13 - Democratizing the corporation

Summary

As the economic, environmental, and social footprints of multinational corporations MNCs have expanded, this influence has become a fact of life in the twenty-first century global economy. For champions of globalization, the rise of the MNC is cause for celebration. Job creation in poor countries, spreading innovation across borders, and building indigenous managerial talent are some of the rewards of MNC activity. For globalization skeptics, the picture, at best, is mixed. In their view, the borderless economy has intensified income disparities across and within countries, favored Northern firms at the expense of local entrepreneurs in part because of global trade rules, and accelerated the destruction of critical marine, forest, and atmospheric ecosystems as the culture of consumerism has fueled relentless demand for goods and services.

Within this unsettled landscape, the question of governance of MNCs has emerged as a pivotal issue among investors, civil society and government, and within MNCs themselves. The incongruity between the continued expansion of MNC scale and influence and the absence of a generally accepted governance framework is becoming increasingly evident. In a world where MNCs collectively are as economically and socially consequential as many national governments, what are the rules of accountability to harness MNC interests such that they serve the long-term public interest?

This core question has spawned a multitude of frameworks, principles, and norms to bring MNCs into alignment with societal expectations, including: the OECD Guidelines for MNCs, the OECD Principles for Corporate Governance, the World Bank's Global Corporate Governance Forum, the UN Global Compact, specialty organizations such as the Global Reporting Initiative (sustainability reporting) and AccountAbility (assurance standards), and investor-led initiatives such as the International Corporate Governance Network (corporate governance principles).