Ever since the economic crisis of 2008, which had shaken the foundations of the strongest economies in the world, the debate has gained momentum as to what are the responsibilities of the multinational corporations, which transact business across multiple jurisdictions. They need to understand and recognise their role within a given socio-economic and political context, otherwise there will be serious questions on the legitimacy of the very concept of a corporation. All these issues were spoken about by Professor John Linarelli distinguished professor from the School of Law at Swansea University, UK.
According to Professor Linarelli, the conception of morality regarding corporations/companies is rather narrowly defined and just thinking that their sole function is the creation of wealth and are responsible only towards their shareholders would be a dangerous idea. The corporations do not operate in vacuum rather they, by virtue of scale of their operations, can contribute greatly to the nation as they operate in the community and deal with their supply chain. They can help in governance systems of a country, can provide skill training to the community and can also help in preserving the ecology of the region. And this in turn can bring greater ease to their processes and functions. So a corporations’ agenda, which is also called corporate social responsibility (CSR), must have elements of human rights in it and must pursue all its policies as per human rights perspective.
We are living in an era of public private partnership where the state and the private operators are collaborating in creating a better and safer world, as it’s in everybody’s interest to do so. A prosperous and well off community enjoys more social peace and harmony rather than the one deprived of even the very basics of existential things. And the CSR can be incentivised by creating a strong justice administration machinery and by setting examples against corruption. Besides, the corporations must also realise that they need to bear the full social cost of their activities.
The complexities of modern day world require a synergy between the private corporations and the govt. to solve various problems. And without this cooperation, it will be very difficult to do so. This model of public private partnership must be replicated on a mass scale. So ultimately through good governance, the govt. Must incentivise moral responsibility and the two must work together for challenges like peace, ecological safety and human development. The enormity of the problems is such that the two must learn to cooperate as it is ultimately the moral imperative of our existential reality.
Self regulation, if it happens, is a great thing but experience tells us that it seldom happens, as there is hardly any incentive in doing so and disincentive in not doing so. And having said that, it cannot be denied that the more the voluntary regulation the better it is, yet we must not forget that we essentially live in a real world. It is a world which is full of all sorts of good and bad people. A system, which is lax in enforcement of its laws, leads to a situation where there is hardly any reason for a person not to abide by the rules of the game. So if voluntary regulation has to be a success, the overall system of governance must improve and provide sufficient incentives for voluntary regulation and until that happens, let there be a gradual movement towards voluntary regulation and not a blind movement towards it.
The difficulties of multinational corporations lay in the fact that they have to operate in multiple jurisdictions and across various geographies. And to provide for smooth operations, the world has entered into arrangements like world trade organisation, bilateral investment treaties and many more such arrangements. The primary objective is to facilitate trade, reduce transactional costs emanating from operations across geographies. As a result, the corporations have become cosmopolitan legal actors. So ultimately in an increasing globalised world, it makes all the sense to deterritorialise through treaty arrangements for better, faster and efficient trade transactions. This would result in greater savings which the corporations may put to fulfill their moral obligations towards the betterment of the place and the people where they operate. This would not only bring in more prosperity but would also end many rivalries, which exist just because of the inertia of historical reasons.
Having said so, the need of the hour is to realise the fact that with the revolutions in telecommunications, especially the internet, the world is becoming smaller. And this serves as an opportunity as well as a threat. Now it is for the government to provide good governance and thereby to provide incentives for voluntary regulation and for the corporations to fulfill their moral obligation. And if it can be done, then it’s an opportunity otherwise can be a very serious existential threat to the whole world.
www.grandmasters.in | 8 Years & Counting
www.rcls.in | 8 Years & Counting
www.itlegalsummit.com | 8 Years & Counting
www.bfls.in | 8 Years & Counting
www.maels.in | 8 Years & Counting
www.plcs.co.in | 8 Years & Counting
Copyright © 2020 Lex Witness - India's 1st Magazine on Legal & Corporate Affairs Rights of Admission Reserved
