Trends in the Social [Ir]Responsibility of American Multinational Corporations: Increased Power, Diminished Accountability

The purpose of this invited essay is to assess the future of the CSR performance of American multinationals in light of several ongoing trends. These trends include companies’ voluntary CSR programs and the global self-regulatory standards for responsible company activities that are developing in almost every industry. Moreover, the decade-long project at the United Nations to identify multinational companies’ responsibilities with respect to international human rights, ultimately spearheaded by Special Representative John Ruggie, has for the first time established global expectations of responsible corporate activity. At the same time, however, legal developments in the United States may be trending in the opposite direction, toward increased power and diminished accountability for corporations. Two legal developments that highlight this counter-trend will frame this discussion. The first, the Supreme Court’s decision in Citizens United v. Federal Election Commission, 558 U.S. 310 (2010) recognizes a constitutional right for corporations to give financial support to a wide range of electioneering activities, including by using corporate funds to pay for and broadcast advertisements for specific candidates for office. The effect is to allow American companies to further consolidate their already substantial political power. The second, the opinion by the U.S. Court of Appeals for the Second Circuit in Kiobel v. Royal Dutch Petroleum, 621 F.3d 111 (2d Cir. 2010), reh’g en banc denied, 642 F.3d 379 (2011), aff’d, 569 U.S. __ , 133 S. Ct.1659(Apr. 17, 2013), denied the possibility of corporate liability under the Alien Tort Statute for Royal Dutch Shell’s employees’ alleged violations of Nigerian community members’ international human rights. A 2-1 majority held instead that violations of international law could only be asserted against natural persons or nations. The Supreme Court granted certiorari and in a decision handed down on April 17, 2013, the Court unanimously affirmed the judgment of the Second Circuit. The five-Justice opinion of the Court held that the ATS cannot be used to redress violations of the law of nations that occur outside the territory of the United States, except in exceptional circumstances not found in Kiobel. Neither the majority opinion nor the concurrence addressed the corporate liability issue, which means that the Second Circuit’s ruling on that issue remains the law of the Second Circuit — an important outcome, given the significance of the Second Circuit as a venue for ATS cases. Taken together, the overall effect of the Second Circuit’s rejection of corporate liability for human rights violations and the Supreme Court’s rejection of exterritorial application of the ATS to any defendant, corporate or otherwise, is the substantial evisceration of companies’ legal accountability for international human rights violations under the ATS. On a theoretical level, these decisions send mixed messages about corporate personhood and identity. But on a practical level, the two decisions work in unfortunate concert to increase the already considerable political power of U.S. corporations at home, even as they reduce the risk of legal accountability for their actions abroad. By doing so, they shrink the shadow of the law — the threat of "hard" legal regulation — that has been an important incentive to the adoption of voluntary, "soft-law" CSR standards. Thus, these legal developments, though ostensibly unrelated to the voluntary pursuit of CSR activity, may in fact act as a disincentive to that activity.

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