Claves del derecho de redes empresariales

CAPÍTULO 2

Network Constitutions: a Response to the Crisis?

GUNTHER TEUBNER

INTRODUCTION

In recent years, transnational corporations (TNC) were involved in a number of scandals that shocked the global public. Ecological catastrophes, like the Exxon Valdez, Shell in Nigeria, inhuman labour conditions, child labour, the repression of union members, the disastrous price policy during the Aids crisis in South Africa, the complicity of transnational corporations in corruption and human rights violations, and with special vigour, the recent corporate abuses in the banking crisis, drastically increased the public awareness of the negative effects brought about by the transnationalization of commercial activities. In parallel, these ramifications triggered a plethora of political initiatives aimed at regulating them through binding legal norms. However, both the strong resistance of transnational corporations against national and supranational regulations as well as the difficulties to achieve effective regulation via protracted international agreements led to the failure of many of these initiatives.21 Nonetheless, one result of this shortfall is particularly noteworthy. Instead of the aspired binding state regulations, a different species of transnational non-state legal regimes spread in huge numbers around the globe — the “voluntary” codes of conduct of transnational corporations.22

Today, these codes exist in various forms, yet two basic variants predominate. On the one hand, the heavy public criticism, disseminated by the media globally, and the aggressive actions of protest movements and civil society non-governmental organizations (NGOs) force numerous transnational corporations to develop corporate codes “voluntarily”. They commit themselves to standards in the issue areas labour conditions, product quality, environmental policies, consumer protection and human rights and promise their implementation (short and imprecise: “private” codes). On the other hand, the state world establishes — through agreements under international law or through the norms of international organizations — codes of conduct for transnational corporations (again, short and imprecise: “public” codes).

How are the subjects of these private and public codes defined? It would be a misunderstanding to determine them as single formal organizations—TNCs, on the one side, and international organizations, on the other. Rather, a network revolution has taken place in both legal spaces. Extensive networks have developed between different organizations, which then facilitate the understanding of the entire configuration as the relationship between two different, mutually closed networks. On the one hand, private codes have already transcended the confines of individual companies. They have extended their validity to corporate groups and conglomerates that transcend national boundaries and encompass in some cases thousands of individual companies. Under pressure from the public and civil society organizations, their scope was even extended beyond the boundaries of corporate groups. With contractual regulations, powerful corporate groups are able to bind their suppliers and their distribution chains to their corporate codes and use the contractual mechanism also to introduce effective monitoring and sanctioning systems.23 On the other hand, interlinks in the codes of the state world can be found. Here, manifold connections between the corporate codes of the ILO, the OECD, the United Nations Organizations, and the European Union have emerged.24 Insofar the parlance of codes of corporations is misleading. This would suggest a world in which the markets are populated by isolated companies. Today’s universe of interconnected enterprises is rightly called a network society. And the adequate expression would be codes of corporate networks.

In many cases, “public” codes for corporate networks remain mere recommendations with no effects whatsoever. And the self-commitments in “private” codes are often only strategic attempts to pre-empt state regulation by the non-binding declaration of intent, or they are mere public relations strategies without involving any effective change of behaviour.25 But there are some empirical studies which deserve particular attention. They demonstrate that in some cases the corporate codes brought about real change; hence that they improved labour conditions, increased environmental protection and pushed through human rights standards.26 It is particularly noteworthy that these studies do not only document success stories; they also specify the social and legal conditions that have to be given, if the codes are meant to be successful.27 Permanent NGOs monitoring or binding contracts with civil societal certification bodies are likely to be among the most important conditions for success.

What is special about the interplay between private and the public codes for corporate networks? My thesis is: As a reaction to recent crises not only tendencies of a private juridification but also of a constitutionalization beyond the state take place. While the debate on legal pluralism, private ordering, and transnational governance concentrate on the question whether new forms of law without the state are emerging in the globalization process, I would like to focus on the question whether in reaction to the crisis stateless societal processe are also developing genuinely constitutional norms. As I have extensively argued elsewhere, this point is based on a concept of constitution that is not limited to the nation state and implies that also non-state societal orders develop autonomous constitutions under particular historical circumstances.28

I try to support this thesis with the following arguments, meant to highlight that the codes of corporate networks feature functions, structures and institutions of genuine constitutions, network constitutions:

1. To the extent that private and public codes juridify fundamental principles of a social order and establish rules for its self-restraint at the same time, they fulfil central constitutional functions for corporate networks.

2. As one among several reactions to the present crisis, a shift within these network constitutions takes place, a shift from constitutive to limitative rules.

3. With their characteristics of double reflexivity and binary meta-coding, both network codes develop genuine constitutional structures.

4. As constitutional institutions, the two codes do not form a hierarchy of public and private constitutional rules, but an ultracyclical linkage of qualitatively different networks of constitutional norms.

Thesis # 1: Constitutional Functions: Constitutive and Limitative Rules

Codes for corporate networks take part in two opposing waves of constitutionalization of the world markets. Advancing Karl Polanyi’s ideas about the transformation of modernity, one can even argue that transnational constitutionalism is part of a “double movement”.29 Also in the trajectory of corporate constitutional law, the expansion of economisation is accompanied by counter movements, which reconstruct the “protective covering of cultural institutions”.

The first constitutional movement is identified by neo-materialist critics of a “new constitutionalism” as well as by ordoliberal advocates of a world economic constitution, naturally with diametrically opposing evaluations.30 The Washington consensus of the last thirty years has pushed ahead politically with this first surge of constitutionalization of the world markets. It did not only trigger political regulation but fundamental principles of economic constitutionalism. They aimed at providing worldwide operating corporations with unlimited latitude for action, which encompassed ending governments holding shares in corporations, combating trade protectionism and freeing commercial enterprises from political regulations. In this vein, the International Monetary Fund and the World Bank have developed regime constitutions, whose guiding principle is to open up national capital markets. An integral part of these constitutionalization tendencies is the corporate governance of multinational corporate networks, whose principles encompass a high degree of corporate autonomy, the capital market-orientation of company law, and the establishing of shareholder value.31

This wave of “neo-liberal” constitutionalization is clearly characterized by its constitutive function, i.e. its focus on providing transnational corporations with a high degree of autonomy. It is fixated on the problem that the worldwide extension of corporate activities is hampered by the segmentary differentiation of the world into nation states. Constitutive rules of this kind serve for releasing the dynamic of commercial enterprises at the global level.

Thesis # 2: Externally Enforced Constitutional Self-Restraint

In the long run, however, it is not sustainable that a corporate constitutionalism restricts itself to its constitutive function in such an one-sidedly “neo-liberal” fashion. It is only a matter of time before the systemic energies released trigger disastrous consequences — alongside their indubitably productive effects. Now a fundamental readjustment of constitutional politics will be required to deal with the outburst of social conflicts. Globalized markets and corporations put — without being significantly hampered by nation state counter programs — a strain on society and the environment through the “negative effects of their own differentiation, specialization and high-performance orientation”. This is the moment when Polanyi’s “dual movement” makes its presence felt, which, as Streeck argues, identifies

“… the not just plural but inherently contradictory forces responsible for the specific dynamism of capitalist development, making it move, not linearly, but in its fits and spurts, and in cyclical waves of institutionalization and de-institutionalization”.32

In such processes of “dynamic disequilibrium”, which alternate between liberation and limitation of systemic energies, the tipping point has now been reached. After a long constitutive phase, combating the risks of unrestrained liberalisation has now become indispensable. Limitative constitutional norms are now needed rather than constitutive ones.

This is the situation after dismantling nation state regulations at a transnational level. While global function-specific communication is no longer hindered by nation-state production regimes, the constitutive constitutional politics of the Washington consensus has overriden many of the limitations that nation-states placed on the dynamics of the function systems. Unburdened by nation-state restrictions, the systems are now placed to follow, globally, a programme of maximising their partial rationality. Despite they differ in their theory assumptions, sociological analyses in the tradition of Karl Marx, Max Weber, and Niklas Luhmann all agree on the consequences of this diagnosis. Whether the laws of motion of capital, or the rationalisation of spheres of social action, or the dynamics of functional differentiation — all identify the destructive energies created by the one-sided function-orientation of a social sector. Globalisation has an accelerating effect. The dismantling of national production regimes releases destructive dynamics in the global systems; destructive dynamics in which the one-sided rationality-maximisation of one social sector collides with other social dynamics.

Now, it is imperative to readjust constitutional policy. In the second wave of constitutionalization, instead of the constitutive, the limitative function of constitutional norms is in demand. As one among many reactions to the crisis, the codes of corporate networks partake in this second wave when they restrict corporate activities in the name of public responsibility. They try to overcome the primacy of shareholder value in favour of a stakeholder-orientation as well as to realize self-restraint in the areas of labour, product quality, environment and human rights.33

This is the message of societal constitutionalism. Not only measures of public regulation, but also the “private” constitutions of corporate networks are faced with the task: How can a sufficiently large degree of external pressure be generated on the corporate networks to push them into self-limitations on their options?

Why self-limitation and not outside limitation, though? Does not experience show that self-limitation merely serves to set the fox to keep the geese and that excesses can only be prevented through outside influence? Equally, though, does not experience also show that attempts at trying to control internal processes through external interventions regularly end in failure? At this point societal constitutionalism does a difficult balancing act between external intervention and self-direction. A “hybrid constitutionalisation” is required in the sense that in addition to state power, external societal forces — that is, formal legal norms and “civil society” counter-power from other contexts (media, public discussion, spontaneous protest, intellectuals, protest movements, NGOs, trade unions) — exert such massive pressure on the expansionist corporatist networks so that they will be constrained to build up internal self-limitations that actually work.

However, workable limitations can take effect only within the system’s own logic, not outside it.

“Every function system determines its own identity … elaborating semantics of self-interpretation, reflexion, and autonomy. The mutual dependencies of the subsystems can no longer be normed in general. Indeed they can no longer be legitimised at all as a condition for order at the overall social level.”34

The difficult task of co-ordinating the function of a social system and its environmental tasks at a sufficiently high level can be tackled only through system-internal reflexion, which can certainly be prompted from the outside but cannot be replaced. This is why there can be no external political definition of transnational corporate constitutions, but only indirect political impulses or constitutional irritations. The knowledge regarding which kind of self-limitation can be selected does not even exist as such. It cannot simply be accessed, but rather has to be generated internally first. Endogenous growth imperatives can be combated only with endogenous growth inhibitors. The knowledge required to do so cannot be built up by an external observer as centrally available experiential knowledge, but only out of the combined effect of external pressures and internal discovery processes.

No one knows how such a capillary constitutionalisation might work in practice. Ex-ante prognoses are by definition impossible. And, for that reason, there is no alternative but to experiment with constitutionalisation. The application of external pressure means that the self-steering of politics, or law, or other subsystems, creates such irritations of the corporate networks, that ultimately the external and internal programmes play out together along the desired course. And that cannot be planned for, but only experimented with. The desired course for corporate network constitutions is limitations of the endogenous tendencies towards self-destruction and environmental damage. This is the core of the constitutional problematic, this difficult handling of the corporate networks’ self-transformation.

Thesis # 3: Constitutional Structures: Double Reflexivity and Binary Meta-Coding

1. Structural Coupling of Reflexive Mechanisms

The codes would not establish constitutional structures, if they only introduced primary rules governing corporate activities in the fields of labour, environment and human rights. The critical threshold is reached, when the codes lay down secondary rules concerning the identification, interpretation, amendment, competences for the enactment and delegation of primary rules. Typically, codes of corporate networks show a three-tiered hierarchy, in which the interplay between primary and secondary rules is discernable indeed. The top level consists of the general principles of the corporate constitution; the middle level regulates enforcement and monitoring; while the lowest level includes concrete instructions for conduct.35 At the top and middle level, a plethora of such secondary rules can be found. They come close to constitutional norms in the strict sense, since they produce as higher-ranking meta-norms a sort of reflexivity of intra-company law. But secondary norms as such do not constitute yet a constitution.

Only the peculiar double character of corporate codes, which I call the double reflexivity of legal norms and social structures, turns them into constitutional norms. If law plays a supportive role in the self-constituting of a social order beyond its function of conduct control, dispute settlement, regulation and frame setting, it creates constitutional law. A corporate constitution in the strict sense only emerges, if a structural coupling of a particular kind comes into being between the corporate organization and the law.36 Transnational corporate constitutions link reflexive processes in the economic organization with reflexive legal processes; in other words, they link fundamental principles of the organization with secondary legal rules.37