The Obligations of Transnational Corporations

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THE OBLIGATIONS OF TRANSNATIONAL CORPORATIONS: RAWLSIAN JUSTICE AND THE DUTY OF ASSISTANCE

Nien-he Hsieh

Abstract: Building on |ohn Rawls's account of the Law of Peoples, this paper examines the grounds and scope of the obligations of transnational corporations (TNCs) that are owned by members of developed economies and operate in developing economies. The paper advances two broad claims. First, the paper argues that there are conditions under which TNCs have obligations to fulfill a limited duty of assistance toward those living in developing economies, even though the duty is normally understood to fall on the governments of developed economies. Second, by extending Rawls's account to include a right to protection against arbitrary interference, the paper argues that TNCs can be said to have negative and positive obligations in the areas of human rights, labor standards, and environmental protection, as outlined in the U.N. Global Compact. More generally, the paper aims to further our understanding of the implications of Rawls's account of justice.

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ransnational corporations (TNCs) continue to be called upon to assume greater responsibilities toward those living in the countries in which they operate. The 2000 United Nations Global Compact, for example, calls for corporations to abide by standards in the areas of human rights, labor, and the environment. Stakeholder theory recently has been interpreted as calling on corporations to act as global citizens (Post, 2002; Logsdon and Wood, 2002). In response, TNCs appear to be heeding these calls, as witnessed, for example, in the Chad-Cameroon Oil and Pipeline Project with its collaboration among oil companies, the World Bank, local NGOs, and government representatives.' In this light, in this paper I explore the scope and moral grounds of the responsibilities that TNCs have toward those living in the countries in which they operate. In particular, I focus on TNCs owned mainly by citizens of democratic, developed economies and on the positive obligations that TNCs might be said to have toward those in the developing economies in which they operate. The positive obligations that I consider are those outlined in the U.N. Global Compact. The Compact states: Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights within their sphere of influence; and Principle 2: make sure that they are not complicit in human rights abuses.

© 2004. Business Ethics Quarterly, Volume 14, Issue 4. ISSN 1052-150X.

pp. 643-661

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Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining; the elimination of all forms of forced and compulsory labour; the effective abolition of child labour; and eliminate discrimination in respect of employment and occupation. Businesses should support a precautionary approach to environmental challenges; undertake initiatives to promote greater environmental responsibility; and encourage the development and diffusion of environmentally friendly technologies.

To be clear, in focusing on these obligations, I am not concerned with the Global Compact in its relation to international law.^ Also, I do not take the Global Compact to present an exhaustive list of the obligations thatTNCs might be said to have. Instead, I take the Global Compact as providing an example of the kinds of responsibilities that TNCs might be said to have given that the Compact lists not only negative, but also positive, obligations in a range of areas, including human rights, labor standards, and the environment. The motivation for focusing on the positive obligations of TNCs is that providing a plausible account of positive obligations of the sort outlined in the Global Compact appears to encounter a distinct difficulty over that of providing an account of negative obligations. Whereas most authors recognize that TNCs have obligations not to engage in certain harmful activities, it is taken as less clear that TNCs have positive obligations to provide benefits and services to those in developing countries, especially when those benefits are similar to those that governments are held to be under an obligation to provide to their citizens.' At the same time, it is precisely these sorts of positive obligations that TNCs are increasingly said to have. The context in which I examine the possibility that TNCs have such positive obligations is John Rawls's account of the Law of Peoples. By the Law of Peoples, Rawls means a "particular political conception of right and justice that applies to the principles and norms of international law and practice" (1999b: 1). Given the importance of Rawls's account of justice in furthering our understanding of what justice requires of economic institutions, Rawls's extension of this account to the international realm presents a natural context in which to pursue our inquiry, and a number of features of this extension allow us to consider the question at hand. Rawls presents his account as "realistically Utopian," by which he means that it "extends what are ordinarily thought to be the limits of practicable political possibility and, in so doing, reconciles us to our political and social condition" (1999b: 11). In addition, Rawls considers the topic of nonideal theory, dealing explicitly with questions about how such well-ordered societies ought to deal with the nonideal conditions of the world, including the existence of poverty and inequality and the presence of states that do not respect human rights. Furthermore, Rawls's account has a role for international cooperative organizations, similar to the United Nations, World Bank, and GATT (1999b: 42). Overall, Rawls presents a plausible account of global justice that accommodates political and social conditions in a way that allows us to examine the question of the obligations of TNCs toward those in developing countries.

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The main difficulty that arises in working within Rawls's account is that because he does not consider the role of corporations, it might be objected that there is little that can be said about the obligations of TNCs from within his account. Addressing this difficulty, in the end I advance two broad claims. First, I argue that there are conditions under which TNCs are obligated to fulfill what Rawls has called a duty of assistance toward those living in developing economies, even though the duty is normally understood to fall on the governments of developed economies. Second, by extending Rawls's account to include a human right to protection against arbitrary interference, I argue that the content of the responsibilities that TNCs have encompass the positive obligations outlined in the U.N. Global Compact along with an obhgation to help support mechanisms that allow those affected by TNC activities to contest corporate decisions in areas that relate to the fulfilling of those obligations. In short, I argue that there is a plausible account whereby TNCs have the kinds of positive obligations outlined in the Global Compact toward individuals living in the developing countries in which they operate. Central to this account are three principles that I hope will help to inform further inquiry on the question of what responsibilities corporations, more generally, might be said to have. The first principle, which I call the Principle ofAssistance, outlines the conditions under which TNCs are obligated to provide assistance to those living in the developing economies in which they operate. The second principle, which is the Principle of Limited Scope, specifies the nature of the limits on the assistance required of TNCs. The third principle is the Principle of Accountability according to which TNCs have an obligation to support mechanisms that enable those affected by TNC activities to contest corporate decisions in areas that relate to the fulfilling of those obligations."• In addition to outlining these principles regarding the responsibilities of TNCs, this paper is offered as a contribution to debates about the implications of Rawls's account of justice for questions about economic enterprises and corporate governance.' Furthermore, because the paper focuses on a concrete proposal—namely, the Global Compact—it is hoped that this paper will contribute to policy debates on the obligations of TNCs operating in developing economies. The paper is organized as follows. In the first section, I describe in greater detail the features of Rawls's account of the Law of Peoples as they pertain to the inquiry in this paper, and the limitations of this inquiry. I also introduce what I take to be an issue that any plausible account of TNC obligations needs to address, which is the issue of limiting the scope of those obligations. The second section outlines the duty of assistance and advances the argument that TNCs can be held to help fulfill this duty. In this section, I outline the way in which this duty of assistance includes obligations to protect and promote human rights, and I advance the case for the Principles of Assistance and Limited Scope. In the third section, I argue that the duty of assistance can be held to encompass the labor standards outlined in the Global Compact. The discussion in this section relies upon an account that I have advanced elsewhere to extend Rawls's account of the basic rights to include certain labor and employment rights on the basis of a concern with arbitrary interference (Hsieh, 2002; Hsieh, 2003). In the fourth section, I discuss the way in which the duty of assistance extends to include

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environmental standards. The fifth section introduces the Principle of Accountability to address an objection to the account in this paper that follows from a concern about the legitimacy of TNCs performing what are regarded as the functions of governments and international cooperative organizations. Section six concludes.

1. The Law of Peoples and the Scope of Obligations To begin our inquiry, in this section I describe in greater detail the features of Rawls's account of the Law of Peoples that pertain to the inquiry into what obligations, if any, TNCs can be said to have to people living in developing countries. As part of this discussion, I outline the limitations of this inquiry. Also, to help explain further the approach taken in this inquiry, I outline the way in which Rawls's account addresses what I take to be a central challenge that must be addressed by any account of the obligations of TNCs to those in developing countries. This challenge is to provide a plausible account of the grounds that limit the scope of those obligations. Rawls grounds his account of the Law of Peoples in a liberal idea of justice that is similar to the idea of justice as fairness (Rawls, 1999a; Rawls, 2000). In his account of the Law of Peoples, the "Society of Peoples" refers to those peoples, or societies, that follow the ideals and principles of the Law of Peoples with regards to their mutual relations (Rawls, 1999b: 3). Among the Society of Peoples are both liberal and nonliberal peoples. Liberal peoples share "a reasonably just constitutional democratic government that serves their fundamental interests; citizens united by what Mill called 'common sympathies'; and finally, a moral nature" (1999b: 23). Those nonliberal peoples that are included among the society of peoples are what Rawls calls decent peoples. One type of decent peoples is what Rawls calls a decent hierarchical people. Such a society is nonaggressive and meets three additional criteria: first, it secures human rights for all members of the society; second, it has a system of law that is able to impose duties and obligations on all people within the territory of the society; and third, those who administer the legal system understand the law to be guided by a common good idea of justice (1999b: 64-67). Both liberal and decent peoples are in what Rawls takes to be the realm of ideal theory: their societies are well-ordered and respect the Law of Peoples in their mutual relations. In his account, Rawls also considers two kinds of nonideal theory. The first kind concerns regimes that do not comply with a reasonable Law of Peoples. Such regimes are known as outlaw states and understand the advancement of their own interests to be a sufficient reason to engage in war with other states. The second kind of nonideal theory concerns what Rawls calls burdened societies. Such societies are those whose "historical, social, and economic circumstances make their achieving a well-ordered regime, whether liberal or decent, difficult if not impossible." To these burdened societies, well-ordered societies owe a duty of assistance to help them establish reasonably just or decent institutions (1999b: 90). In this paper, I focus on the second kind of nonideal theory and frame this paper as an inquiry into the obligations of TNCs that are owned and managed by members of liberal or decent peoples and that operate in burdened societies. This focus limits the

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inquiry of this paper in two ways. First, the paper does not consider TNCs owned by members of societies other than liberal or decent peoples. Second, the paper does not consider what obligations TNCs may have with regard to operating in outlaw states. Given the importance of TNCs owned by members of liberal or decent peoples in the global economy and the preponderance of burdened societies, however, I do not understand these limitations to rule out the relevance of the inquiry pursued in this paper.* In any account of the obligations of TNCs to those in burdened societies, I take it that a central challenge that must be addressed is to explain the grounds that limit the scope of those obligations. By this, I do not mean that the account must specify, as a practical matter, the specific limits on those obligations. Instead, by this I mean that for an account of the obligations of TNCs to be plausible, the grounds from which those obligations are said to follow must also recognize what we take to be reasonable limits with regard to whom the obligations are owed and with regard to how burdensome those obligations are. For example, it might seem that a plausible account of the intuition that TNCs have obligations to those who are, and can be, affected by their activities in developing countries lies in a broadly consequentialist account grounded in the well-being of individuals. To the extent that it is in a TNCs ability to improve the lives of those individuals in developing countries, on a broadly consequentialist account, the TNC has an obligation to aid those individuals, even if such aid is at a cost to shareholders. The difficulty with such an account, and one that is raised against consequentialist accounts in general, is that such an account is fairly extensive in what it requires of TNCs. For example, some have argued that although TNCs have obligations to refrain from certain harmful practices, they do not have additional affirmative obligations to aid those in developing countries (Donaldson, 1989). The Nike corporation, on this view, for example, might be said to have an obligation not to purchase from suppliers who use child labor to manufacture clothes even though it has no obligation to fund the children to attend school.' Furthermore, even if we were to recognize that TNCs have positive obligations to promote the well-being of those whom they are able to help, many would argue that those obligations are limited. On this view, even if the Nike corporation has an obligation to send the children to school, Nike might not have an obligation to provide them with housing. This is not to say that a broadly consequentialist account grounded in well-being is not able to address these concerns.* The point in discussing such an account is to help illustrate the way in which limiting the duties appears to be central to any account of the obligations of TNCs. As a general matter, the account of the Law of Peoples addresses this challenge of limiting the scope of obligations. Although the account is grounded in a liberal idea of justice that is similar to the idea of justice as fairness, there is no general duty to address social and economic inequalities to the degree required in the account of justice as fairness within a domestic context. That is to say, unlike the Difference Principle, the duty of assistance does not aim to make the least fortunate as well-off as possible. Instead, the duty of assistance is owed only to burdened societies even if there are well-ordered societies that are rather poor relative to others. Furthermore, the duty of assistance that is owed to burdened societies aims to help them "to be

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able to manage their own affairs reasonably and rationally and eventually to become members of the Society of well-ordered Peoples" (Rawls, 1999b: 111). Rawls takes this aim to set a limit to the amount of assistance that is owed under the duty of assistance. Part of the reason for this limit is to keep well-ordered societies from acting patemalistically toward burdened societies (1999b: 111). The limit also means that there is no general duty on the part of well-ordered societies to try to reduce social and economic inequalities among societies.' Although it remains to be determined what are the precise limits on the scope of assistance as a practical matter, what matters for our analysis is that obligations owed to those in burdened societies under Rawls's account of the Law of Peoples are naturally limited from within the account itself. As such, Rawls's account of the Law of Peoples does not face a difficulty in meeting the challenge of limiting the scope of obligations. This, however, is not to say that Rawls's account is without any challenges for purposes of our inquiry. The challenge that Rawls's account presents is that it is not clear whether TNCs can be said to be under a duty of assistance, because the duty of assistance applies to well-ordered peoples acting through their governments and international cooperative organizations. It is to addressing this challenge that I now turn.

2. The Duty of Assistance and TNCs To understand what obligations, if any, TNCs might owe by way of the duty of assistance, it will help to understand more precisely what form fulfilling the duty might take. According to Rawls, human rights play a central role in the fulfillment of a duty of assistance on the part of well-ordered societies to burdened societies. In this section, I examine this claim in more detail and the extent to which it grounds the obligations that TNCs might be said to have as outlined in the U.N. Global Compact. Rawls outlines three guidelines to fulfilling the duty of assistance. For the moment, I leave analysis of the first and third guidelines to sections four and five of this paper, and examine the second guideline. The second guideline emphasizes the importance of focusing on human rights as a way to help bring about changes in the regimes of burdened societies. Rawls writes that "what must be realized is that merely dispensing funds will not suffice to rectify basic political and social injustices (though money is often essential). But an emphasis on human rights may work to change ineffective regimes and the conduct of the rulers who have been callous about the well-being of their own people" (1999b: 108-109). Rawls defines human rights to include "the right to life (to the means of subsistence and security); to liberty (to freedom from slavery, serfdom, and forced occupation, and to a sufficient measure of liberty of conscience to ensure freedom of religion and thought); to property (personal property); and to formal equality as expressed by the rules of natural justice (that is, similar cases be treated similarly)" (1999b: 65). Rawls's account leaves open the form in which the focus on human rights is to be realized in fulfilling the duty of assistance. Funding to regimes, for example, might be targeted to establishing and reforming local institutions to protect human rights. Well-ordered societies also might provide advice to regimes

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on ways to focus on the promotion and protection of human rights. Regardless of the form in which the assistance is provided, Rawls is clear that assistance involves a material commitment on the part of well-ordered societies and that assistance ought to focus on the area of human rights. One point that I take to be clear is that TNCs have an obhgation not to be involved directly in the violation of human rights in the course of their activities in burdened societies. This obligation is independent of any obligation that might follow as a result of the duty of assistance. That is to say, given that Rawls's account enumerates a list of human rights, it follows that individuals have a claim not to have their human rights violated regardless who the perpetrator of that violation might be, including TNCs. With regard to the principles of the Global Compact, such an understanding grounds Principle 2, which states that businesses should "make sure that they are not complicit in human rights abuses." Given that Rawls understands there to be a human right to "freedom from slavery, serfdom, and forced occupation" it also seems to follow that TNCs, along the lines of Principle 4, have an obligation not to be involved in forced and compulsory labor, and along the lines of Principle 5, have an obligation not to be involved in child labor, at least in its most severe forms.'" In addition, Rawls's understanding that there is a human right to formal equality can be taken to ground an obligation on the part of TNCs to refrain from discrimination in employment and occupation along the lines of Principle 6. In this manner, there is reason to ground some of the principles of the Global Compact, at least partially, in the conception of human rights found in Rawls's account of the Law of Peoples. At the same time, the wording of the U.N. Global Compact calls on TNCs not only to avoid violation of human rights and labor standards, but also to support and promote them. Recall that Principle 1 states that "businesses should support and respect the protection of internationally proclaimed human rights within their sphere of influence." Similarly, Principles 4, 5, and 6 appear to call on TNCs not only to refrain from engaging in forced labor, child labor, and employment discrimination, but also to support the elimination of such practices more generally. To be clear, a lack of violation of human rights by TNCs might help to promote a political culture in burdened societies that leads to a focus on respect for human rights. However, the principles of the Global Compact call for TNCs to be engaged in the active elimination of such violations of human rights. For this reason, I take the Global Compact to attribute to TNCs an obligation similar to the duty of assistance on Rawls's account of the Law of Peoples. The question then becomes whether there is a plausible justification for concluding that TNCs are under the duty of assistance with respect to the areas covered by Principles 1, 2, 4, 5, and 6. If well-ordered societies abide by the Law of Peoples in doing their share to fulfill the duty of assistance, it is difficult to argue that TNCs have obligations associated with the duty of assistance that are beyond the negative obhgations described above. This is not to say that there are no other grounds on which TNCs might have positive obligations. The point is that if there are such obligations, they would not be grounded in the duty of assistance. Suppose, however, that the government of a well-ordered society is not doing its share to fulfill the duty of assistance, either directly to burdened

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societies or through international cooperative institutions." In such a situation, is it plausible to hold that there are conditions under which TNCs have obligations associated with the duty of assistance? One response might be that TNCs that are largely owned by members of the well-ordered society do have obligations to help fulfill the duty of assistance as an extension of the obligations that their shareholders have. Even though the government is not doing its share to fulfill the duty of assistance, members of the well-ordered society still owe a duty of assistance. As such, it might be said that in their capacity as members of the well-ordered society, shareholders owe a duty of assistance to those members of the burdened societies in which the TNCs operate and that this duty is to be discharged by the TNCs in which they own shares. Even though shareholders are plausibly under an obligation to fulfill the duty of assistance by virtue of their position as members of a well-ordered society, it might be objected that the above response proceeds too quickly. On one objection, if the government of the well-ordered society is explicit in its unwillingness to fulfill its share of the duty of assistance, members of the well-ordered society might develop a legitimate expectation that they will not be asked to help fulfill the duty of assistance, which then would count against the permissibility of TNCs incurring the costs associated with fulfilling the duty of assistance. A more general objection might be that there is something illegitimate about permitting TNCs to pass on to shareholders the costs associated with a duty that it is the government's role to discharge. On these objections, a straightforward extension of the duty of assistance to TNCs does not ground positive obligations of the sort under consideration in this analysis. I present an argument to help address these objections. To begin, I take it that TNCs operate in burdened societies for a reason, which is that they benefit from doing so. This is not to deny that TNCs incur costs associated with operating in such burdened societies. For example, to the extent that corruption among government officials is a feature of some burdened societies, TNCs bear a cost from operating in burdened societies that they would not otherwise incur.'^ However, if TNCs did not benefit, they would not be operating in burdened societies. In some of these situations, it is plausible to assume that TNCs and their shareholders benefit directly from the burdensome conditions that characterize the society in which they operate. In such situations, it seems unfair that TNCs and shareholders benefit from the conditions for which they still are under a duty of assistance to help alleviate. Thus, I argue for a principle which holds that in those situations in which TNCs benefit directly from the burdensome conditions under which they operate and shareholders of the TNCs still owe a duty of assistance because the government is not doing its share to fulfill the duty of assistance, TNCs have obligations associated with fulfilling the duty of assistance. Let us call this principle of TNC obligation, the Principle of Assistance. The Principle of Assistance does not specify the form that the assistance must take. Some TNCs might best meet their obligations through activities that relate to their core competencies.'^ Other TNCs might best meet their obligations by helping local agencies provide assistance. What matters, I take it, is that TNCs provide assistance in ways that are effective and efficient. For purposes of this paper, apart from

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emphasizing that this assistance is to be consistent with helping burdened societies achieve the conditions of being well-ordered, I leave aside further discussion of this issue, and turn to analyze the overall amount that TNCs are obligated to contribute on this account. Given that the obligations of TNCs are grounded in the duty of assistance, we have good reason to hold that an individual shareholder is obligated to contribute to any one burdened society no more than the amount that she would be obligated to contribute in her capacity as a citizen of a well-ordered society if her government were in fact fulfilling the duty of assistance to that burdened society.'"* If we apportion this obligation among the TNCs that operate in burdened societies in proportion to the allocation of her ownership among TNCs, we arrive at the maximum burden that any one TNC is obligated to incur in order to help fulfill the duty of assistance on her behalf in the burdened societies in which they operate. In turn, by aggregating the obligations of all shareholders, we arrive at the maximum amount that TNCs are obligated to contribute toward fulfilling the duty of assistance. Because the obligations of TNCs are grounded in the benefits incurred by TNCs, I introduce an additional constraint, which is that this amount TNCs are obligated to provide should not exceed the amount by which TNCs benefit directly from the burdensome conditions. Let us call the principle that specifies the nature of these limits on TNC obligations, the Principle of Limited Scope. For purposes of this paper, I assume that TNCs are able to help alleviate the conditions of a burdened society at a cost that is at least as great as that of governments of well-ordered societies and international cooperative organizations. As such, the amount that a shareholder contributes toward fulfilling the duty of assistance is no more than she would be required to contribute if her government were doing its share to fulfill the duty of assistance. In some situations, however, TNCs might be able to alleviate the conditions associated with burdened societies at a cost that is lower than that faced by governments and international cooperative organizations. In such situations, a question arises as to whether the amount that TNCs are required to contribute ought to be less than what governments are required to provide. Another question that arises in such situations is whether TNCs are permitted, or perhaps even obligated, to fulfill the duty of assistance in lieu of governments, even when they do not benefit directly from the burdensome conditions in a society. These are important questions to consider. For purposes of this paper, however, I leave them aside." If the account that I have advanced is correct, TNCs can be said to have obligations to those in developing countries of the sort contained in Principles 1,2,4, and 5 of the Global Compact. Although the duties of nondiscrimination in employment outlined in Principle 6 are consistent with the account thus far, there might be a question as to whether a concern with formal equality is adequate to ground such duties. Furthermore, in the area of labor standards, the rights to association and collective bargaining outlined in Principle 3 might not be said to follow from the account advanced thus far. In the light of these points, I turn to consider explicitly the obligations of TNCs with respect to labor standards in these two areas.

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In this section, I argue that TNCs can be held to obhgations in the area of labor standards, as outlined in Principles 3 and 6 in the Global Compact, by way of extending the account advanced thus far. I extend the account by drawing on an account that I have advanced elsewhere concerning the relationship between Rawlsian justice and the claims of workers to participate in corporate governance. This is an account of an economic regime that I call workplace republicanism.'^ In the account of workplace republicanism, I argue that workers have a claim to an institutionally guaranteed claim to contest managerial directives. This right is grounded in the claim that individuals have a basic right, on Rawls's account of justice as fairness, to protection against arbitrary interference and this right extends to the workplace. Following the line of scholarship that takes protection against arbitrary interference to be central to a republican conception of freedom and government, I call an economic regime that protects workers against arbitrary interference a regime of workplace republicanism." Depending on the circumstances, the right to contest managerial directives is realized in different forms, which include the right to unionize and the right to strike. Protection and promotion of such rights is embodied in Principle 3 of the Global Compact. Additionally, on the account of workplace republicanism, a basic right to protection against arbitrary interference grounds a claim to protection against unjustified forms of discrimination in the workplace. Protection and promotion of such a right is embodied in Principle 6. As such, if the basic right to protection against arbitrary interference can be accommodated within the account advanced in section one, then the account grounds the obligations associated with labor standards, as outlined in the Global Compact. On the account of workplace republicanism, I argue that the considerations that help to ground a basic right to personal property help to ground a basic right to protection against arbitrary interference with respect to important interests. '* According to Rawls, the right to own personal property is among the basic rights given that it is one of the social bases of self-respect.'^ By the social bases of self-respect, Rawls means "those aspects of basic institutions normally essential if citizens are to have a lively sense of their worth as persons and to be able to advance their ends with self-confidence" (Rawls, 2000: 59). One role that the ownership of property plays toward this end, I argue, is to help protect an individual against arbitrary interference. In defining arbitrary interference, I draw upon Philip Pettit's articulation of a conception of freedom according to which an individual is free insofar as she is not subject to mastery by another individual.^" An individual is subject to the mastery of another agent if this agent has the capacity to interfere arbitrarily in the choices that the individual is in a position to make. By interference, Pettit means the worsening of the individual's choice set. Such interference is understood to be arbitrary if it is conducted in a manner that is "subject just to the arbitrium, the decision or judgment, of the agent" (Pettit, 1997: 55). That is to say, such interference is arbitrary if the decision by the agent "is not forced to track what the interests of those others require according to their own judgements" (Pettit, 1997: 55).

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The control of personal property helps to protect against such arbitrary interference in two ways. First, with respect to the domain within which control of property is exercised, the owner of property is protected against arbitrary interference by others—as in, for example, the case of owning a house.^' Second, because having access to such a protected domain allows an owner to escape from arbitrary interference in areas outside of that domain, ownership of property helps to protect an individual from arbitrary interference in areas outside of that domain. Accordingly, protecting against arbitrary interference is part of the reason to include ownership of personal property among the social bases of self-respect. In turn, I argue that protection against arbitrary interference, at least with regard to important interests, ought to be included among the social bases of self-respect and hence designated a basic right. Arbitrary interference involves making decisions that affect another individual's interests without any consideration for that individual's interests or her judgments about those interests. In its most extreme forms, we might say that arbitrary interference is to treat another individual as though her interests and judgments did not matter. As such, arbitrary interference is the absence of treating an individual with respect, which I take to imply that protection against arbitrary interference ought to be included among the basic rights. As I argue, however, a basic right to ownership of personal property does not provide adequate protection against arbitrary interference. In the context of large-scale economic enterprises, for example, managerial discretion in the face of costly exit gives managers the capacity to exercise arbitrary interference with respect to important interests of workers. To the extent that such managerial discretion is required for the effective functioning of economic enterprises, it is not possible, or even desirable, to eliminate such discretion. In such a situation, assuming that exit remains costly, workers require the ability to contest managerial decisions in order to exercise their basic right to protection against arbitrary interference. As noted at the outset of this section, such a claim might take the form of a right to collective bargaining along with the right to protection against arbitrary discrimination.^^ Given that the list of human rights in Rawls's account of the Law of Peoples includes the right to personal property, if the account of workplace republicanism is correct, this suggests that a right to adequate protection against arbitrary interference ought to be included among the list of human rights. In the context of the workplace, such a right grounds the claims embodied in Principles 3 and 6 of the Global Compact. In turn, if the account in section two is correct about the way in which nonideal circumstances can give rise to obligations for TNCs not only to respect such rights, but also to help promote them by helping to fulfill the duty of assistance, then Rawls's account of the Law of Peoples grounds obligations, on the part of TNCs, to protect and promote both human rights and labor standards. 4. Environmental Standards In this section, I consider the extent to which the account advanced thus far can encompass the remaining set of principles outlined in the U.N. Global Compact,

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which are those that call on TNCs to uphold and promote environmental standards. These are Principles 7, 8, and 9 of the Global Compact. To be clear, for purposes of this discussion, I put aside debate over what practices and policies best protect and enhance the environment, and assume that it is possible to define some such set of policies and practices in line with the obligations that TNCs are said to have. Liberal political philosophy has been criticized on the grounds that it does not pay adequate attention to the treatment of environmental issues and that when it does, it does so in a manner that understands the environment to be purely instrumental in value (Serres, 1995). Without denying this point, the obligations on the part of TNCs to uphold and promote environmental standards nevertheless have the potential to be rather demanding even if the environment is understood in purely instrumental terms. On the account thus far, TNCs have obligations not only to avoid infringing on human rights, but also to fulfill the duty of assistance to a limited degree. To the extent that environmental considerations enter at the level of human rights and in the context of the duty of assistance, then TNCs have obligations to uphold and promote environment standards. In what follows, I outline two ways in which considerations about the environment might enter Rawls's account of the Law of Peoples. The first way in which considerations about the environment might enter this account follows from the fact that subsistence is included among the list of human rights. Although there is often a tension between protection of the environment and the ability of people to subsist, in other situations, upholding environmental standards is required for maintaining the ability of people to subsist. As an example, consider the situation described in Aguinda v. Texaco, Inc., a class action lawsuit on behalf of 30,000 Indians and farmers of the Oriente region of the Ecuadorian Amazon Basin and 25,000 downstream residents of Peru. Between 1964 and 1990, the Texaco Petroleum Company, a subsidiary of Texaco, in partnership with PetroEcuador, the state oil company of Ecuador, extracted oil from the Oriente region (ChevronTexaco, 2002). According to one description of the charges made against Texaco, these operations are said to have resulted in the following practices: The claimants allege that Texaco released untreated, oil-laced water that had been pumped out of the ground as part of the company's oil drilling operations, and that broken pipelines released nearly seventeen million gallons of crude oil into the Amazon forests during Texaco's operations in Ecuador, almost fifty percent more than was released by the Exxon Valdez. In addition, they claim that more than four million gallons of highly toxic "produced water" were dumped daily into open pits rather than re-injected into the ground. This dumping apparently violated Texaco's own policy stated as early as 1971 that this was not considered to be an acceptable practice. (Cohan, 2001: 147-148)

The contamination is described as having "dramatically increased cancer risks, unleashed widespread sanitation and nutritional problems and led to hundreds of cases of avoidable sickness and death" (Cohan, 2001: 147-148). With this example we see that the activities of TNCs have the potential to violate certain human rights, perhaps most notably that of subsistence, when TNCs do not uphold environmental standards. To the extent that TNCs have obligations not to violate such rights under

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the nonideal conditions of burdened societies, we have reason to hold that TNCs have an obligation to uphold some set of environmental standards in the context of developing countries. The second way in which TNCs might be said to have obligations that relate to environmental standards is by way of the duty of assistance. As noted in section two, Rawls presents three guidelines to fulfilling the duty of assistance, the second of which emphasizes the importance of human rights. In the first guideline, Rawls explains the role of a principle ofjust savings in meeting the duty of assistance. The purpose of a principle of just savings is to establish the basic institutions of a wellordered society and to enable a situation that enables all citizens to live a worthwhile life. Rawls writes: Savings may stop once just (or decent) basic institutions have been established. At this point real saving (that is, net additions to real capital of all kinds) may fall to zero; and existing stock only needs to be maintained, or replaced, and nonrenewable resources carefully husbanded for future use as appropriate. Thus, the savings rate as a constraint on current consumption is to be expressed in terms of aggregate capital accumulated, resource use forgone, and technology developed to conserve and regenerate the capacity of the natural world to sustain its human population. (Rawls, 1999b: 107)

From this we see that the natural environment occupies a central role in realizing a just rate of savings on Rawls's account. The importance of the environment gives rise not only to activities to conserve it, but also to activities to develop new technologies to help along these lines. Recall that under certain nonideal conditions, TNCs are said to be under an obligation to help fulfill the duty of assistance, which aims to help burdened societies to attain the conditions that allow them to become well-ordered societies. Given that the real savings required to realize the conditions of a wellordered society involve protection and promotion of the natural environment, to the extent that TNCs are required to help fulfill the duty of assistance, their obligations appear to extend beyond meeting certain environmental standards to the development of new technologies to protect and preserve the environment. In the light of these two points, let us consider again the principles regarding environmental standards as put forward in the U.N. Global Compact. The principles are as follows: Principle 7: Principle 8: Principle 9:

Businesses should support a precautionary approach to environmental challenges; undertake initiatives to promote greater environmental responsibility; and encourage the development and diffusion of environmentally friendly technologies.

On the basis of the above discussion, it seems to follow that TNCs have obligations of the sort outlined in all three principles. To the extent that a precautionary approach to the environment is required to avoid causing damage of the kind in Aguinda v. Texaco, TNCs are obligated to follow Principle 7. In addition, TNCs might be said to be obligated to follow Principles 8 and 9 to the extent that TNCs have an obligation

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to help fulfill the duty of assistance under nonideal conditions by way of the principle of just savings. In short, if the account thus far is correct, TNCs can be held to the obligations outlined in all of the principles of the U.N. Global Compact on the grounds found in Rawls's account of the Law of Peoples.

5. The Governance Gap In response to the account thus far, it might be objected that it is inappropriate for TNCs, which are private entities, to carry out what are regarded as the responsibilities of governments. In this section, I address this objection by introducing the Principle of Accountability. On this objection, the challenge to the account lies not in the different roles of TNCs and the governments of well-ordered societies as discussed in section two, but rather in the differences between TNCs and the governments of the burdened societies in which the TNCs operate. The assistance from well-ordered societies is normally intended for the governments of burdened societies. It might be said, however, that there is a crucial difference between the governments of burdened societies and TNCs, which is that TNCs are not accountable to the members of burdened societies in a way that their governments are. In turn, it might be objected that this fact poses a challenge to the claim that the duty of assistance can apply to TNCs, because TNCs lack the accountability to those in burdened societies that makes it possible for the duty of assistance to be discharged. In response, the first point to note is that not all governments of burdened societies are accountable to the members of their societies. The fact that the duty of assistance is intended to focus on human rights suggests it is the case that many governments of burdened societies are not accountable to the members of their societies. Accordingly, the relative lack of accountability on the part of TNCs to those in burdened societies should not count against TNCs being under an obligation to fulfill the duty of assistance. At this juncture, it might be said that the objection raised at the outset remains even if there were no difference in the degree to which TNCs and governments are accountable to the members of a burdened society. On this view, the very lack of accountability of TNCs to the population of burdened societies in which they operate makes them unsuitable organizations through which to deliver services associated with fulfilling the duty of assistance. Part of the reason underlying this view might be that the lack of accountability is a consideration on the grounds that we understand people in burdened societies to have a claim to protection against arbitrary interference. Given the ability of TNCs to make decisions that affect important interests of those who work and live in their vicinity, the lack of accountability means that TNCs have the capacity to interfere arbitrarily with regard to important interests of those who might be affected by their actions. The situation described in Aguinda v. Texaco is a case in point. Because the farmers and indigenous people in the Oriente region and Amazon basin faced high costs of exit and were not able to hold Texaco and PetroEcuador accountable, they were subject to the capacity for arbitrary interference by Texaco and

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PetroEcuador. More generally, being subject to the exercise of discretion by another party with regard to matters that affect one's interests puts one in a situation of being subject to arbitrary interference by that other party, if one faces costly exit and lacks the means to hold the other party accountable. This is independent of whether or not the other party intends to cause one harm. In this manner, the lack of accountability of TNCs in itself violates the claim of people in burdened societies to protection against arbitrary interference. Hence, the objection is that to the extent that TNCs are not accountable to members of burdened societies, it is inappropriate to require them to provide services, even if in the context of fulfilling the duty of assistance. The plausibility of this objection counts against the unfettered operation of TNCs in burdened societies on the account advanced in this paper. However, rather than conclude that TNCs have no obligation to fulfill the duty of assistance, we might conclude instead that TNCs ought to provide mechanisms to protect those who live in burdened societies against arbitrary interference as a result of the activities of TNCs, as part of fulfilling the duty of assistance. To be clear, these mechanisms would not require full participation in corporate governance on the part of those in burdened societies. Instead, as discussed above in section three, what is required for protection against arbitrary interference is that affected parties have the ability to contest decisions taken by managers of TNCs. Mechanisms to allow affected parties to do so might include, for example, a substantial consultative process, recognition of unions, or participation in aspects of governance. By emphasizing only the ability to contest decisions, the mechanisms under consideration are consistent with the institutions of governance in a decent hierarchical society, in which consultation of members, rather than full participation by members, is the basis for governance (Rawls, 1999b; 71-72). The establishment of mechanisms that allow people in burdened societies to engage with the governance of TNCs is also consistent with the general spirit in which Rawls advances the case for duty of assistance. Recall that the duty of assistance is limited in its scope by the achievement of conditions within burdened societies that allow them to be well-ordered societies. The duty of assistance does not call for additional aid. One of the reasons for this, according to Rawls, lies in the importance of avoiding paternalism on the part of well-ordered societies in dealing with peoples of burdened societies. "The third guideline for carrying out the duty of assistance," Rawls explains, "is that its aim is to help burdened societies to be able to manage their own affairs reasonably and rationally and eventually to become members of the Society of well-ordered Peoples" (1999b; 111). Accordingly, once this goal is met, no further amount of assistance is required. Rawls continues, "thus the well-ordered societies giving assistance must not act patemalistically, but in measured ways that do not conflict with the final aim of assistance; freedom and equality for the formerly burdened societies" (1999b; 111). To the extent that a concern with paternalism arises in the context of the provision of assistance by TNCs, introduction of mechanisms of the sort noted above goes some way to help to address such a concern. The Principle of Accountability summarizes this intuition by holding that TNCs have an obligation to help support mechanisms that enable those affected by TNC activities to contest corporate decisions in areas that relate to the fulfilling of those obligations.

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6. Conclusion As stated at the outset, I take it that any plausible account of the obligations of TNCs to those living in the countries in which they operate must provide some discussion of the grounds that limit the scope of those obligations. To the extent that an account is able to demonstrate that TNCs have obligations in fulfilling the duty of assistance on Rawls's account of the Law of Peoples, then such an account would address this concern with the scope of obligations, because the duty of assistance is limited in its scope. In this paper, I aim to provide such an account. To begin, I advance the claim that there are nonideal conditions under which shareholders of TNCs have an obligation to fulfill the duty of assistance up to the amount that they would have to pay as citizens of well-ordered societies who owe a duty of assistance to those in burdened societies. Central to this claim are the Principle of Assistance and the Principle of Limited Scope. Furthermore, I advance the claim that the duty of assistance encompasses the obligations outlined in the principles of the U.N. Global Compact in the areas of human rights, labor standards, and environmental protection. This claim involves interpreting Rawls's three guidelines for fulfilling the duty of assistance in relation to the activities of TNCs. This claim also involves accepting that a claim to protection against arbitrary interference is among the list of human rights. If this last point is correct, however, TNCs have an additional obligation, which is to help provide mechanisms through which those affected by their activities are able to contest corporate decisions. The Principle of Accountability captures this intuition. In addition to examining the obligations of TNCs, the account in this paper is intended to contribute to our understanding in related areas of research. First, by advancing the claim that the obligations of TNCs can be understood as extensions of the obligations of shareholders, the paper provides one way to interpret global corporate social responsibility. Second, by grounding the obligations of TNCs in terms of aiming to help burdened societies achieve reasonably just or decent institutions, the account in this paper provides a framework in which to examine the longstanding question of whether TNCs should pursue constructive engagement with governments of countries that violate human rights or leave such countries." Third, the account provides one way in which to understand the study of economic enterprises and corporate governance within Rawls's account of justice as fairness. If the account advanced in this paper is correct, a number of unaddressed issues lend themselves to further inquiry. One issue is to develop a more detailed account of the specific obligations examined in this paper and the ways in which to fulfill them. Another issue is to understand the precise degree of assistance required of TNCs. A further issue to consider is whether there are additional obhgations that attach to TNCs operating in burdened societies. In addition, there remains the broader task of extending the analysis to TNCs operating in outlaw states and to TNCs that are not owned by members of liberal or decent peoples. There is no reason to think that addressing these and the many related issues will be straightforward. I hope that the account in this paper provides the motivation and a plausible basis on which to continue this task.

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Notes For helpful comments and questions, I thank John Boatright, Thomas Donaldson, Thomas Dunfee, Robert Phillips, Joshua Margolis, Sara Toomey, Alec Walen, three anonymous reviewers, and participants in the session, "Governance as a Global Issue," at the Business Ethics in a Global Society conference held at the Santa Clara University Markkula Center for Applied Ethics. I am grateful to the Markkula Center for helping to enable participation at the conference by way of a Young Scholar Award. All remaining errors are my own. ' For a discussion of the ethical issues that arise in this case see Hsieh, Laufer, & Schwartz, 2003. ^ On this point, see Mayer, 2003. ' Thomas Donaldson (1989), for example, accepts that it is plausible to ground obligations on the part of TNCs to help protect individuals in developing economies against deprivation of certain human rights. Although these obligations are more demanding than constraints on TNCs against depriving individuals of those rights, they are not as demanding as obligations to help provide for those rights. The positive obligations discussed in this paper appear to be akin to these latter obligations, and as such, as a general matter do not seem to be included in Donaldson's account. Richard T. DeGeorge (1993) attributes to TNCs the sort of positive obligations that I discuss. I thank Robert Phillips for emphasizing the focus on positive obligations. '' I thank Joshua Margolis for encouragement to highlight these principles and for help in clarifying them. ' Robert Phillips and Joshua Margolis discuss the difficulties in applying Rawls's account of justice to questions about economic enterprises (1999). '' I thank two anonymous reviewers for raising this point. ' John Hall (2000) provides a general discussion of the issues that arise in the garment industry. * Liam Murphy (2000) provides such an account. In contrast, Barbara Herman (2001) provides a Kantian account of one way in which to address these issues with regard to a duty of beneficence. Of course, some argue that we should not recognize such limits (Singer, 1972). ' Charles Beitz (1979) and Thomas Pogge (1994; 2002) each advance a cosmopolitan account of global justice according to which such social and economic inequalities ought to be minimized to a greater extent than Rawls advocates. '" On the issue of child labor, for purposes of this paper, I focus on its most extreme forms. It remains an open question as to what follows from the account advanced in this paper for the permissibility of child labor in its less extreme forms. "By this I mean that the government is unwilling, rather than unable, to do its part. If the government or society were unable to assist burdened societies, then they would not be under a duty. I thank Alec Walen for helpful discussion on this point. '^ For discussions on corruption and bribery, see, for example, Dunfee & Hess, 2000; Nichols, 2000. " Thomas Dunfee and David Hess (2002) discuss the ways in which TNCs are able to provide assistance by way of their core competencies. '•* This assumes that the tax system of a well-ordered society distributes the tax burdens in a fair manner. " For an analysis of these issues that focuses on the comparative advantage of private corporations in providing assistance, see Dunfee & Hess, 2002.1 thank Thomas Dunfee for helpful discussion to clarify a number of the above points. "Workplace republicanism is understood to be distinct from workplace democracy. The former is understood to be concerned with protecting workers against arbitrary interference, whereas I

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take the latter to require workers to control the use of productive assets. The distinction might be seen in the case of employee ownership when ownership does not provide workers with control. Although the lack of control means that employee ownership in this case might not meet the criteria of workplace democracy, it might nevertheless meet the criteria of workplace republicanism to the extent that the ownership claims of workers give workers enforceable claims against management. Such claims might help protect workers against arbitrary managerial decisions. The material in this section relies on arguments presented in more detail elsewhere (Hsieh, 2002; Hsieh, 2003). " Philip Pettit argues that central to republicanism is the idea of freedom as non-domination, or freedom from being subject to arbitrary interference by another individual. There are other elements of the republican tradition that other scholars regard as integral (Pettit, 1997). '* The basic rights and liberties are those rights and liberties that are required to provide the "political and social conditions essential for the adequate development and full exercise of the two moral powers of free and equal persons," which are the capacity for a sense of justice and the capacity for a conception of the good (Rawls, 2000: 45). " Rawls writes, "one ground of this right is to allow a sufficient material basis for personal independence and a sense of self-respect, both of which are essential for the adequate development and exercise of the moral powers. Having this right and being able effectively to exercise it is one of the social bases of self-respect" (Rawls, 2000: 114). ^" Pettit contrasts this conception of freedom with two standard conceptions of freedom: freedom as self-mastery, or positive liberty, and freedom as the absence of interference by others, or negative liberty (1997: 22). ^' Although there is a legal distinction between real property and personal property, for Rawls, ownership of certain forms of real property is included within the scope of personal property. " Although the right to contest managerial directives might require employee representation on the board of directors, on the account of workplace republicanism, the right to contest does not require stronger forms of employee participation as in worker control of firms, as prescribed by the ideal of workplace democracy. Discussion of this issue is taken up in another account (Hsieh, 2003). ^•' I thank Joshua Margolis for raising this point.

References Beitz, C. 1979. Political Theory and International Relations (Princeton, N.J.: Princeton University Press). ChevronTexaco. ChevronTexaco issues statement on U.S. circuit court decision affirming dismissal of Ecuador litigation (August 19, 2002). Cohan, J. A. 2001. "Environmental Rights of Indigenous Peoples." UCLA Journal of Environmental Law and Policy 20: 133-85. DeGeorge, R. T. 1993. Competing with Integrity in International Business (Oxford: Oxford University Press). Donaldson, T. 1989. "Moral Minimums for Multinationals." Ethics and International Affairs 3: 163-82. Dunfee, T, and D. Hess. 2000. "Fighting Corruption: A Principled Approach: The C2 Principles (Combating Corruption)." Cornell International Law Journal 33: 593-626. 2002. "The Legitimacy of Direct Corporate Humanitarian Investment." Business Ethics Quarterly 10: 95-109.

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Hall, J. 2000. "Human Rights and the Garment Industry in Contemporary Cambodia." Stanford Journal of International Law 36: 119-74. Herman, B. 2001. "The Scope of Moral Requirement." Philosophy and Public Affairs 30(3): 227-56. Hsieh, N. 2002. "Employee Ownership and Workplace Democracy." Paper presented at The State of Democratic Practice, The Democracy Collaborative Affiliates Conference, University of Maryland, College Park. 2003. "Rawlsian Justice and Workplace Republicanism." Paper presented at the Research Seminar in Political Theory, Oxford University. Hsieh, N., W. S. Laufer, and M. S. Schwartz. 2002. "Business Students Debate Ethical Principles and Social Impact." Development Outreach 4: 24-27. Logsdon, J. M., and D. J. Wood. 2002. "Business Citizenship: From Domestic to Global Level of Analysis." Business Ethics Quarterly 12: 155-89. Mayer, A. 2003. "The Human Rights Principles in the 2000 UN Global Compact: Six Principles in Search of a Theoretical Framework." Working paper. Legal Studies Department, The Wharton School, University of Pennsylvania. Murphy, L. 2000. Moral Demands of Nonideal Theory (Oxford: Oxford University Press). Nichols, P. 2000. "The Myth of Anti-Bribery Laws as Transnational Intrusion." Cornell International Law Journal 33: 627-55. Pettit, P. 1997. Republicanism: A Theory of Freedom and Government (Oxford: Oxford University Press). PhiUips, R., and J. Margolis. 1999. "Toward an Ethics of Organizations." Business Ethics Quarterly 9: 619-3B. Pogge, T. 1994. "An Egalitarian Law of Peoples." Philosophy and Public Affairs 23: 195-224. 2002. "Moral Universalism and Global Economic Justice." Politics, Philosophy and Economics 1: 29-58. Post, J. E. 2002. "Global Corporate Citizenship: Principles to Live and Work By." Business Ethics Quarterly 12: 143-54. Rawls, J. 1993. Political Liberalism (New York: Columbia University Press). 1999a. A Theory ofJustice (revised ed.) (Cambridge, Mass.: Harvard University Press). 1999b. The Law of Peoples (Cambridge, Mass.: Harvard University Press). 2000. Justice as Fairness, ed. E. Kelly (Cambridge, Mass.: Harvard University Press). Singer, P. 1972. "Famine, Affluence, and Morality." Philosophy and Public Affairs 1: 229-43. Serres, M. 1995. The Natural Contract, trans. E. MacArthur (Ann Arbor: University of Michigan Press).