“We live in a world where markets are not less important than countries and where multinational companies are not less important than governments” – this claim by Shimon Peres (cited in Rosenau, 1998, p.28) shows two essential developments in the area of international relations: nation states´ power has suffered a decrease, while transnational corporations (TNCs) have become more powerful political actors (Hildebrandt, 2003). Some of the TNCs have annual sales that are higher than the GDP of countries: 21 companies were among the 100 largest economies in 2000 if salaries and benefits, depreciation, amortization, and revenues summed (Sarfati, 2009).
The central question then is how much power TNCs nowadays have and what their actual role and influence in the area of international relations is. Do TNCs dictate the conditions under which they operate? Or are states still the unchallenged main actor of international relations? And how do TNCs, states, and nongovernmental organizations (NGOs) work together?
In this environment of economic globalization, global rules for global markets are essential. The question is how these should be implemented, and who should do so. Taking into account the mentioned declining regulatory capacity of nation states it becomes obvious that there have to be other institutions fulfilling the demand for international rules, in order to achieve a balance between market and social concerns (Brown, 2010). Taking these developments into consideration, this paper will discuss the research question, in how far TNCs are able to fill existing institutional voids, and what their motives are. Do they initiate actions because they are willing to do so, or are they forced to? The hypothesis is that TNCs are able to cope with existing institutional voids by using codes of conduct, which emerge as informal institutions that set international rules. In order to analyze this problem the paper will take the United Nations Global Compact (GC) as an example of one specific code of conduct that has been set up to create global rules.
Table of Contents
- 1 Introduction
- 2 TNCs in a globalized world
- 2.1 Economic environment for TNCs
- 2.2 Political environment for TNCs
- 2.2.1 TNCs as political actors
- 2.2.2 State versus TNC power
- 3 Self-regulation as a voluntary initiative of TNCs
- 3.1 Codes of Conduct
- 3.2 The UN Global Compact
- 3.3.1 The UN Global Compact Principles
- 3.3.2 How does the UN Global Compact work?
- 3.3.3 How do TNCs benefit from the Global Compact?
- 3.3.4 How does the UN benefit from the Global Compact?
- 3.3.5 Criticism of the UN Global Compact
- 3.3.6 Future of the Global Compact
- 3.4 General problems with the self-regulation of TNCs
- 4 Conclusion
Objectives and Key Themes
This paper explores the role of transnational corporations (TNCs) as political actors in a globalized world. The main objective is to examine the extent to which TNCs are able to fill existing institutional voids through the use of codes of conduct, specifically focusing on the United Nations Global Compact (GC) as an example. Key themes and ideas discussed include:- The changing power dynamics between nation-states and TNCs in a globalized world.
- The role of TNCs in economic development and their impact on national economic policies.
- The concept of institutional voids in developing and emerging markets and how TNCs navigate them.
- The rise of self-regulation as a voluntary initiative of TNCs and the role of codes of conduct in setting international rules.
- The UN Global Compact as a specific example of a code of conduct and its benefits, limitations, and potential future.
Chapter Summaries
Chapter 1: Introduction
This chapter establishes the research question: To what extent are TNCs able to fill existing institutional voids through the use of codes of conduct? It highlights the growing power of TNCs in international relations and the need for international rules to balance market forces with social concerns. The paper proposes the hypothesis that codes of conduct serve as informal institutions that set international rules.Chapter 2: TNCs in a globalized world
Chapter 2 examines the economic and political environment for TNCs in a globalized world. It explores the opportunities and challenges presented by economic liberalization and technological advancements for TNCs, particularly in developing and emerging markets. This section also discusses the concept of institutional voids, which are characterized by weak or non-existent institutions in certain countries.Chapter 2.1: Economic environment for TNCs
This sub-chapter focuses on the economic advantages and challenges that TNCs face in expanding to new markets, particularly in developing and emerging economies. It discusses the impact of weak institutions on TNCs' strategies and explores how TNCs adapt to such environments.Chapter 2.2: Political environment for TNCs
Chapter 2.2 delves into the political dynamics between TNCs and nation-states. It discusses the shift in power dynamics and explores the different perspectives on the role of TNCs in international relations, including the liberal and realist approaches. It also analyzes the relationship between TNC power and state power.Chapter 2.2.1: TNCs as political actors
This sub-chapter explores the growing influence of TNCs as political actors. It discusses how TNCs have become agents of development, creating jobs and transferring knowledge. However, it also acknowledges the complexities and potential challenges associated with their role.Chapter 2.2.2: State versus TNC power
Chapter 2.2.2 examines the ongoing debate regarding the relative power of TNCs and nation-states. It presents the opposing perspectives of the liberal and realist approaches and discusses the importance of the judicial order set by states for TNCs.Chapter 3: Self-regulation as a voluntary initiative of TNCs
Chapter 3 explores the concept of self-regulation as a voluntary initiative by TNCs and examines the role of codes of conduct in addressing the issue of institutional voids.Chapter 3.1: Codes of Conduct
This chapter introduces the concept of codes of conduct as a form of self-regulation for TNCs. It explores the role of codes of conduct in setting international rules and addressing ethical concerns.Chapter 3.2: The UN Global Compact
Chapter 3.2 focuses on the UN Global Compact (GC) as a specific example of a code of conduct aimed at creating global rules. It discusses the principles of the GC, its mechanism of operation, and the benefits it offers to both TNCs and the UN.Chapter 3.3.1: The UN Global Compact Principles
This section delves into the specific principles of the UN Global Compact, outlining the ethical and social guidelines for TNCs.Chapter 3.3.2: How does the UN Global Compact work?
This section explains the operational framework of the UN Global Compact, including its implementation process and monitoring mechanisms.Chapter 3.3.3: How do TNCs benefit from the Global Compact?
Chapter 3.3.3 analyzes the advantages that TNCs gain by participating in the UN Global Compact.Chapter 3.3.4: How does the UN benefit from the Global Compact?
This sub-chapter outlines the benefits of the UN Global Compact to the UN itself, showcasing its role in promoting ethical business practices globally.Chapter 3.3.5: Criticism of the UN Global Compact
Chapter 3.3.5 addresses the criticisms leveled against the UN Global Compact, recognizing its limitations and potential weaknesses.Chapter 3.3.6: Future of the Global Compact
This section explores the potential future of the UN Global Compact, analyzing its impact on international rules and its evolving role in the context of globalized business.Chapter 3.4: General problems with the self-regulation of TNCs
This section discusses general challenges and concerns associated with self-regulation of TNCs, considering the limitations of codes of conduct and their ability to effectively address ethical and social issues.Keywords
The key terms and concepts explored in this paper include transnational corporations (TNCs), institutional voids, codes of conduct, self-regulation, global governance, economic globalization, UN Global Compact, ethical business practices, and the changing power dynamics between nation-states and TNCs in a globalized world.- Quote paper
- Laura Jakobeit (Author), 2010, Transnational Corporations as Political Actors, Munich, GRIN Verlag, https://www.grin.com/document/167314
