Re-visioning global governance: constraining the power of MNCs

13 April 2016
Opinion

Multinational corporations (MNCs) have eclipsed nation-states in their power and ability to set the international agenda. Four options for controlling corporate dominance over global governance.  

Image of UN Flag
Image of UN Flag / Photo credit https://www.flickr.com/photos/sanjit/
In the past two years governments have negotiated a new international structure for sustainable development that seeks to integrate social, economic, and environmental matters in a new fashion. The process resulted in replacing the Commission on Sustainable Development with a High-Level Political Forum and a reformed ECOSOC and inviting multi-stakeholder bodies to take the lead in implementing key areas of the new 2030 Agenda. The General Assembly has separately adopted three resolutions on global governance since 2012 [i]. Meanwhile complaints continue to multiply about the failures of the United Nations and more broadly the UN system.

In 2020 the UN will be 75 years old. Its birth, as it were, began seriously in 1943 well before the outcome of WWII was clear. The driving goals for the design of the UN and the Bretton Woods institutions (BWIs) were to prevent another war between major powers, to avoid another Depression and to not replicate the League of Nations.

By the time the UN Charter was adopted, these concerns were not equally important – only the Security Council dealing with war and peace was given mandatory authority. Over the decades, the major aspiration of the international community shifted. As new global aspirations were identified, new, largely autonomous institutions were built. And,  there were regular reform efforts,[ii] as each generation recognized that the global governance system was not keeping up with the needs of the world. The agreements about the new institutional structures for the 2030 Sustainable Development Goals, the frustrated efforts to ‘reform’ the Security Council and the Secretary General’s selection process, and the thwarted effort to fix the governance at the IMF/World Bank are all part of this tradition.

Accusers and defenders

The complaints about the UN are not trivial. There are charges that the UN system is dysfunctional in meeting its assigned goals; that the UN is inefficient and ineffective with its resources; that its economic and social governance system is fundamentally out of date; and that peace keeping and peace building functions have not prevented genocides and major military interventions. And that Government appeals for additional multi-stakeholder governance bodies are even moving agenda items off the UN’s radar. At any UN system meeting, one can hear more critiques in the coffee bars; at any time one can read and listen to more weaknesses in even otherwise friendly media; and at any gathering of scholars the starting point more often than not is that the UN is a structural failure.

Defenders of multilateralism have solid replies to many of these critiques – the money and capacity to run an international program is just not provided by governments; there has also been a large gap between the aspirations projected onto the UN system  and the willingness of countries to make it happen; the five permanent members of the Security Council did or didn’t do something in their own ‘national’ interest; the Secretariats of the UN system have done some amazing things that are just not reported in the media; and, if the UN and the specialized agencies didn’t exist, they would have to be created.

For the United Nations’ birthday at 75, it would be a good idea to consider what the UN system should look like based on the lessons learnt since 1945. What if one could complement the proliferation of complaints about the limitations of the post WWII institutions with a proliferation of ideas for what international governance post- globalization ought to look like. As with the 1943 discussions about the UN, the Havana Declaration, the Bretton Woods agreements, and the founding meetings for all the other existing international organizations, the thinking about the way to balance goals, governance, institutions, and power takes a good deal of time and intellectual creativity.

Democratic options?

So what if there was a clean slate (say the 1943 discussions did not result in the current legacy of institutions), what would global governance look like today? Or put in another way what are the current aspirations expected from the ‘international community’, what are the current powerful forces that need to be accommodated, and what are the democratic options for a world with nine billion people, tens of thousands of ‘multinational corporations’, and millions of ‘civil society’ organizations?

In some ways, the challenge facing leaders in earlier generations was easier than a clean slate challenge is now. At the end of the 1940s there was only one strong military and economic power, not a multipolar world with hundreds of economic bodies and military alliances. The League of Nations had truly collapsed, and was not just collapsing, as some contemporary critics say the UN system is.

In 1943 and in the following decades, governments were the only formal actors in global governance. Clearly this is no longer the case. MNCs are clearly major actors in global governance and, in the view of many, have eclipsed nation-states in power and ability to set and adapt the international agenda. And some civil society organizations too have become major actors in global governance in their own right. One international effect of the Thatcher-Reagan de-regulation drives and the increasing assertiveness of MNCs in global governance is that governments in the UN system have stepped further back from governing globalization. In their 2009 report, the World Economic Forum argues that government-centric governance for major issues should be replaced by a multi-stakeholder-centric system.[iii]

In addition the world today is institutionally and technologically more complex than it was at the end of WWII. Globalization, climate change, interlocked financial systems, multiple regional wars, high speed internet realities, are just a few of these more complex aspects. Re-visioning a democratic global governance system today is indeed a daunting challenge, a challenge that Davos did take up in its 1 ½-year policy study.

Not surprisingly the Davos view is that MNCs should be more engaged in global governance, not less. An alternative argument is that MNC engagement in global governance is a key stumbling block to a more democratic global governance system.

As an example of how crucial it is to conceptualize a different democratic global governance system that could be the basis for the future, one could look at what it would take to constrain the role of MNCs in global governance. Were one examining this phenomenon in an OECD country, one could describe this as addressing ‘corporate capture of the regulatory process’. From the vantage-point of global civil society and social campaigns, this undertaking is fundamentally about how to level the playing field in global governance. From the perspective of international law, one could describe this challenge as preventing domestic corporate personhood from morphing on the international level to corporate governors.

In the spirit of starting from a blank slate, this paper presents four options for controlling corporate dominance over global governance.

Option A:

One option is to rebuild the UN system, giving economic, environmental, social and gender decision-making the same legal mandatory status as decision-making in the Security Council, so that multilateralism could govern globalisation. Under this option the specialized agencies which deal with these issues would report to the new body with the integrated and legal capacity to adopt decisions binding on government members. This mandatory power on governments, similar to that now held by the Security Council, could only be invoked under special circumstances such as by a supermajority vote on the new Council.

Following the Mexican, Asian, and 2009 financial crises, a number of governments and independent experts called for an Economic Security Council. Option A is built on this rationale but goes a step further in institutionalising not just economic security matters  but also the security of social, environmental, and gender issues.

UN Charter revision is an unusual process. It has mostly been ‘revised’ not by the formal amendment process, as laid out in the Charter, but by a process called ‘Charter modification by practice’. One good example of this modification-by-practice is that two veto-members of the Security Council named in the Charter, the Republic of China and the USSR, were simply replaced by the People’s Republic of China and Russia without any formal vote when reality demanded it. Were the General Assembly to treat resolutions on these four sectors that were adopted by a supermajority differently, it could build into a practice where these resolutions had enhanced obligation on governments.

Option B:

A second option could be to outlaw MNCs’ involvement in global policy-making and programme implementation, as is done in the WTO Framework Convention on Tobacco Control [iv]. This approach would reverse the commitments of two Secretaries-General to the self-standing Global Compact and the tenor of six General Assembly resolutions on ‘partnership’ with the private sector. It would also reverse a decade or more of public-private partnership offices in almost all UN specialized agencies and programmes. The rationale for this approach is the generally accepted position that in national democracies the elected governing authority is an arbiter between, amongst others, the private sector and employees, customers, and others impacted by the private sector. In the international sphere, the UN system could be envisaged in an analogous role.

Two measures transitional to re-gaining the autonomy of the intergovernmental process and programs from corporate interference could be put in place. One transitional measure would be the establishment of legal standards for selecting those MNCs that supply goods or services to the UN or make proposals for donations to the UN bodies. MNCs routinely include such due diligence criteria in their supply contracts, their evaluations of potential mergers, and their reputational risk assessments. The second option would bring this routine corporate practice into the global governance space.

The minimal criteria for the selection of acceptable MNCs could include that the firm:

  • works in conformity with the UN Charter or
  • has endorsed or accepted widely accepted human rights principles (such as the Universal Declaration of Human Rights); 
  • is not under indictment for financial or moral matters
  • is not seen as working against a Security Council decision or as having an active role in a regional war;
  • is not involved in trafficking of persons, weapons, or banned products
  • is not involved in any industry whose core business activity (e.g. tobacco sales) are antithetical to the accomplishment of UN system goals
  • is not undertaking work with the UN to counter adverse brand associations elsewhere; or
  • is undertaking engagement with the UN to gain market dominance or market share, particularly in developing countries.

Whether these specific criteria are appropriate or comprehensive should be decided by an intergovernmental process. What is crucial is that the UN establish explicit standards for more limited engagement with MNCs and utilize these standards in its daily activities.

To make the standards fair and effective, the UN system could have a public body that welcomed news of corporate activities that might abridge the standards, and a separate body that provided MNCs with a public opportunity to challenge an adverse judgement. This approach would reverse the no-standards approach central to the functioning of the Global Compact and various UN system offices seeking corporate donations.

 A second transitional practice for option B would be to revisit the UN funding formula and the level of overall core and program budget requirements for the UN system. One leverage that MNCs exert over the UN system is created from the mismatch between the aspirations of the world community and the resources necessary to address these expectations. In such a period of program conflict, the lore of accepting MNC financial and in-kind contributions to ‘meet a need’ can be overwhelmingly difficult to resist. Most such proposed project contributions may be very large for a UN agency but relatively small financially for a global firm and these proposed contributions inherently come with programmatic and policy conditions. Were governments to frankly address the under-funding of the global system, it would temper a powerful MNC lever over the UN system.   

Option C:

A third option to constrain the engagement of the MNCs with the UN system is to create a quite different governance arrangement. If one considers that governments in the international system are not now able on their own to control the engagement of MNCs in global governance, a reconfigured international governance structure that brought civil society into the formal process could serve as a counterweight to MNC intrusions.

In this quite provocative option, a self-standing international civil society body could bring legitimate public scrutiny to MNC activities in global governance. In short, as governments forces are apparently too weak to assert effective global governance, it may be time to legally recognise the de facto status that civil society and MNCs have in global decision-making and design a new global institution that incorporates an appropriate political balance between these sectors as a complement to the existing government-based UN system.  The model here is the International Labour Organization with its tripartite governance system involving joint decision-making by representatives of employers, workers and governments.

Periodically over the past 30 years, there have been calls for a parliamentary chamber at the UN[v] and for a civil society chamber at the UN. The argument in both cases has been to increase the formal presence of these constituencies in the UN system as a complement to foreign affairs-centered government representation and to permit greater accountability of the UN system to the wider society.

This rationale behind option C for new chambers to contain private sector influence at the UN system is different.  It is premised on the assumption that open engagement between civil society representatives, government delegates and corporate executives is a more effective way to deal with un- and under-disclosed global corporate political roles than the current system.

A first step in this process could be taken by the Office of the President of the General Assembly (OPGA). The President could extend invitations to both communities to convene independent bodies to propose the terms of reference for their chamber, the financing necessary to secure the independence of the chamber, and the possible rules of procedure for the selection of delegates and relations between the two new bodies and the General Assembly. In parallel, the existing General Assembly Ad Hoc Committee on the Revitalization of the GA, established 7 years ago[vi], could be asked to define the government perspective on engaging with the two chambers and insuring that the civil society chamber has sufficient resources and capacities to effectively serve as a counter-weight to MNCs and be a good partner in governing globalization.

Option D:

A fourth option is for governments to adopt a new Vienna Convention specifying the rules for how corporate-centric multistakeholder groups ought to operate when they expect to be seen as a legitimate part of a global governance system. This convention would be a historical extension of the current series of Vienna Conventions and UN system procedural guides. For example, there are formal conventions and rules: the Vienna convention on diplomatic rules[vii], another Vienna convention on how to manage conflicts between different agreements[viii], and a UN rule book that lay out ways to protect minority views and to ensure a sense of democratic process at the inter-governmental level. 

As multi-stakeholder governance arrangements are likely to proliferate, one could establish a set of rules to govern the behavior of legitimate multi-stakeholder governance groups on one hand and to disempower those multi-stakeholder groups that are really disguised oligopolies or self-interested groups intent on taking over governance of pressing public concerns without meaningful engagement with the multilateralism. Option D could not stop a particular multi-stakeholder group. But it could set a government-authorized standard for representation as well as the basis for  internal democratic rules for those multi-stakeholder bodies that seek to be recognized as part of the global governance community.  

Besides the legal principles embedded in the existing Vienna conventions, a new multistakeholder convention could draw on the experiences of both currently functioning multi-stakeholder groups with respectable public records (e.g. the work of the Forest Stewardship Council in setting standards for the trade in sustainably harvested wood products) as well as some multistakeholder groups with decades of practice (e.g. the International Labour Organization). 

An appropriate rule book on multi-stakeholder governance would address a range of issues such as (1) what are the appropriate categories of participants in a given multi-stakeholder group; (2) how should MSGs address the inherent power balance between these categories; (3) what are correct standards –or should there be standards – to select appropriate participants for each category; (4) who selects the organizations to represent each participant category; (5) what are the de facto terms of reference for the group; (6) where does the cash involved come from and go to; (7) what is the internal decision-making process for the multi-stakeholder group; and (8) what are its external obligations.[ix]

Pushes and pull for each option

Reform of the current structure of global governance will not come enthusiastically or voluntarily from ministries of foreign affairs or from within the UN system.

After World War II, the most powerful governments created the Security Council with special seats for themselves, and the Bretton Woods Institutions with special voting powers for themselves. A few years later, these governments also agreed to the Universal Declaration on Human Rights, putting in place principles to constrain how governments can treat their own citizens, and expressing what citizens can appropriately expect from governments.

Changing the engagement of MNCs with the international system can however evolve from a number of different directions. First, a shock on the order of magnitude of a economic depression, global ecological crisis, or a war can prompt rethinking of the institutional arrangements for the intergovernmental system. Following the start of the 2008/2009 crisis, key heads of state were calling for a new Bretton Woods-type conference. Second, it could evolve from citizen campaigns and social movements that insist on a completely new institutional arrangement to counter corporate influence in global decision-making. And third, it may be provoked by the exposes of an egregious multinational corporations overstepping appropriate bounds, say by campaigning for a specific new Secretary-General, such that those committed to multilateralism recognize that they need new allies to counter-balance the advance of multinational corporations and multi-stakeholder governance groups in global governance.

From whatever direction the pressure comes to create a post WWII-based governance arrangement, a package of democratic alternative proposals needs to be well formulated well in advance.  As a result of the last financial crises, the World Economic Forum prepared recommendation on how they would want the next system of global governance to operate.[x] Those whose focus is more clearly on democracy, equity, and environmental security need independently to imagine how a different system could be designed.


[i] A/ 65/94 of   8 Dec 2010;  A/66/256 The United Nations in global governance, 16 March 2012; A/67/289 The United Nations in global economic governance 9 July 2013

[ii] The Ad Hoc Working Group on the Revitalization of the Work of the General Assembly has been in place for over half a decade.

[iii] Harris Gleckman, Readers’ Guide : Global Redesign Initiative, website of the Center for Governance and Sustainability, UMass-Boston, www.umb.edu/gri, accessed April 5, 2016

[iv] Article 5.3 of the WHO Framework Convention on Tobacco Control, 2003. Available at: http://www.who.int/fctc/text_download/en/

[v] The Hague Institute for Global Justice and the Stimson Center, Confronting the Crisis of Global Governance, report of the  Commission Global Security, Justice & Governance, A http://www.stimson.org/sites/default/files/file-attachments/Commission_on_Global_Security_Justice%20_Governance.pdf , June 2015, accessed April 5, 2016

[vi] Center for UN Reform Education, Revitalization of the General Assembly, http://www.centerforunreform.org/?q=node/34 accessed 3 April 2016

[vii] Vienna Convention on Diplomatic Relations, 1961

[viii] Vienna Convention on the law of treaties, 1969

[ix] For additional background on these issues, see Harris Gleckman, Multi-stakeholder governance : a corporate push for a new global governance, Open Democracy, 19 January 2016, https://www.opendemocracy.net/harris-gleckman/multi-stakeholder-governance-corporate-push-for-new-global-governance , accessed 5 April 2016

This views and opinions of this article do not necessarily reflect the position or views of the Transnational Institute.