Multi-stakeholderism: a corporate push for a new form of global governance

19 January 2016
Report

The World Economic Forum’s Global Redesign Initiative is perhaps the best reflection of how corporations and other elites envision the future of governance. It calls for marginalising intergovernmental decision-making with a system of multi-stakeholder governance, but what does this mean for democracy, accountability and the rule of law?

Prompted by the uncertainties about the stability of globalisation, in 2009 the World Economic Forum (WEF) convened an international expert group to formulate a new system of global governance. This project was led by the three most senior leaders of the World Economic Forum (WEF) – Klaus Schwab, its Executive Chairman; Mark Malloch-Brown, then its Vice-Chairman; and Richard Samans, its Managing Director. One of the concepts proposed by WEF for its aptly named Global Redesign Initiative (GRI) is a system of multi-stakeholder governance as a partial replacement for intergovernmental decision-making.1

Over the 18 months of the GRI programme, WEF created 40 Global Agenda Councils and industry-sector bodies to craft a range of themespecific governance proposals. Each Council consisted of a mix of the corporate, academic, government, entertainment, religious, civil society, and academic worlds.2 Their 600-page report centres on these thematic proposals, plus a series of policy essays and organising principles that lay out the WEF framework for a multi-stakeholder governance system.

What is ingenious and disturbing is that the WEF multi-stakeholder governance proposal does not require approval or disapproval by any intergovernmental body. Absent any intergovernmental action the informal transition to MSG as a partial replacement of multilateralism can just happen.

This report also built on WEF’s three decades of convening an annual series of elite global and regional multi-stakeholder conferences. In the past 20 years in the intergovernmental arena, multi-stakeholder consultations have gained wide support as an umbrella framework for bringing together diverse constituencies to develop common approaches to contemporary global challenges and to present challenging development projects.

Back in 1992 at the Earth Summit in Rio, for example, Agenda 21 recognised nine discrete “non-state” groups, called in UN language, ‘Maine Groups’. These groups were able to engage officially on their own behalf or as part of a multi-stakeholder group with the Rio process and subsequently at the Commission on Sustainable Development and the High Level Political Forum.

Over the same two decades, several instances of programmatic MSG have also begun operating. Some examples are the Marine Stewardship Council, the Forest Stewardship Council, the Global Fund to Fight AIDS, Tuberculosis and Malaria, and the Kimberley Process on diamonds mined in conflict areas. Each of these sector-focused organisations has a different configuration of corporations, governments, and civil society participants;3 each has had a different procedure to set its terms of reference; each has a different set of rules for making decisions and adopting policy statements; and each has achieved a different level of success.

Here the definition of success is obviously crucial. The Kimberley Process has “solved” its original problem but is sharply split internally; the Global Fund has generated considerable new capital for global health but has also threatened the legitimacy of the World Health Organization (WHO); the Forest Stewardship Council has transformed a significant portion of the global timber market but has struggled to keep its governance system vibrant;4 and the UN Secretary-General’s Partnership Facility is explicitly aligned with the Millennium Development Goals (MDGs) without, however, allowing any explicit intergovernmental oversight.

By 2007, a government-led multi-stakeholder study on global governance summarised the diversity of purposes of multi-stakeholder activities in the following manner:

"Numerous past initiatives stand to demonstrate that multistakeholder cooperation – bringing together representatives of government, civil society, the private sector, religious organisations, academia and media – may take a range of different forms and contribute to global governance and problem-solving in various ways: [they can] help to broaden discussion and identify global public needs... introduce the element of global issue interest into intergovernmental negotiations, alongside the traditional national interest... help to overcome stalemate in highly conflictridden policy arenas... and gather and disseminate knowledge by bringing together actors with different views on and approaches to issues."5 

Now, everywhere one turns in international relations there are calls for new MSGs. Members of the Organisation for Economic Co-operation and Development (OECD) want them to implement the Sustainable Development Goals (SDGs) (the successor to the MDGs); the UN Security Council wants public–private partnerships (PPPs) in war zones; developed countries expect that MSGs will provide the $100 billion per year for climate-related issues; the United Nations Framework Convention on Climate Change (UNFCCC) looks to the partnerships with the private sector as key institutional arrangements to implement what is an intergovernmental convention; the UN Secretary-General sponsors UN–business partnerships to provide energy for all;6 and developing and developed countries call on MSGs to solve “technical” problems with the flow of capital to developing countries.

What WEF proposes is to take these prior attempts at multi-stakeholder engagement and elevate them into a “multi-stakeholder governance” system. It is not alone in this effort. As noted above, various UN bodies have made recommendations for institutionalising global PPPs. There are, however, sharp differences between multi-stakeholder consultation and multistakeholder governance, some of which are often blurred by loose use of the terms “multi-stakeholder” and “partnership”.

There are strong divergences of views between governments and citizens about whether MSGs are near angels who can deliver everything or whether they are inherently dangerous because profitability or business efficiency should not be a necessary condition for “solving” a global crisis.

Even given this divergence of views, it is one thing for MSGs to advocate for a position (for instance, to lobby intergovernmental bodies) or provide their knowledge and expertise to governments.7 It is another thing when the multi-stakeholder consultation format morphs into a multi-stakeholder governance system that silently or not so silently takes over “solving” a global problem.

Frustration with the inadequacies of governments – working bilaterally, regionally or multilaterally – has encouraged a number of civil society organisations (CSOs) to opt to “negotiate” directly with the dominant multinational corporations (MNCs) affecting their issue and, when these “negotiations” result in a joint programme, create institutional governance arrangements to implement the outcome.

The leadership of these CSOs, as well as leading academics, are often uncomfortably aware that these partnerships may mean compromises with “the devil”, but see limited opportunities for effective action if they work exclusively with governments and the UN system. The proliferation of multi-stakeholder governance arrangements has, however, gained credibility without a careful analysis of the democratic and political consequences of these institutions.

For the wider public and particularly for grassroots communities affected directly by the issue it seeks to address, it is not then surprising that an announcement that a new MSG is taking a lead on global issues is greeted with a good deal of scepticism and anxiety. Much of this discomfort comes from the recognition that there is an asymmetry of power in “working with” MNCs and the variety of forms and governance structures used by multi-stakeholder groups. And there is the obvious recognition that any deal with MNCs on a global issue has the potential to further displace governments and the international system as key leaders in global governance.

From the WEF perspective, this development is actually a positive outcome. The first transformative step proposed in the GRI report is to

"Redefine the international system as constituting a wider, multifaceted system of global cooperation in which intergovernmental legal frameworks and institutions are embedded as a core, but not the sole and sometimes not the most crucial, component."8

In any case there are simply no clear rules for MSGs on accountability, responsibility, dispute settlement, and representation – key elements that are otherwise accepted as core principles for a legitimate global governance process. 

WEF’s view of stakeholders and multi-stakeholderism

Let’s step back and look at WEF’s key definitions and assumptions about global democracy. For WEF, the multi-stakeholder concept is centred on the corporation, with stakeholders being constituents associated with the corporation. As WEF founder Klaus Schwab outlined in 1971, and then reiterated in the organisation’s 40th anniversary history book in 2010,9 the “management of the modern enterprise must serve all stakeholders (die Interessenten), acting as their trustee charged with achieving the long-term sustained growth and prosperity of the company”.

The concept is illustrated with a graphic depicting the company in the centre with ovals from top to bottom that read “shareholders (owners)”, “creditors”, “customers”, “national economy”, “government and society,”, “suppliers” and “collaborators”.

The three crucial elements of what WEF means by multi-stakeholder are embedded here. First, that multi-stakeholder structures do not mean equal roles for all stakeholders; second, that the corporation is at the centre of the process; and third, that the list of WEF’s multi-stakeholders is principally those with commercial ties to the company: customers, creditors, suppliers, collaborators, owners, and national economies. All the other potential stakeholders are grouped together as “government and society”. Note that Schwarb says nothing about democracy in this approach to multi-stakeholder activities.

The existing multilateral system of nation-states is fundamentally different than a framework that puts the MNC at the centre of the power. Under WEF’s proposal, the selection of key multinational executives for a multi-stakeholder governance arrangement would be done either by the initiating organisation (in the GRI report, typically WEF is cited as the convening body) or by self-selection of leading firms interested in managing a particular global challenge with other constituents. The “flexible” governance system could be used to replace governments when a core group of MNC executives decide they could be effective in their own terms in addressing a global challenge.10

From multi-stakeholder consultations to multi-stakeholder governance

WEF’s proposal is to elevate the annual Davos and regional multistakeholder meetings and the various experimental forms in multistakeholder governance into a new explicit form of global governance. Multi-stakeholder groups, PPPs, or coalitions of the willing and able, as they are variously termed in the GRI report, would be expected to take the lead in addressing unsolved global issues.

There is no need to wait for the intergovernmental system to gain universal consensus to act: those MNCs, countries, civil society bodies, academic institutions, and parts of the UN that share a common approach could take it upon themselves to act. The official intergovernmental system can defer to these joint partnerships, provide de facto recognition to a multi-stakeholder process, or provide legality after the fact to the outcomes of a given PPP.

What is left unsaid is that leaving governance to self-selected and potentially self-interested elite bodies also can risk undermining public acceptance and democracy.

As the GRI project directors explain:

"While experimentation with individual public—private and multistakeholder partnerships has flourished over the past decade, including in many international organizations, they continue to play an incremental, even experimental, role in the international system rather than a systematic one. For this to change, policy-making processes and institutional structures themselves will need to be adapted and perhaps even fundamentally repositioned with this in mind."

Issues at stake

Criticisms of this new global governance proposal have been raised in UN official meetings, in scholarly writings, and in statements made by leading members of civil society and social movements. In current debate one hears eight cutting-edge issues and concerns related to multi-stakeholder global governance groups:
 

  1. how are the categories of actors selected or excluded;
  2. how do MSGs address the inherent power balance between actors;
  3. who selects the organisations and individuals to represent each participant category;
  4. what are the correct standards – or should there be standards – to select appropriate institutional participants for each 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.

To elaborate on these cutting-edge issues.

1. Selection (and exclusion) of categories of participants

In multilateralism the nation-state is the central and key actor. Only governments can vote, only governments can designate representatives to attend official meetings, and only governments can submit conventions to their parliaments for ratification. In a multi-stakeholder arrangement, the designation of key actors becomes ambiguous.11

A system to select the appropriate category of actors for solving a given global crisis (as distinct from the selection of intergovernmental bodies) has no parallel in multilateralism where governments are the only formal decisionmaking agents.

Participant categories in existing MSGs include governments (at the national, regional, and municipal levels), CSOs (at the international, regional and national levels), academics, gender-based or other rights groups (such as women’s rights organisations or Lesbian, Gay, Bisexual and Transgender (LGBT) rights movements), investors (from insurance firms to individuals with retirement accounts), manufacturing and servicing firms (such as MNCs, or micro- small-, or medium-sized enterprises) ,indigenous peoples, labour organisations, other Rio Major Group categories and other non-state actors relevant in some way to given global problem (e.g. educators, senior citizens, or nearby residents and communities). 

As each MSG addresses a different problem area, the choice of institutional categories of participants will tend to vary dramatically. At the moment, the selection process tends to be biased toward those with an explicit stake in the outcome and other categories of stakeholder who are likely to agree with the approach of the sponsor of the MSG. This means that those categories of stakeholder that are not as cooperative with the sponsors and those categories that will be negatively affected by the likely outcome of the MSG are generally excluded from the start of the process.

2. Balancing power between categories of governance actors

All categories of actors in a multi-stakeholder governance system are not created equal. State, non-state, and corporate actors have asymmetric capacities to finance their participation in MSGs, different levels of potential ways to negotiate in a process, a different set of technical skills and clearly different capacities to implement or hinder the outcome of a MSG process. The various actors also vie for the leadership role.

In WEF’s new governance proposals the state is but one player among many and not necessarily the dominant one. In multilateral forums, there is a recognition that participants in a decision-making process need to be balanced on geographic, gender, and relative political power grounds.

A simple definition of what constitutes an acceptable balanced group gets far more complicated for a multi-stakeholder process. Do geographic, gender, and access-to-resources-to-participate-effectively need to be balanced within each category or across the overall participation in a specific MSG?

Over the past decades, the multilateral system has evolved structural ways to partially address the asymmetries of power between nation-states. Any new system of global governance that expects to be seen as legitimate will probably take many decades to devise credible ways to balance inherent resource and power differences.

3. Once the categories are agreed, who selects the organisations to represent each one?

In multilateralism, there are clear rules for how a government designates an individual as an ambassador or representative at an international conference. In a multi-stakeholder governance arrangement, representatives are seldom, if ever, designated by their corporate board, a non-governmental organisation (NGO) board of directors, or university trustees to act on behalf of that institution. Rather they are usually selected on an informal one-to-one basis by the sponsoring organisation. Of course, there are thousands if not millions of individual organisations that could “represent” a given category.

The third cutting-edge issue, then, is who is given the authority to select or approve individual organisations, businesses, and institutions to fill the seats for each category of MSG member. The range of bodies currently used includes a wide diversity of political institutions. There are MSGs created by MNC consortiums, by university-affiliated institutes, by intergovernmental organisations and the UN secretariat. And there are MSGs that were originally multi-stakeholder consultative groups that have morphed into a self-selected governance organisation.

For WEF, the secretariat selects the organisations and individuals who are invited to participate in the next generation of Global Agenda Councils. The original 40 have now become 69 operating Global Agenda Councils, six meta-councils, and 11 regionally focused councils12 – WEF selects the participants in all these bodies. 

4. Minimum standards for the selection of individual representatives for each category of participants

All MNCs and all CSOs, to select but two categories, are not blemish-free, but what criteria should be used to select proper and legitimate organisations to participate in global governance system or to work with the UN system? MNCs routinely include such criteria in their supply contracts, due diligence for mergers, and risk assessments for business partners.

Criteria could include, for instance, that the organisation works in conformity with the UN Charter and with widely accepted UN principles (such as the Universal Declaration of Human Rights and the SDGs) and is not under indictment for financial or moral matters or working against a Security Council decision.

5. Defining the problem/scope of a given MSG

Framing a global issue is generally considered the first step in a political process. Governments often spend considerable time negotiating the wording used to frame an issue. This sometimes ends up in a lengthy resolution reflecting compromises between diverse viewpoints. On other occasions it results in an ambiguous phrase that keeps complex issues open for future negotiations.

The reason for these outcomes is that control of over the definition of a problem can give a lead to or place a restriction on the likely outcome of the effort; and it can – explicitly or implicitly – provide an agreement on the obligations and expectations of the participants to the final outcome.

Of course, any group can define an issue in its own frame of reference. What WEF proposes is that when important global issues appear on the international political horizon, a multi-stakeholder group can be quickly created to take the lead in defining the issue, taking that role away from the multilateral process. They may, if the leading MNCs wish, scope the issue very narrowly, or they may, from the outset, frame an issue in a way such that a market-based solution is likely to be the “best” outcome.

6. Sources and uses of cash by and for the MSG

The sixth complex issue for any MSG has to do with the flow of cash – namely, which institution or participant is providing the cash to finance the group and which institution or participant is expected to provide the cash to implement its recommendations. Here “cash” is a generic term that includes direct payments, institutional resources, loaned organisational capacities, and money management. This issue then entails reconciliation of the differences in access to cash between the participants and the political expectations for internally generated resources (e.g. what wealthier participants will want to fund) and externally supplied resources (e.g. what monies can be expected from government agencies, foundations, or corporate underwriting).

Big issues require big doses of capital, expertise, and political commitments. Basic legitimacy would require at least clarity and good practice on core transparency and accounting principles as well as definitions on how to measure various forms of “cash” that are provided to make the MSG operate and to implement the outcome of its recommendations.

7. Internal decision-making processes and relationship to the rule of law

In the UN system there are well-developed rules on voting procedures, on how smaller or weaker nations can engage in issues with a sense of equity, and even on resolving procedural disputes. These rules grew out of 300 years of evolving international law on the responsibilities, obligations, and liabilities of governments. A multi-stakeholder system disrupts this history.13 There are no recognised standards governing the internal decision-making process of MSGs or ones that clarify the obligations, responsibilities, and liabilities of these new “governors”.

What happens, for example, to the responsibilities of states when a multi-stakeholder group steps in take the lead over on a specific global issue? Do MNCs and civil society assume some obligations and liabilities, traditionally designated to nation-states, when they start to participate in global governance? Most multi-stakeholder governance groups work with a high degree of internal confidentiality and vagueness about their decision-making rules. For the Global Agenda Councils, for instance, the agendas are not public, let alone the outcomes.

8. External obligations of the participants

In multilateralism, the outcome of a negotiation generally includes a set of instructions to an international body to implement the agreement, plus a funding mechanism to provide the resources to carry out the agreement, or a set of commitments by governments that they will take independent actions to implement it. In most cases, this is done through a clear set of procedures to report back to the capital on the outcome of agreement, arrange funding from national budgets, and, where necessary, seek endorsement by a parliamentary process.

In multi-stakeholder governance, the pressing issue is that there is no obligation for any of the participants to commit resources to implement the outcome of a given undertaking. Nor is there any clarity on the way deliberations and outcomes are shared with the global public; the degree to which each governing actor is obliged to consult with the constituencies that it “represents”, the opportunity the public have to challenge the MSG’s proposals, and the role the MSG might take in orchestrating government and other actors to implement its recommendations.

This opt-in and opt-out approach is the essential component of WEF’s approach to global governance. 6

Concluding observations

In none of these areas is there a rule book or even clarity about responsibilities, obligations, or liability under international law. This new terrain of global governance is making up its own rules on the fly or going about its activities without even any regard for rules of procedure. And, as noted earlier, a large component of GRI’s multi-stakeholder governance proposals can be implemented without intergovernmental approval.

The World Economic Forum proposals for multi-stakeholder governance are a timely reminder that we need to take a new look at the current rules of engagement in international affairs. It is then timely for a broader range of other social groups, particularly those most adversely affected by globalisation, to re-think how they believe global governance should work.

After World War II, the most powerful governments created the UN Security Council with special seats for themselves, and the Bretton Woods Institutions with special voting powers for themselves. A few years later, in 1948, the UN General Assembly also agreed to the Universal Declaration on Human Rights, putting in place principles to constrain how states should treat their own citizens, and expressing what citizens can appropriately expect from governments.

One association, led by today’s powerful corporate actors, has proposed next system of global governance. As with the post-WWII situation, today’s powerful actors, MNCs, are recommending how to use their power to establish themselves in crucial governance roles. Governments, which are being bypassed by this WEF governance proposal, and CSOs and other non-state constituency groups, who are being invited on a selective basis in to the new governance system, can – and should – play an essential role in writing the rules of engagement with MNCs and the rules for constraining the worst effects of globalisation.

In my analysis there are four options to control the drive toward multistakeholder governance that is acting outside multilateralism. One option is to outlaw MNCs’ involvement in global policy-making and programme implementation, as is done in the tobacco convention;14 a second option is to rebuild the UN system, giving economic, environmental, and social decision-making the same legal mandatory status as decision-making in the Security Council, so that multilateralism could govern globalisation; a third option is to legally recognise the de facto status that civil society and MNCs have in global decision-making and design a new global institution that that incorporates an appropriate political balance between these sectors and supplants the existing government-based UN system; and a fourth option is for governments to adopted a new Vienna Convention specifying the rules for how MSGs could operate as an adjunct part of multilateralism.

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