, we have endeavored to balance these often delicate and sometimes competing endeavors with varying degrees of commitment and success. It was no accident that Keynes emphasized the uniqueness of the problem – everything else in the field of politics either falls into this trifecta or arises from it – and reflects the feverish times of the Great Depression, on the edge of which Keynes was writing. It is clear, he mused, that unbridled freedom to make profits does not alone create a sustainable economy, much less a viable society (Keynes, 1926a).
Some of the cruelest injustices of Dickens and robber baron capitalism that still dominated the economy in Keynes’s time (endemic child labor and the active submission of opportunities for women and racial minorities) have since been addressed, if not eliminated. And government regulation of corporate affairs is now expected, if not always expedient or warmly welcomed by companies themselves. Today, few large companies do not know what expectations are placed on them in order to be socially responsible and environmentally conscious. They need to acquire their social license to go beyond their legal permission to establish. Or, as the US Business Round Table put it in its historic 2019 statement, the purpose of a company is to “profit”. all Stakeholders – Customers, Employees, Suppliers, Communities and Shareholders ”(in fact, a far cry from his ardent insistence 22 years earlier that“ a company’s primary goal is to generate economic returns for its owners ”).
No self-respecting multinational company can afford it these days Not To have bold statements of their green commitment and loyalty to human rights (BHRRC) on their company website, even if it is not always clear to observers and company boards what that means in practice. This last point is one of the reasons why the now ten-year-old UN Guiding Principles on Business and Human Rights have received so much corporate support for providing guidance on what that practice might look like.
From this fine rhetoric of these soft laws, some new hard laws have emerged. For example, corporate due diligence laws in relation to human rights in France, the Netherlands and (soon) the EU, as well as modern slavery laws in the UK and Australia. Other legal ways to hold companies accountable have also been revived, such as: B. the domestic tort laws (Lindt, 2020), of which the US Illegal Act of Foreigners Act is just one example that is still – just – hanging there (Desierto & Song, 2021).
It seems like capitalism is taking its role in solving the Keynesian problem seriously. Companies that pay attention to questions of “integrity” and “social responsibility”, as Victor Brudney, Harvard’s leading business lawyer complained 40 years ago, were then too willingly sacrificed on the altar of “efficiency”. Perhaps we are witnessing the “civilization” of globalization, for which I have argued elsewhere (Kinley, 2009), or we are seeing the salvation of capitalism by making it “more accountable” to citizens, like former financier Michael O. Argument Between Leary and Warren Valdmanis (O’Leary & Valdmanis, 2020)?
Still, corporate carelessness and bastards still occur. Lucrative export markets in developed countries continue to promote the “race to the bottom” competition between and within developing countries. Eight years after more than 1,100 textile workers died in the collapse of the Rana Plaza building in Dhaka, Bangladesh, insecure jobs are still claiming the lives of 11 years and older. The biggest names in the extractive industries continue to fail to learn safety lessons with devastating consequences. Vale led the collapse of two tailings dams in Brazil in four years, killing more than 300 people and causing environmental disasters (Zimmermann).
Meanwhile, those who attempt to expose corporate human rights abuses face physical, financial or legal assault. The impressive Business and Human Rights Resource Center has tracked more than 3,250 such attacks worldwide since 2015, including the increasing use of company-sponsored “SLAPP” lawsuits to silence whistleblowers and human rights defenders. And while business leaders keep telling data collectors BSR and GlobeScan that human rights are their top priority when it comes to sustainability concerns, in practice their companies still don’t go wild. For example, reviewing the annual results of the landmark Corporate Human Rights Benchmark of 200 leading companies in 2020, Robert Eccles bluntly concluded that it seems that “human rights really aren’t that important.” [them]’.
Reset to default?
So the picture is mixed and we are rightly calling for more, better and faster. It would be a mistake, however, not to acknowledge the profound changes in attitudes towards and within companies about the expected achievements of capitalism over the past 30 years. Environmental awareness is no longer a corporate outsider, but a core business concern, and although social and human rights issues are not quite as widespread, they are hitting the same path through the doors of the boardroom. Our perspective on the progress made should therefore be intergenerational and not just immediate.
Heralds of what is to come can be read from potentially ideological tipping points in the contemporary landscape, the meaning of which, although not yet fully understood, is nonetheless tangible. Three emerging trends or initiatives now occupy this category, which together give legitimate reasons to believe that some type of company / society restart may be possible.
Philanthro-capitalism, supported by foundations of the same name that have been spun off from major business corporations, has its place in our modern economies by healing the sick (Novo Nordisk and Gates Foundations), childcare (INGKA Foundation) and combating climate change (Bloomberg Philanthropies ). Reflecting the conscience of some capitalists of “giving back” such efforts is important and commendable, but they are not the very capitalism that is actually after profit. It is when such concerns are part of a company’s thinking In front-benefit from becoming really meaningful; when How you do more than What Spending it is the key question when it comes to a company’s social or environmental impact.
The mantra of ESG (“Environment, Social and Governance”) has spread in international business. The desire to attend to such matters was fueled by forces that came from a somewhat unlikely source. The financial sector has long been an obstacle to understanding or even recognizing its social and environmental responsibilities, yet the calls for ESG awareness are getting loudest from among large investors, asset owners and asset managers (Kinley, 2021).
The appetite for sustainable investing has grown exponentially, especially in so-called green and social bonds, for example. ESG investment and advisory services have increased – the description of recent acquisitions in this area by global management consultancy McKinsey as “enabl”[ing] We help customers in all sectors and regions … to successfully cope with the risks and opportunities of the macroeconomic transition to a more sustainable future. ”Reflects this trend well.
Perhaps most significant is the assertive demeanor of investors like BlackRock, the world’s largest wealth holder. In his acclaimed annual letters to CEOs around the world, Larry Fink, the company’s CEO, has long advocated the value of long-term sustainable investment strategies. This attitude, he stated in his letter from 2021, is not only environmentally friendly, but also financially prudent, as sustainability investment indices now consistently outperform their overarching benchmarks – a result that he describes as the “sustainability bonus”. The latest BlackRock Declaration on Human Rights also makes it clear that human rights risks are not perishable, but are core – that is, “essential” – for all companies today and therefore cannot be ignored. The market looks for such announcements when they are made by a company with an investment portfolio valued at over $ 9 trillion.
Corporate motivations to connect with their socially responsible soul aren’t always as benign or selfish. In two recent European court cases, for example, judges have made it clear that certain corporate environmental behavior standards are not only optional or desirable, but also legally enforceable.
The first of these cases concerned the right to environmental protection enshrined in the French Constitution. As strange as it may seem to Anglo-Saxon eyes, such rights can easily be found in the constitutions and laws of many countries in Europe as well as Africa and South America (Zimmer, 2021). In the world of common law (with the notable exception of Ireland) and, oddly enough, international human rights law in general, there is no explicit protection of environmental rights (Rodríguez-Garavito, 2018). Anyway, in early 2020 France’s highest court, the Conseil Constitutionnel, to decide whether the constitutional requirement to preserve the environment as the “common heritage of all humanity” trumps the constitutionally protected right to free economic activity. Such is the case, the court concluded, upholding a law banning the production, storage and transportation of certain agricultural pesticide products.
The second case, this one before a Dutch court, went even further and found that oil giant Shell (based in the Netherlands) owes a duty of care under Dutch law to take appropriate measures to reduce its greenhouse gas emissions. The Hague District Court issued a remarkable judgment in May 2021, much more familiar to common law attorneys and judges (namely, tort), in which it argued that “based on the relevant facts and circumstances, the best available science about” dangerous Climate change and how to deal with it, and the widespread international consensus that human rights offer protection from the effects of dangerous climate change … companies must respect human rights. ”In this particular case, Shell is obliged to change its group company policy accordingly, especially one Reduce group-wide CO2 emissions by 45% net by the end of 2030.
The possible effects of the case can hardly be overestimated. Indeed, in its express reliance on the scope of the scientific evidence on the negative effects of climate change on health and the environment, the court is reiterating the litany of toxic damages lawsuits against tobacco and asbestos companies (pioneered in the US and the UK and Australia followed), which spelled the reorganization and near-demise of these industries (Rabin, 1992; Carroll et al, 2005). The key difference is that the responsibility for preventing known harm from carbon emissions encompasses a much larger group of companies than just oil and gas companies, and possibly any business unit with a significant emissions footprint.
Delivered to Caesar …
In a geopolitical world that is still dominated by the centrality of the state, actions by governments to encourage or compel corporations to be socially responsible are of paramount importance. Good corporate citizenship, fueled by ‘business case’ arguments (i.e., what’s good for the bottom line) or imposed by avant-garde judicial authorities, is all well and good, but should be for authoritative leadership that truly blames companies to the public interest we and must look at the states themselves.
Of course, states often do not lead. Either because their policies are individually captured by the economic power of the corporations or because they cannot or do not want to cooperate together and coordinate their actions, which is almost always fatal in our globalized economy. This is why the recent OECD brokered initiative to introduce a global minimum corporate tax is so astonishing.
For decades, multinational corporations have been able to minimize their tax liabilities through a combination of transfer pricing (shifting corporate profits to countries with low or no taxes while parking liabilities in high-tax countries) and the extensive use of tax attorneys to take advantage of so many tax breaks and gaps as possible. The strategic use of tax laws is widespread among global corporations, especially in the service and technology sectors, where products are intangible (and therefore easily relocated). The chorus of dissatisfaction in rich and poor countries alike about this situation finally prompted the OECD to take a stand, because whether through clever circumvention or illegal circumvention, the result is sure to look like tax evasion against most regular tax payers and voters (Kinley , 2018, 156-60).
After the recent G20 meeting in Venice, a total of 130 countries signed a two-pillar agreement to set a minimum corporate tax rate for all large multinational companies that are classified as companies with an annual turnover of more than 890 million US dollars (estimates assume that there are 8,000 such entities). A lower limit of 15% is to be created below which large companies cannot lower the taxes they have to pay somewhere (Pillar 2). As a result, companies will no longer be able to protect their profits in low-tax countries (according to the tax foundation, there are currently 35 countries where the highest corporate tax rate is below 15%). And even under Pillar 1, the 78 or so largest and most profitable companies will not be able to pay taxes in countries in which they generate profits and not in their headquarters (Devereux & Simmler, 2021). Overall, these claws could be worth up to $ 240 billion in additional tax revenue each year, according to the OECD.
Not all countries are interested in the deal. Hungary, Ireland and Estonia, for example, have big beneficiaries of the extremely low corporate tax rates and will likely be forced to register (by the treaty-bound countries that hold taxes specifically for global companies based in hold-out states). And it remains the daunting task of working out the details of the collection and distribution of the tax. But aside from these issues, the importance of such a coordinated global effort to hold companies accountable on such a vital issue cannot be denied. It will stop the “30-year race to the bottom of corporate tax rates,” as US Treasury Secretary Janet Yellen cockily put it.
Indeed, it is still too early to say whether all these promising signs will change the role of companies in our society in a sustainable and lasting way. After all, they are silver linings that are still surrounded by dark clouds. Both the finance and extractive sectors, for example, have managed to break free of the aforementioned Pillar 1 global tax redistribution arrangement, despite the fact that it includes some of the richest and most profitable companies in the world. The transformation from Damascus to environmental cause is by no means universal. For more than 30 years, oil giant Exxon, supported by its large institutional investors, has steadfastly resisted numerous efforts by minority shareholders to change the company’s anti-climate change policy. And in our Financial Services Human Rights Benchmark, Kym Sheehan and I show how the understanding of the relevance of human rights in banking and financial services companies is still severely impaired by the fact that board members routinely do not see human rights risks as opportunities. For all the momentous symbolism of a new global corporate tax system, the fact that most of the tax revenue goes to the rich countries and the 60 or so countries that have not acceded to the agreement (and which therefore do not need additional tax revenue) is that almost all of them are poor and in need of them most urgently cooperative action to stop the cross-border flows of illicit finance from their public coffers.
In his most famous work, The General Theory, Keynes suggested that a market economy will only achieve its full potential for the benefit of society as a whole, not just those with capital, when we “get rid of the objectionable features of capitalism” (Keynes, 1936 [at 221]; Cardim de Carvalho, 2009). The trends discussed in this short article, while insufficient for this monumental task, at least point in the right direction.
Brudney, Victor ‘The Independent Director: Heavenly City or Potemkin Village? “(1982) 95 (3) Harvard Law Review, 597-659.
Business and Human Rights Resource Center (BHRRC), corporate dashboard (searchable).
Cardim de Carvalho, Fernando, “Keynes and the reform of the capitalist social order”, (2009), 31 (2) Journal of Post-Keynesian Economics, 191.
Carroll, Stephen et al. Asbestos litigation, (Rand, 2005).
Devereux, Michael and Simmler, Martin, Who pays amount A?, EconPol Policy Brief No 36 (2021).
Keynes, John Maynard, “Liberalism and Labor” (1926), in Essays on Persuasiveness (Royal Economic Society, 1931).
Keynes, John Maynard, “The End of Laissez-faire” (1926a), in Essays on Persuasiveness (Royal Economic Society, 1931).
Keynes, John Maynard, The General Theory of Employment, Interest, and Money (Macmillan, 1936).
Kinley, David, Civilization of Globalization: Human Rights and World Economy (Cambridge University Press, 2009).
Kinley, David, Necessary Evil: How To Fix The Finances By Saving Human Rights (Oxford University Press, 2018).
Lindt, Angela, “Transnational Human Rights Litigation: A Means of Obtaining Effective Remedies Abroad” (2020) 4 (2) Journal of Legal Anthropology.
O’Leary, Michael and Valdmanis, Warren, Accountable: The Rise of Citizen Capitalism (HarperCollins, 2020).
Rabin, Robert, “A Social Law History of” Tobacco tort Litigation “(1992) 44 Stanford Law Review 853
Rodríguez-Garavito, César, “A human right to a healthy environment? Moral, Legal and Empirical Considerations “, in John H. Knox & Ramin Pejan (Eds.), The human right to a healthy environment (Cambridge University Press, 2018).
Further reading on e-international relations