- -
- 100%
- +
An autonomous, non-state, non-political, and hence genuinely societal constitutionalization occurs in the codes of transnational corporations, since they juridify reflexive social processes that concern the relationship of the company with its environments by linking them to on their part reflexive legal processes, i.e. standardizations of standardizations. Under this condition, it is reasonable to talk of elements of a genuine constitution within the corporate codes of transnational corporations. The codes show indeed typical elements of a constitution: regulations concerning the establishment and practice of organizational decision-making (procedural rules of the corporation) and the definition of the system boundaries (fundamental rights of individuals and institutions vis-à-vis the corporation).
The norms at the top level of corporate codes are especially geared towards these conditions. They regulate the fundamental decision-making processes of transnational corporations, which concern the relationship with their human and natural environments, especially the relationship with the employees whose fundamental rights are respected by the organization. The “guidelines” at the top level have constitutional character, since they are not only mere behavioural norms, like the rules at the lowest level. Rather they are explicitly higher-ranking norms, phrased as general principles and serving both as starting points for intra-corporate norm-generation and as yardsticks for the internal and external review of norms. This requires certain institutional arrangements, especially procedural roles, which are responsible for setting, modifying, interpreting and implementing the primary rules. It is therefore especially the middle level of control and implementation bodies that mediates between abstract principles and concrete corporate decisions. Thus, private codes do not only generate autonomous law as private ordering; at the same, they constitute their own constitutional foundations without being dependent on public codes — they generate literally constitutions without the state.
2. Binary Meta-coding of the Corporate Constitution
The endpoint of the constitutionalization of a corporation is reached, when a specific binary meta-coding develops. The meta-coding oscillates between the values “code-compatible”/ “code-adverse”, both with regard to the corporate constitution. A meta-coding exists in this case, because such a constitutional code subjects the already binary coding of intra-company legal norms to an additional examination, namely whether they conform to the requirements of corporate constitutional law. Here, the hierarchy between simple and constitutional law emerges, which is typical for all constitutions. The legal code (legal / illegal) is subordinated to the constitutional code (constitutional / unconstitutional). However, there is something peculiar to the constitutional meta-coding. It is not only hierarchically superior to the legal code but at the same time also to the economic code. It therefore subjects to reflection all economically binary coded operations of the corporation, whether they comply with the principles of the public responsibility of the corporation or not.
The constitutional meta-coding is therefore a hybrid. It serves as a fictional unity for two different constitutional reviews within the corporation. It is, on the one hand, placed hierarchically above the legal and, on the other hand, above the economic binary code. Therefore, it assumes a different meaning depending on whether it reviews the economic or the legal code. In economic contexts, it serves for reflecting the social responsibility of the company and seeks to identify strategies for environmentally friendly economic activities. In the context of corporate law, it introduces the distinction between simple and constitutional law and reviews simple legal acts for their compliance with the values and principles established in the corporate constitution. The meta-coding triggers the re-entry of fundamental principles of economic organization into the law as constitutional principle and vice versa the re-entry of law in the corporate organization.
Thesis # 4: Constitutional Institutions: Private and Public Codes in an Ultracycle
Even if in this way constitutional functions and structures can be identified, it remains still difficult to capture the institutional structure of corporate codes in more theoretical detail. Some authors describe them as the “new sovereignty” of transnational corporate networks and stress thereby their unrestrained self-regulation.38 However, this does not do justice to their numerous normative dependencies on the environment; because the currently relevant corporate codes emerge from the conflicts between three groups of actors —, civil society groups, transnational corporations plus their delivery and distribution organizations and supranational institutions — whose mutual relations remain however unclear.
1. The Inversion of Nation State Hierarchies
Other authors try to model these relations as “governance triangles”.39 This is, however, similarly inadequate for grasping the social embedding of the codes. It suggests mistakenly that a transnational equivalent emerges to the state-organized neo-corporatist triangle of the European welfare states. In comparison to the nation states, one is here however confronted with a totally different constellation in the relation between these three social forces. Also the model of “multi-level-governance” is hardly appropriate for capturing the peculiar interplay of the two transnational types of code.40 In the nation state, corporate constitutions could certainly be conceived as a multi-level arrangement of constitutional norms, legal and judicial rules, on the one hand, and intra-organizational private ordering on the other. But its transfer to global corporate constitutions is mistaken. The different conditions of the transnational as well as the results of the first wave of societal constitutionalization, especially the high autonomy of transnational corporations, have fundamentally changed the relations between public and private collective actors compared to the corporate constitutions of the nation state. In the drastic words of an observer:
“Contract replaces law; networks of relationships replace a political community; interest replaces territory; the regulated becomes the regulator.”41
In the corporate constitutions of European nation states, as is well known, the linkage between public and private norms took place in hierarchical formations. The corporate constitution was based on a clear primacy of the state in the form of constitutional, statutory and judicial norms. The private ordering of corporations remained clearly subordinate to state law; it remained limited to those spaces of autonomy state law had left. This hierarchy of norms can be captured in the conceptual pair hard law / soft law.42 The state enacts hard law in company law, in the law of co-determination and in regulation law in the form of binding and sanction-reinforced norms. In contrast, intra-corporate norms are only a kind of soft law. As a manifestation of private autonomy they are not recognized as genuine legal norms, because their obligatory nature and enforcement depend on state recognition, and because they are subject to the review of state courts, whose results often repeal and change them.
In comparison to this traditional hierarchy, one can detect significant changes in the transnational codes which do not match the standard categories. In the interplay of the two corporate codes, a downright inversion of the hierarchy between state law and private ordering can be observed. A dramatic reversal takes place especially in the hard-law / softlaw quality of the public and private corporate codes: Now, it is the state norms that feature the quality of “soft law”, while the mere private ordering of transnational corporate networks emerges as new forms of “hard law”.
The norms under international public law, which, for instance, the UN enacted in the Codes of Conduct for Transnational Corporations, are not comparable with the binding norms passed for the corporate constitution by parliaments and constitutional courts of the nation states. Although it was initially planned in the 2003 “Draft Norms on the Responsibilities of Transnational Corporations” that a supranational regulatory body should directly regulate the conduct of transnational corporations with the help of sanction-reinforced norms binding under international law,43 the massive resistance of influential nation states and of the corporate lobby marked a turning point. The finally passed version contained merely “soft law”: non-binding recommendations whose implementation cannot be enforced by legal sanctions.44
On the other hand, intra-corporate network codes are merely non-state private ordering, but in fact they are the governing law of the land with a high degree of binding force and effective sanctions. Private law doctrine still contests vehemently their genuine legal character, since it insists upon the state deduction of normative validity claims and does not recognize private ordering as law. And it is only gradually that economically and sociologically inspired concepts of law emerge, which assign legal character to the normative orders of private transnational actors — under particular circumstances.45 Intra-company and inter-company codes are directly binding for the actors involved, and they are equipped with effective sanctions, which are executed by newly created compliance departments.
In this way intra-corporate and inter-corporate organizational law seals itself off from the state law. In direct opposition to the usual norm-hierarchical relation between state and private law, public codes do not work as the constitutional basis for the authorization of the private codes. They produce their own validity from the linkage of primary and secondary norms in the realm of private ordering. They constitute a closed non-state system of legal validity, which is itself structured hierarchically. As already mentioned above, the top level encompasses the general principles of the corporate constitution, the middle level regulates enforcement and monitoring, the lowest level includes concrete rules of conduct. They thus generate their authorizing foundation themselves by their own constitutive rules. And intra-company rules, which regulate conduct according to the legal code, are reviewed themselves according to the constitutional code.
2. Hypercycle and Ultracycle
Inversion of hierarchy does still not go far enough. While there is a clear factual and normative primacy of the private over the public codes, the primacy is of no hierarchical nature. Rather more appropriate is the exclusion of the public by the private. State norms are not subordinated to private norms, rather they are banished from the interior of norm setting into the corporate environment. With this, the notion of a unitary legal space of state and private rules becomes obsolete. Instead, two independent legal spaces develop, an autonomous, privately ordered, coercive inner law of corporations and a state regulated ensemble of normative recommendations of conduct.
While it seems obvious that they form two mutually closed legal spaces it is not easy to determine what constitutes their closure. In any case, it is not the operative closure of social systems in the strict sense that separates them. Their closure is not based on the difference between their operations, as both code-orders are processed by the same type of operations — legal acts. Rather, it is a mutual structural closure that arises from two differences. One is the strict limitation of their space of validity: private codes claim validity for the members of the transnational corporations, public codes claim validity for the contracting states. The other is their different quality, as binding norm, on the one hand, and as mere normative recommendation, on the other. In terms of systems theory: The inner differentiation of the global legal system arises not through the emergence of a new kind of legal operations which would trigger an operative closure between the newly created subsystems. Rather the validity symbol is transferred in such a way that it creates boundaries between different legal orders. It brings about the structural closure by defining boundaries between different spaces of validity. Traditionally, the validity spaces are defined by territorial boundaries as in nation states, region or cities, in the transnational context they are of a issue-specific, functional or jurisdictional kind. Hence, one has to distinguish clearly between different forms of closure, operative and structural, which consequently also result in different ways how legal orders open up to each other. In this way, the private and public codes constitute two mutually closed legal orders, between which no transfer of validity takes place, but which influence each other in different ways.
As I said at the beginning, in both legal spaces extensive normative networks have developed between different organizations, which then allows to understand the entire configuration as the relation of two different, mutually closed normative networks. The interrelation of these two closed code-networks certainly does not match the traditional relationship between private and public corporate constitutional norms. Often, it is therefore attempted to conceive the relationship itself as a single large network or even a network of networks, as a metanetwork between state and private actors.46 This is not necessarily mistaken, but relevant differences disappear. The relation can be captured in more detail in the difference between “hypercycle” and “ultracycle”.47 A hypercycle emerges when communicative operations within a closed network form cycles that are interlinked in a circular way. In contrast, an ultracycle emerges when a cycle of mutual perturbations is developed between closed networks. Within private codes of corporate networks, interlinkages are of a hypercyclical nature; between the cyclical legal operations, which connect to each other within different formal organizations (i.e., TNCs, their suppliers, and their sales organizations), interorganizational direct connections are developed. The validity symbols of private ordering are directly transferred via intraorganizational law and interorganizational contracts. Within this network of private legal operations, the private norms have a direct binding effect on participants and in instances of norm infringements, sanctions are ordered. In this way, a closed scope of private ordering emerges through the hypercyclical linkage of TNCs and other commercial enterprises.
In an entirely different way, these mutually interlinked private codes are connected to public codes. For this kind of connection, unlike the model of the hypercycle, the ultracycle model is appropriate. Although public codes define certain politically desired obligations and establish the boundary between permitted and banned activities, they are only informal recommendations and mere appeals for certain conduct. They are also valid law, yet in a paradoxical form; they are law in force but without legal sanctions. This means that private codes, which present themselves as self-referentially closed validity circles, are not only entirely independent from public codes when it comes to their validity, but also that public codes cannot even connect normatively to private standardizations. They do not participate in the normative unity of the intra-corporate and intercorporate codes. Only from the outside, they can appeal, suggest, motivate, urge, or even compel, but they cannot command or suspend validity. They are only external irritations for the inner-validity cycle of private codes. The codes of the United Nations, the ILO, the OECD, and the European Union are mere constitutional impulses, which—certainly with great influence—international organizations send toward TNCs. Whether they indeed coagulate there into binding constitutional norms is not decided by the institutions of the state world but in the inner processes of private organizations.
3. Learning Pressures: Internal Self-limitations due to External Constraints
If under certain circumstances, interrelations between the network codes emerge, then an ultracycle arises, a perturbation cycle between the public and private codes. In the usual descriptions of how private and public soft-law regimes are interrelated, the fundamental difference is concealed which exists between the hypercycle of private codes and the ultracycle of public and private codes. This should, however, not tempt one to dismiss ultracycles as mere political window dressing, as mere white noise of the state world, unable to affect the intra-company codices at all.48
What matters are learning pressures, i.e. internal changes induced by external constraints. Both elements have to be present in order to enable public and private codes to act in combination: an internal change of cognitive and normative structures and external pressure directed towards it. Otherwise ultracyclical linkages do not emerge, and public codes remain external impulses with no effects. Here, the above-mentioned special quality of mutual closure becomes apparent which makes possible a special quality of mutual opening. A transfer of validity between both is out of the question, instead learning pressures, that is other mechanisms of mutual opening, are developed.
At this point, one of the most significant changes in the legal structure becomes visible, which occurs in the transition to world society. Niklas Luhmann described this change in the following way:
“at the level of the consolidating world society, norms (in the form of values, regulations, purposes) do not anymore steer the pre-selection of the cognitive, rather vice versa the problem of adaptation through learning gains structural primacy and the structural conditions for the capability of all subsystems to learn have to be supported.”49
This means that the code-orders of the two networks do not simply communicate via the medium of law. The validity of normative expectations is not transferred from one network code to another via legal operations. Instead, learning processes of corporate legal codes are triggered, often even compelled, by non-legal media — by expertise, by political and societal power, by normative persuasion as well as by monetary incentives and sanctions. In this context, cognitive primacy does not mean that corporate codes lose their legal-normative quality and only function as mere cognitive expectation. It is only the relations between the two normative networks that become de-normativized. While the codes themselves remain normative orders, the relations between them switch to cognitive mechanisms.
What does the first element of learning pressures — cognitive learning — consist of? The public codes only provide “templates”, behavioural models, principles, best practices, recommendations for the private codes. The ultracyclical linkage of both network codes triggers learning processes, which do not take place as validity transfer of rules within one legal order but run across the boundaries of mutually closed orders. Their particularity is that they do not amalgamate the involved orders into one unitary legal order with common legal operations, rather they are reconstructed via complex cognitive processes.50 It is exactly this separation that makes possible a cognitive surplus value, which is generated when the sparks of perturbations jump across the boundaries between the involved codes. This may even lead to normative innovation. The ultracycle does not end their autonomy, rather it uses their autonomy to produce new norms, both of hard law in intra-company codes and of soft law in the codes of the state world.
What makes the learning effect special? Corporate groups can use the public codes to gauge what societal expectations they face, without having to follow them completely. In this way the public codes counterbalance the tunnel vision developed by the private codes and provoke their re-orientation towards a transnational public policy. Public codes provide constitutional stimuli for learning similar to the normative demands placed on corporate networks by protest movements and civil society organizations.
What does the second element — pressure — consist of? In this learning process, legal sanctions do not play a prominent role. Rather extra-legal mechanisms are responsible for the effect that corporate networks take public codes as compulsion for learning, and develop their own codes for their particular circumstances. In no way are these extra-legal mechanisms inferior to legal sanctions. First and foremost, it is inter-organizational power processes — unilateral pressure and political exchange — that force commercial enterprises to develop corporate codes. It cannot be stressed enough that this external pressure is an indispensable condition for corporate codes to exert an effect at all.51
According to the hitherto existing experience, nation states and the international organizations of the state world have generated the necessary power resources, yet only to a certain extent. The power pressures of a public network, of protest movements, NGOs, unions, non-profit organizations and public opinion have proven to be crucial. Economic sanctions often tip the scales. The sensitivity of consumers, of whose purchase behaviour corporations are dependent upon, and of certain groups of investors, who exert economic pressure on the commercial enterprises is decisive.52 It remains to be seen, whether the state world will take a leading role in exerting stronger external pressures on corporations after the financial crisis. In this context, the latest news rather feed scepticism. In any case, although they would change the balance between internal and external regulation, they would not make disappear the difference between hypercycle and ultracycle.
Behind the metaphor of “voluntary codes”, therefore, lies anything but voluntariness. Transnational corporate networks enact their codes neither on the basis of their understanding of common good requirements nor due to motives of corporate ethics. They comply only “voluntarily”, when massive learning pressures on them are exerted from the outside. The learning process does not proceed within the legal system from code to code via validity transfer of rules, but on a long-winding detour through other social systems and other media of communication. It is not sufficient to describe this as if legal sanctions are simply replaced by social sanctions. This would conceal the drastic effects such circuitous learning pressures have. In the described ultracyclical “translation processes”, system boundaries are in fact transcended; a perturbation cycle emerges between legal acts, pressures of political and societal power, cognitive operations of epistemic communities, normative persuasion and economic sanctions, which then goes back to legal acts in the other code. The original content of the public recommendations is dramatically changed, when they undergo a complicated translation process into different worlds of meaning. When the soft law of the public codes is “translated” into the language of expert knowledge, which develops models and organizes monitoring, this creates special effects. Different outcomes occur when it is translated into the inter-organizational power of political negotiations between international organizations, NGOs and transnational corporations, different again when it is reconstructed in the reputation mechanisms of the public or in monetary incentives and sanctions. Other changes occur when finally it is “re-translated” into the legal parlance of the hard law of intra-company and inter-company codes. These rather indirect connections between both network codes highlight that the auto-constitutionalization of the corporate world does come about neither due to intrinsic motives of voluntariness nor due to the sanctioning mechanisms of state law, but due to a circuitous translation process in which different learning pressures come to bear.
CAPÍTULO 3
Régimen de diversas actividades en redes empresariales 53
PETER KREBS Y STEFANIE JUNG