Private Governance Mechanisms Research Articles

Traceability and foreign corporate accountability in mineral supply chains

AbstractIndustrialized economies in the EU depend heavily on imports of minerals. The extraction and parts of the transport and processing of these minerals take place in the Global South and often bear high human rights and environmental risks. A lack of traceability in mineral supply chains makes it particularly difficult to hold companies accountable for negative environmental and social impacts of their operations and those of their suppliers. This paper analyses three mineral supply chains (copper, platinum, and gold) in order to develop propositions about how supply chain‐specific characteristics affect traceability and foreign corporate accountability (FCA) in mineral supply chains. The analytical framework focuses on three dimensions: geopolitical dynamics, industry characteristics, and private governance mechanisms. The authors argue that chain‐specific characteristics may foster or thwart traceability and FCA in mineral supply chains and thus provides a novel contribution to the debate on traceability and accountability in mineral supply chains.

The Role of Deliberative Mini-Publics in Improving the Deliberative Capacity of Multi-Stakeholder Initiatives

Multi-stakeholder initiatives (MSIs)—private governance mechanisms involving firms, civil society organizations, and other actors deliberating to set rules, such as standards or codes of conduct, with which firms comply voluntarily—have become important tools for governing global business activities and the social and environmental consequences of these activities. Yet, this growth is paralleled with concerns about MSIs’ deliberative capacity, including the limited inclusion of some marginalized stakeholders, bias toward corporate interests, and, ultimately, ineffectiveness in their role as regulators. In this article, we conceptualize MSIs as deliberative systems to open the black box of the different elements that make up the MSI polity and better understand how their deliberative capacity hinges on problems in different elements. On the basis of this conceptualization, we examine how deliberative mini-publics—forums in which a randomly selected group of individuals from a particular population engage in learning and facilitated deliberations about a topic—can improve the deliberative capacity of MSIs.

The Institute of International Finance: From Poacher to Gamekeeper?

AbstractThe Institute of International Finance (IIF) is a key actor in global finance, mixing private-interest representation and market governance roles. Analyzing the historical development of the IIF offers important insights into the interaction between state and business and the resulting patterns of public and private governance. Based on archive sources and a unique set of interviews with elite policymakers spanning three decades, I argue that market structures, interest groups, and public policymaking processes stand in a recursive relationship. Secondly, I argue that interest groups take on private governance roles with the aim to remain the focal point of public policymakers vis-à-vis competing interest groups. This has important implications for the study of interest groups and global financial governance. The analysis of interest groups should be extended to the way they shape markets through private governance mechanisms and how that recursively feeds back into interest group advocacy and public policymaking processes to fully grasp lobbying dynamics. The study of global governance should include analysis of interest group competition within the opportunities and constraints emanating from public policymaking processes so as to understand the emergence of private patterns of governance and their interaction with public governance mechanisms.

Integrating Voluntary Sustainability Standards in Trade Policy: The Case of the European Union’s GSP Scheme

Trade policy is increasingly being used as a policy instrument to pursue non-trade objectives such as environmental protection or the protection of labour rights. A key example is the European Union’s Generalised Scheme of Preferences (GSP). The current approach is being confronted with significant challenges. How these challenges can be addressed is currently subject to debate, and increased attention is turning to the role that private governance mechanisms can play in this context. This paper will look into the potential role that Voluntary Sustainability Standards (VSS) can play. The paper will analyse and assess the complementarity between VSS and EU GSP, and it contributes to the literature on interactions between private and public policy-making for sustainability. The main research question focuses on what role VSS can play in the European Union’s GSP scheme. To answer the question, the paper develops two models by which VSS can be integrated in EU GSP (a mandatory and a voluntary approach). The study is based on interviews with key experts from different stakeholder groups and an analysis of the ITC standards map database. The paper shows that the integration of VSS in EU GSP, as outlined in the two models, is confronted with several challenges. These challenges are discussed, and alternatives are explored.

The contested geographies of master planned estates: the role of the building design codes

ABSTRACTMuch of the debate in contemporary urban studies has surrounded the provision of affordable housing in capital and regional cities. Master planned estates (MPEs) have emerged as the dominant form of housing in Australia. Master planned estates often include private governance mechanisms to regulate resident behaviour and building designs, improving the sales potential and creating an enhanced living environment for residents. Using case studies of three MPEs this paper explores aspects of the building design codes (BDCs), including their rationale, contribution to initial engagement and resident experiences. It finds that while the BDCs are perceived as integral to improving estate sales and the long-term operation, the developer’s commitment declines over time. The BDCs help to attract new residents by creating predictability. The estate residents are largely supportive of the BDCs and some feel abandoned when the developer’s commitment declines. The results are interpreted through a commodity perspective, which considers how the moments of production, exchange and consumption are inflected through culturally derived notions of home and home-making processes.

Developing Country Firms and the Challenge of Corruption

Corruption is an important topic for management scholars and practitioners. Given the rise to economic prominence of firms from developing countries, this paper investigates how developing country firms engage with this challenge. Based on a content analysis of 191 codes of conduct, issued by firms from 18 developing countries, we first investigate what anti-corruption commitments developing country firms make in their codes of conduct; we then determine contextual factors at national business system level that drive differences in firm engagement. We provide evidence for a ‘mirror view’ of corporate social responsibility, according to which companies match the quality of national-level institutions in their own anti-corruption commitments. This result stands in contrast to the basic expectation underlying the concept of corporate social responsibility that companies step in to close governance gaps and address wider societal-level challenges. Our findings thus highlight limitations to purely private governance mechanisms aimed at combatting corruption.

Developing country firms and the challenge of corruption: Do company commitments mirror the quality of national-level institutions?

Corruption is an important topic for management scholars and practitioners. Given the rise to economic prominence of firms from developing countries, this paper investigates how developing country firms engage with this challenge. Based on a content analysis of 191 codes of conduct, issued by firms from 18 developing countries, we first investigate what anti-corruption commitments developing country firms make in their codes of conduct; we then determine contextual factors at national business system level that drive differences in firm engagement. We provide evidence for a “mirror view” of corporate social responsibility, according to which companies match the quality of national-level institutions in their own anti-corruption commitments. This result stands in contrast to the basic expectation underlying the concept of corporate social responsibility that companies step in to close governance gaps and address wider societal-level challenges. Our findings thus highlight limitations to purely private governance mechanisms aimed at combatting corruption.

Improving environmental practices in agricultural supply chains: The role of company-led standards

Abstract Food retailers and manufacturers are increasingly committing to address agricultural sustainability issues in their supply chains. In place of using established eco-certifications, many companies define their own supply chain sustainability standards. Scholars remain divided on whether we should expect such company-led programs to affect change. We use a major food retailer as a critical case to evaluate the effectiveness of a company-led supply chain standard in improving environmental farm management practices. We find that the company-led standard increases the adoption of most environmental best management practices among the company's fruit, vegetable and flower growers in South Africa. This result is robust across two identification strategies: a panel analysis of over 950 farm audits and a cross-sectional matching analysis using original survey data. In-depth interviews suggest that the program's unique focus on capacity building through audit visits by highly trained staff, coupled with a close business relationship between the retailer and their growers help to explain the increased effectiveness of the program as compared to other private environmental standards. Contrary to the argument that company-led initiatives are mere window dressing, this study provides a critical example of the positive role private governance mechanisms can play in improving environmental farm management practices globally.

Media Attention to Corporate Scandals over Time

Corporate reputation is widely seen as a valuable if intangible asset for most companies. In turn, a company’s reputation is shaped in significant ways by the attention it receives in the mass media. Hence this paper explores media attention to large-scale corporate scandals. Building on the literature on both agenda setting and corporate reputation, we examine quality newspaper coverage of a sample of 123 major corporate scandals between 1990 and 2016. Whilst previous studies typically examined specific corporate scandals in isolation, we focus on the interplay of different scandals as well as on changes in media attention over time, which are not least due to the rise of social media. With regard to the interplay of scandals, we observe crowding-in processes between scandals of different types, accompanied by routinization effects where repeated scandals are of the same type. We also find substantial changes in media agenda-setting, where more recent scandals have attracted significantly higher peaks of attention followed by a much steeper decline. Our findings have important consequences for a company’s choice of an optimal crisis response strategy. At a societal level, our findings have implications for private governance mechanisms that operate through societal scrutiny based on critical media coverage.

Regulating Nanomaterials: A Case for Hybrid Governance

Despite their growing usage in commercial and industrial applications, nanomaterials have yet to be been thoroughly researched as to their potential health, safety, and environmental risk to human life after incorporation into new product improvement, development, design, and manufacturing processes. Identifying the appropriate governance framework for effective risk assessment analysis of toxicological risk to human beings—specifically manufacturing employees and consumers—and other living organisms, resulting from the development and application of these nanotechnology-based products, has yet to be scientifically determined. With major regulatory gaps in the public regulation framework at national and international levels of governance, a proposed private governance framework is needed to assist the existing public regulatory framework with the proliferation of products and manufacturing processes utilizing nanomaterials. There are three distinct (yet complimentary) approaches available to develop a private governance framework to complement existing national public regulatory frameworks: responsible innovation, risk management, and voluntary guidelines/industry standards. The case for supporting a hybrid governance framework, combining public and private governance mechanisms, for nanotechnology is reflective of the current public policy environment that has emerged to best address health, safety, and environmental risk assessment issues concerning nanotechnology and nanomaterials.

Hackerspaces as Entrepreneurial Anarchy

Claims that hackerspace anarchy may be a potentially comparatively efficient form of governance for proto-entrepreneurial information about market opportunities in the early stages of new technologies. An analytic narrative over secondary data of hackerspaces reveals private governance mechanisms including graduated social ostracism, costly signalling to facilitate ordering, collective action processes and nested hierarchies of rules. Agents in hackerspaces eschew, at least temporarily, organising in firms, markets and states, in favour of their own privately developed rule systems. There are two main comparative institutional drivers for why anarchy may be a more efficient solution for the problem of entrepreneurial coordination of distributed information. First, the institutions of firms and states may be comparatively ineffective at dealing with highly uncertain and distributed Hayekian information. And second, collective action processes may through time increase the comparative efficacy of private institutional solutions. The implication of this are that policy attempts to integrate these autonomous independent innovation organisations into the entangled system may either: impurify the spontaneous order processes underpinning hackerspaces and thereby distort the emergent ordering of entrepreneurial information into market opportunities; and decrease the institutional ‘robustness’ of the innovation system writ large.

Industry-Specific Multi-Stakeholder Initiatives that Govern Corporate Human Rights Standards Legitimacy Assessments of the Fair Labor Association and the Global Network Initiative

Multi-stakeholder initiatives (MSIs) are increasingly used as a default mechanism to address human rights challenges in a variety of industries. MSI is a designation that covers a broad range of initiatives from the very general (for example, the UN Global Compact) to those targeted at a single issue (such as child labor). Critics contest the legitimacy of the private governance model offered by MSIs. The objective of this paper is to assess the dominant approaches to business and human rights challenges and discuss their legitimacy generally and with respect to accountability and effectiveness specifically. We argue that one type of MSI, namely industry-specific MSIs have the potential to serve as a model for a democratically legitimate form of private governance. We analyze two industry-specific MSIs - the Fair Labor Association and the Global Network Initiative - to get a better understanding of how these MSIs formed, how they define and enforce standards, and how they seek to ensure accountability. Based on these empirical illustrations, we discuss the value of this specific MSI model and draw implications for the democratic legitimacy of private governance mechanisms.

Value Chain Governance and Governmentality of Horticultural Exporters by Developing Economies: A perspective of Kenya’s Fresh Fruits and Vegetable Export Sector

The domain of governance has largely been extolled by Nations, States or governmental and intergovernmental actors especially in upholding Nations’ sovereignty and values. While this still holds, governance complexity has been reinforced by establishment of global value chains such as in food and agriculture commodities increasingly being influenced and controlled by non-state actors in different parts of the world by both corporate and retail actors through private governance mechanisms. These mechanisms often fall short of universal standards and the resultant effect is ramified through proliferation of standards that result to state of governance that is constantly being redefined as ‘codes of colours’. This paper thus seeks for an alternate dimension based on Foucault’s governmentality theory. The quest for this overarching theory is based on its mediatory role that regulates the excesses of private interests in regulations while not prioritizing any state’s sovereignty but views governance inclusively to both the State and non-state actors; this view promotes the broader understating of global value chains in the global economy of the 21st century. The paper’s methodology is based on literature review pertinent to governance theory, value chain governance, governmentality as its key variables in light of the agrifood sector. It applies the value chain discourse and governmentatity in light of the Kenya’s Horticultural export and strategic positioning to the EU market. This paper’s novelty in light of the discourse and building on the body of knowledge and for the plausible ways and means to re-articulate value chain governance in the global economy while creating a viable alternative between the States, and Non-State actors for the benefit of both the upstream agents and downstream customers.

Multi-level Governance of Land Use Changes in the Brazilian Amazon: Lessons from Paragominas, State of Pará

Land use governance in the Brazilian Amazon has undergone significant changes in the last decade. At the national level, law enforcement capacity has increased and downstream industries linked to commodity chains responsible for deforestation have begun to monitor some of their suppliers’ impacts on forests. At the municipal level, local actors have launched a Green Municipality initiative, aimed at eliminating deforestation and supporting green supply chains at the territorial level. In this paper, we analyze the land use transition since 2001 in Paragominas—the first Green Municipality—and discuss the limits of the governance arrangements underpinning these changes. Our work draws on a spatially explicit analysis of biophysical variables and qualitative information collected in interviews with key private and public stakeholders of the main commodity chains operating in the region. We argue that, up to now, the emerging multi-level scheme of land governance has not succeeded in promoting large-scale land use intensification, reforestation and rehabilitation of degraded lands. Moreover, private governance mechanisms based on improved product standards, fail to benefit from potential successful partnerships between the public and private sector at the territorial level. We propose a governance approach that adopts a broader territorial focus as a way forward.

The role of ideas in political economy

The Austrian School of economics has gradually developed a coherent and unitary theory of social-political change melding together four elements: (1) praxeology as a universal and culture-invariant account of how a given structure of incentives generates outcomes, (2) ideas as a distinct realm from incentives and subjected to cultural evolution, (3) social and political entrepreneurs as self-interested drivers of institutional change constrained by knowledge problems, and (4) institutions understood as a complex mesh of formal rules and private governance mechanisms. The paper discusses the key elements of this theory and highlights the connections to public choice (especially the Virginia School) and new institutional economics (especially the Bloomington School). Two practical applications are explored: understanding the relative importance of intellectuals, public opinion, and rent-seeking in determining policies in advanced democracies; and the role of social entrepreneurship in development economics.

The Role of Organizational Scope and Governance in Strengthening Private Monitoring

Governments and other organizations often outsource activities to achieve cost savings from market competition. Yet such benefits are often accompanied by poor quality resulting from moral hazard, which can be particularly onerous when outsourcing the monitoring and enforcement of government regulation. In this paper, we argue that the considerable moral hazard associated with private regulatory monitoring can be mitigated by understanding conflicts of interest in the monitoring organizations’ product/service portfolios and by the effects of their private governance mechanisms. These organizational characteristics affect the stringency of monitoring through reputation, customer loyalty, differential impacts of government sanctions, and the standardization and internal monitoring of operations. We test our theory in the context of vehicle emissions testing in a state in which the government has outsourced these inspections to the private sector. Analyzing millions of emissions tests, we find empirical support for our hypotheses that particular product portfolios and forms of governance can mitigate moral hazard. Our results have broad implications for regulation, financial auditing, and private credit and quality rating agencies in financial markets.

Introduction to symposium on private agrifood governance: values, shortcomings and strategies

IntroductionThe governance of global food and agriculture is beingtransformed as the food system has become more global-ized and as corporate control of that system has becomemore concentrated. Traditionally the domain of govern-mental and intergovernmental actors, the governance offood and agriculture is increasingly becoming not justinfluenced, but also ‘‘created’’ by corporate actors viaprivate governance mechanisms. These mechanismsinclude industry-set quality and safety standards, privatecodes of conduct, and corporate social responsibility (CSR)initiatives. While the literature has paid considerableattention to the globalization of the agrifood system morebroadly (Bonanno et al. 1994) and has begun to look at therole of corporations in the system (Clapp and Fuchs 2009),empirical research on private governance mechanisms inglobal food and agriculture governance is only just startingto emerge. We still require considerably more insight onthe nature of the private governance mechanisms and theirimpact on fundamental values and core objectives of foodgovernance.The rise of private governance mechanisms in theagrifood system poses challenges for several fundamentalvalues and core objectives of food governance. In partic-ular, the privatization of key aspects of the agrifood gov-ernance system raises questions about their ability touphold democratic legitimacy and to promote sustainabil-ity. How do democratic ideals fit with private actors gen-erating rules and regulations that transcend nationalborders moving to spaces previously occupied by states(Schaller 2007)?

The Role of Organizational Scope and Governance in Strengthening Private Monitoring

Governments and other organizations often outsource activities to achieve cost savings from market competition. Yet such benefits are often accompanied by poor quality resulting from moral hazard, which can be particularly onerous when outsourcing the monitoring and enforcement of government regulation. In this paper, we argue that the considerable moral hazard associated with private regulatory monitoring can be mitigated by understanding conflicts of interest in the monitoring organizations’ product/service portfolios and by the effects of their private governance mechanisms. These organizational characteristics affect the stringency of monitoring through reputation, customer loyalty, differential impacts of government sanctions, and the standardization and internal monitoring of operations. We test our theory in the context of vehicle emissions testing in a state in which the government has outsourced these inspections to the private sector. Analyzing millions of emissions tests, we find empirical support for our hypotheses that particular product portfolios and forms of governance can mitigate moral hazard. Our results have broad implications for regulation, financial auditing, and private credit- and quality-rating agencies in financial markets.

Global (Non-)Law: The Perspective of Evolutionary Jurisprudence

Globalization and the rules it generates confront legal scholarship with a number of intricate issues. One of these lies at the core of a hypothesis which has been debated for some time in the literature. According to this hypothesis, the legal vacuum left by nation states in the institutional organization of cross-border commerce has been filled by a variety of private governance mechanisms, with the result that regulatory responsibility has been taken over by private or hybrid actors. Testing this proposition requires analytical tools capable of discriminating between private ordering and public law-making. The private, or hybrid, governance regimes that would seem to be the hallmark of what is slowly emerging as global law are a Byzantine mixture of legal and social norms. Because of this, the foremost problem to be solved is that of deciding where to draw the line between legal and non-legal norms. Only if there are unequivocal criteria for distinguishing between law and non-law does it become possible to comprehend how hybrid regimes arise and evolve within the globalization process and, thus, to determine whether private actors have in fact assumed regulatory responsibility.