ARTICLE

Received 22 Sep 2015 | Accepted 17 Nov 2015 | Published 22 Dec 2015 DOI: 10.1057/palcomms.2015.42 OPEN

Who’s in charge? Corporations as institutions

of global governance
Christopher May1

ABSTRACT In most accounts of global governance, where corporations are included, they
are seen as either subject to various international organisations’ regulatory impact or are
identified as having (benign or malign) influence over agenda setting around the scope and
practices of global regulation. However, here I examine a third dimension that has hitherto
been under recognised: this article starts to develop an analysis of the terrain that global
corporations govern themselves, sometime singularly, sometimes collectively and sometimes
collaborating with the more “normal” institutions of global governance. I seek to develop an
account of how the corporation governs this terrain and the mechanisms that businesses
have developed (or utilised) to maintain their authority. I suggest that it makes sense to
understand global corporations as directly analogous to more “normal” institutions of global
governance, and that discussion and analysis of global governance needs to integrate this
third dimension if it is to examine the full spectrum of governance beyond the state. This
article is published as part of a thematic collection dedicated to global governance.

1 Politics, Philosophy & Religion, Lancaster University, Lancaster, UK. Correspondence: email: [email protected]

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I
Introduction enlightening to assess global corporations as institutions of global
n this article I am not going to discuss how various governance themselves.
corporations have shaped the agenda of particular institutions
of global governance, nor am I going to set out the impact that
globally focussed regulatory institutions have on particular A permissive (albeit brief) definition of global governance
business sectors or corporations. These two common perspectives The first step is to establish a definition of global governance that
might be regarded as conceptualising the relationship between is both acceptable and permissive of inclusion of corporations.
corporations and global governance as either input (helping shape The first aspect—that of scale—is relatively easy to resolve: when
the agendas of global governance institutions) or output we talk of global governance the two distinctions we are making
(corporations impacted by institutional decisions) (Brühl and are between domestic and non-domestic, and between the
Hofferberth, 2013: 354). Rather, I propose a third perspective, international and the global. The former is a question of state
one that is missing from the alternatives set out by Brühl and sovereignty, borders and national politics; global governance may
Hofferberth in their survey of approaches that see companies as have an impact on this realm of politics but is not limited to the
social actors: that the global corporation itself has a significant territory delimited by any particular state’s borders. The
governance role within its own international structures, and we distinction between international and global draws attention to
can usefully consider this as a form of global governance in itself.1 those aspects of governance that are not merely manifest between
This complements the emerging account of corporate states on a bilateral or (explicitly) multilateral basis; “global” is
constitutionalism that extends the analysis of corporate intended to convey something about the (potentially) compre-
governance (Bottomley, 2007), to suggest that global hensive character of this emerging complex of governance
corporations’ governance function reaches well beyond the institutions (Weiss, 2013: 28). Although not all institutions of
internal relations between managers and shareholders. Indeed, global governance have a comprehensive reach—many are
while the United Nations Global Compact (UNGC), the limited by membership and almost all are limited by mission or
Extractive Industries Transparency Initiative (EITI) and other sector—the institutions commonly included within the term do
organisations indicate there is a growing recognition in (global) not suffer such limits to their collective globality. The term
policy circles that improving the governance function of “global” conveys the potential rather than actuality of the scale of
corporations can have beneficial effects across their supply activities of any individual institution and is more accurate if all
networks, there has been less discussion of how this governance institutions of global governance are taken as a single collective
function might be best understood as a political economic issue, class, developing a global complex of governing norms.
rather than merely a technical question of effective economic The second term, governance, was introduced into political
control. Coe and Yeung’s (2015) recent work on global production analysis to identify governing as a process which was not limited
networks also maps out much of the space I am concerned with, to formalised state-constituted institutions. There is immediately
and offers a dynamic account of supply/value chain development, some analytical difficulty around the interchangeable use of
but their account lacks any significant non-economic dimensions institution and organisation: the latter having a formal existence
to how governance might be understood. Indeed, given that (headquarters, secretariat, rules, members) while the former has
“governance” is often presented as the importation of business come to be seen as considerably more permissive, used to also
values and processes into politics (Eagleton-Pierce, 2014), it is include laws, customs and social practices that are unorganised in
perhaps surprising that corporations’ (extra-economic) the sense of the latter term (Weiss, 2013: 29–31). This leads Weiss
governance of their own networks has remained under- (2013) to offer the following definition:
remarked. Therefore, this article is concerned with the wider
network of relations represented by the supply chain assembled global governance is collective efforts to identify, understand
and governed by contemporary globally active corporations. or address worldwide problems that go beyond the capacities
Patterns of organisation vary widely between corporations of individual states to solve … the capacity within the
(Dicken, 2003: 212–219), not least as the legal systems in which international system at any moment to provide government-
they are incorporated may be different (common or civil law like services and public goods in absence of a world
systems) and have different national regulatory expectations. government. Thus, it is the combination of informal and
Furthermore, in some sectors such as resource extraction or formal values, rules and norms, procedures, practices and
infrastructure there are often a number of major corporations policies, and organisations of various types that offer a
that may be owned partly or completely by the state. Never- surprising and desirable degree of global order, stability and
theless, here I will focus on the question of governance in general predictability. (32)
rather than look at actual corporate networks (as will be required
to further develop this approach). What follows is different from Weiss suggests that the provision of “order, stability and
much discussion of (global) supply chains that focusses on their predictability” is delivered through global governance by a diverse
management,2 as it suggests there is a governance function being set of (formal) organisations and (more informal) institutions. If
undertaken by corporations, which is characterised by explicit in this conception the particular types or institutions or
and implicit power relations, not only the technical management organisations is (relatively) permissive, based on effect rather
of efficiency in network interactions. These forms of authority do than character, then the key issues must be scope/scale—global—
not necessarily reach beyond a corporation’s own network(s), but and the provision of order, stability and predictability in this
because of the global reach of such networks their political realm of interactivity. Therefore, while Weiss does not draw this
economy parallels many of the characteristics more usually explicit conclusion, these aspects of governance could be
identified in the realm of global governance. Hence, rather than delivered or enacted by a corporation, rather than a regulatory
examine corporations as either influencing global governance organisation of some sort.
institutions, or negotiating regulatory interactions with these We also need to consider the forms of socio-political power
institutions, both of which remain important issues, here I argue that have informed the development of the institutions of global
that our understanding both of global governance and the governance, an issue sometimes obscured by more organisational,
political economy of the global corporate sector can be enhanced functional or technical accounts of specific institution’s history
by taking a third (complementary) view. This is to say, it will be (Pierre, 2015: 190–202). The sources of power deployed through

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global governance are no more or less complex than social corporation in the food sector might do. Likewise, corporations
analyses of power would be in other political economic realms. In in capital intensive industries such as energy generation will
Michael Barnett and Raymond Duvall’s (still) influential typology confront different governance issues from clothing retailers with
of forms of power in global governance we find various forms of extensive and complex supply chains. For instance, a high-
power arrayed across four dimensions: compulsory (through the technology corporation will be concerned not just with the
deployment of resources); institutional (through rules); structural manner in which partners use specific IPRs but also the national
(via the control of agendas of practice); and productive (or as it is legal context, such as a state’s government’s willingness to enforce
often referred to constitutive—the ability to define the political such rights; Chinese (lack of) willingness to enforce IPRs has in
realm and practices themselves) (Barnett and Duvall, 2005; see the past been identified as an issue for the development of some
also, Lukes, 2005). This typology of dimensions of power across supply chain relations. However, for clothing and/or assembling
global governance is reflected in Kennedy’s (2009) observation networks, the impact on the brand of labour relations will be a
that the larger concern with contractors seeking to either distance
themselves from unwelcome developments (such as the Rana
globalisation of law, the legalisation of politics and economics, Plaza fatal building collapse) or by seeking more direct control of
have brought with it a tremendous dispersion of law. All labour standards in the supply chain though forms of relational
manner of rules, enforced and unenforced, may, as a matter of contracting.
fact, affect any global transaction. And as a matter of law there As these examples illustrate it is likely that the corporation may
are conflicting and multiplying jurisdictions, asserting the be effectively managed by a coalition of stake-holding groups
validity or persuasiveness of their rules, with no decider of last focussed on a myriad range of outcomes including immediate
resort … We will need to assess the dynamic and distribution profitability but by no means limited to it, and therefore as
effects of one or another attitude toward the disorderliness of corporations have become embedded in more fragmented supply
global governance. (55–56) chains so these coalitions have often needed to resolve internal
conflicts over various competing outcomes (Dallas, 1988: 40–42).
The elements of this dispersion and disorderliness that interest As this suggests we immediately need to differentiate between the
me here are those that we can identify within the overall control of the corporation and its beneficial ownership.
organisational structure of global corporate extended and Certainly, much of the discussion on corporate governance in
networked supply chains. This is to say that global governance recent years has been concerned with aligning the interests of
happens in a wider field of social relations than is often explicitly corporate managers with the (often presumed) interests of the
mapped. corporation’s shareholders (its beneficial owners). Ways are
Therefore in this article I suggest that if we examine global sought that ensure managers focus on and prioritise “shareholder
corporations’ networks including their affiliated subsidiaries and value”, a frequent proxy for rising share prices and maintaining
their contractors we will be able to recognise a realm that looks dividend payments. That there has been considerable policy and
remarkably similar to global governance as usually presented. legislative work on alignment suggests that hitherto owners and
Moreover, corporations’ governance function underpins the managers have not necessarily shared a view on how corporations
competitive advantage gained by globally active corporations: should be managed. There is much to be said about this aspect of
corporations not only seek to manage the impact of a globally corporate governance (not least the effective extent of the division
integrated political economy on their operations, but also the very between ownership and control) but here I want to emphasise
opposite; they seek to shape, (re)form and govern the political that even if we accept some form of alignment is necessary, it
economic terrain in which they operate to their advantage does indicate that the governance and control function of the
(Picciotto, 2011: 68). To establish the utility of an approach that corporation is not fully articulated to ownership (when firms are
sees corporations as institutions of global governance, I will now incorporated at least) and thus management groups within
set out how the character of global corporate networks can be corporations are often governing (to some varying extent)
included within the dimensions of global governance explored autonomously. Taking an optimistic view of managerial interests,
briefly above.3 the chief outcome of the governance function is the direction and
implementation of a chosen competitive strategy across its supply
network. A more pessimistic view, which has driven much of the
Global corporations as institutions of global governance discussion of alignment and incentivisation, is that managers
To some extent the approach herein parallels Lynne Dallas’ manage the corporation in their own interests and not the
notion of the power model of corporate governance (counter- shareholders (presenting a classic principal-agent problem for
posed to the efficiency model). Here, the corporation resolution). This is further complicated by corporations them-
selves being owners of subsidiaries and thus across a range of
actively seeks to structure its environment to serve its needs of different relationships are both principal and agent.
autonomy and discretion. While certain concrete realities Partly due to the frequent requirement for local operations to
exist, such as the scarcity of resources, how these resources are be incorporated under local states’ laws, contemporary global
used and distributed is a matter of social organisation, corporations are often actually groups of separate companies
dependent on cultural, historical, social and power factors. controlled through various means from a central point. These
(Dallas, 1988: 114) networks are frequently arrayed around a hub, even if the formal
and legal arrangements are organised in such a way as to partly
The decisions made by the corporation are not necessarily obscure this fact, and the states where the hub is located have
directly concerned with efficiency or profit maximisation but little effective regulatory control over the entire (dispersed)
rather with the perpetuation of control and the values stressed by network (Veldman, 2013: S25). However, the corporation needs
the central management group(s). Moreover, these values are to establish a working balance between centralisation (direct
likely to vary from sector to sector: corporations in the control) and the existence of a network of (formally) autonomous
pharmaceutical or high technology sectors will have considerable partners and contractors, which is where governance comes in.
more interest in the manner in which their networks treat, use Governance from this central point is seldom entirely
and protect intellectual property rights (IPRs) (May, 2010) than a hierarchical but is more often a process of negotiation and

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engagement. The central corporation may have distinct advan- institutions, sometimes as single governing authorities them-
tages but subsidiaries, contractors and others may also have forms selves. While using forms related to, and indeed constituted by
of leverage that can be deployed within supply chain decision- states, their actual character and effect within the corporation’s
making.4 Thus, where the core corporation is contracting with “internal” relations (that is within its networked supply chain not
partners to access particular technologies, or localised resources only within its incorporated core) are defined by the corporation
or knowledge(s), the contractor may have significant leverage not the (or a) state (Robé, 1997: 66–67). Where corporations are
opportunities within any contractual relation. The central constituted differently from the dominant Western model,
corporation may also seek to benefit from “reverse diffusion” of perhaps incorporated in states across the Global South, or are
practices and innovations where these have been developed in State Owned Enterprises, although the formal/legal issues may
one part of the network; here governance is concerned with how vary considerably, prompting in some cases considerably different
to establish the new practice/approach around the network. governing practices, the underlying requirements for efficacy are
In addition, the corporation at the centre of the network may likely to be similar (even if this would need to be confirmed by
have multiple interests and thus present competing positions to research into specific cases). This is to say: to be effective (even if
partners, shifting and changing the focus of potential leverage. state sanctioned) forms of supply chain, or network governance
For instance, particular sub-contracting partners in the network need to be regarded as legitimate by network partners,
may get a very different steer from the Corporate Social contractors and participants.
Responsibility (CSR) team that visits their plant to ascertain
their compliance with various standards and requirements, than
they will from the buying team, whose emphasis is likely to be on The legitimacy of corporations’ governance function
price and quality.5 Focusing on corporations as institutions of The construction of the legitimacy of corporate network
global governance suggests the reasons for differences between governance needs to take place across three initially negative
high-level commitments and what happens within the supply- aspects of power relations: differences in circumstances; dispa-
chain itself; like other governance institutions, global corporations rities in interest; and requirements for compulsion (Beetham,
have complex bureaucratic managerial arrangements which 1991: 59–63). First, the difference between the core/organising
produce difficulties of coordination between policy and practice corporation and its partners needs to be legitimated: this may be
(a not uncommon observation within global governance achieved through recognition of the ownership of technology or
analyses). through appreciation of brand value(s), through access (albeit
Following David Ciepley, we can posit that “within its indirectly) to established sales networks and/or via other
jurisdiction, the business corporation exercises powers analogous resources or assets that can only be utilised through the network.
to those of government, if more limited, including the right to Second, the subordination of decision making (governance)
command, regulate, adjudicate, set rules of cooperation, allocate which results from involvement in the network has to be
collective resources, educate, discipline and punish” (Ciepley, demonstrably in the interests of participants; how involvement
2013: 142). However, while Ciepley and others are right that allows partners to effectively access various assets within the
when compared to the sovereign state there is considerable network is key. Third, to remain legitimate the relation must be
difference in the scope and range of such legitimate capabilities (or at least plausibly be seen as) consensual; negotiations around
(Crane et al., 2008: 72–76), when we compare the global “incomplete contracts” and conditions of supply will have
corporation to the typical institution of global governance these significant impact on whether the governance of the network is
differences are considerably less significant. The corporation can regarded as legitimate or exploitative.6 Differences between actors
actually be in a stronger position as regards its network than a might also be justified through “cognitive” legitimacy (linked to
globally-focussed institution or organisation is as related to its the acceptance of market relations as themselves being generally
issue area (or constituent state members). Corporations may well legitimate), but where relations go beyond the one-off spot
be able to more effectively sanction and govern network members market contract, legitimacy makes supply-chain governance more
than some international organisations can govern state members. effective. The core corporation needs to manage these networks
Moreover, global corporations have developed processes that more subtly than merely attempt to construct command and
often mimic legal structures. This then negates many unwelcome control arrangements that are more costly in time and other
consequences of globality; in the absence at the supranational resources.
laws of property or contract, the global corporation’s network of Legitimacy may be less of an issue where network partners are
subsidiaries and affiliates respond to the internalised law-like not actually independent of the core corporation. As corporations
rules and regulations the core corporation puts in place (Gessner, are now mostly legally constituted to allow them to also own
2012: 151), and less to differences in national legislation. Within companies themselves, in these cases governance is legally
its own network (or effective jurisdiction) the corporation is a established (and not required to be consensual). Corporations
form of governing body, adopting as Ceipley suggests many of the can benefit from the limited liability afforded to investors/
attributes of government; the authority it is able to mobilise, shareholders, shielding the central (governing) corporation from
however, is not completely separate from government, but rather some risks and liabilities in the network, and establishing a range
flows from the legal mechanisms (such as incorporation and of political economic firewalls to enhance the security of the
property law) that facilitate corporations’ operational modes in central organisation. Indeed, part of the purposes of global
specific jurisdictions. The corporation’s governance function is corporations’ governance function is the control of risk from
not against the state, but rather is partly facilitated by the state outlying areas of the supply chain while harvesting the economic
(Robé, 1997), and where differences in national legislation are to and other benefits of engagement with such partners (low wage
the corporation’s advantage, the relationship between globalised costs; new technologies; new markets and so on). However, the
internal rules and national laws is finessed to ensure both core corporation then has its own principal/agency issue to
elements serve the corporations’ needs. resolve, in that it needs to ensure subsidiaries are working in the
Therefore, although global corporations certainly interact with interests of their (corporate) owners.
the other institutions of global governance, they also govern These complex networks of both subsidiaries and indepen-
significant realms of the global political economy, sometimes in dent companies are tied together through a web of contracts
conjunction with the regulations and guidelines of other (Picciotto, 2011: 132–133). While the character of these supply

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chain networks is perhaps specific to contemporary capitalism, can be manifest through standard setting as well as through
management itself, as James Burnham pointed out in a contract law more generally. The use of private law (contract
remarkably prescient analysis over 70 years ago, is always about provisions and arbitration agreements) often utilises public
controlling (and benefitting from) the access to resources international law as a background justification but equally is
(Burnham, 1941 [1972]; see also Ciepley, 2004). Defining the crafted to serve the needs of the particular corporate network in
managerial revolution as the shift in society from a privileging of which it is deployed (Gessner, 2012: 158–159), rendering this part
ownership, to a society where increasingly power stemmed from of that corporation’s governance functionality. However, as
control and/or management of institutions, Burnham suggests Danielson (2005) has pointed out
to us how and why global corporations’ managers have become
defacto agents of global governance.7 Specifically, when we think the decisions and actions of corporations have social
of global corporations’ governance function the key issue is not consequences largely indistinguishable from those created by
necessarily the ownership of assets and resources, but rather public regulators, but... corporate decision-making [i]s largely
the ability and abiding interest in controlling access to those insulated from public participation, engagement or scrutiny...
resources (Rajan and Zingales, 1998). While significant parts of If corporations are significant institutions in the transnational
the supply chain network are outside the ownership structure of governance regime, then policymakers and activists will need
any particular global corporation, the ability to control access to to find ways to affect the decision-making of these corporate
the central resources of the network and also (through non- institutions. (424)
competition clauses in contracts, for instance) an ability to
constrain access by competitors to key “independent” elements The democratic deficit often identified as compromising the
of the network is an important element of corporations’ legitimacy of global governance, is repeated and is likely more
governance function. Although the ownership structures of serious where corporations by their very actions are regulating
global corporate networks are often complex, it is the economic interactions, even if these are also shaped by various
management and control of these networks that produces other regulatory regimes and to a large extent internal to
identifiable governance effects.8 contracted networks across their global supply chains. The choice
This management interest is not limited to the issue of prices between competing standards, differential corporate governance
or market conditions but rather given their network character, regimes and the incorporation of national rules into standard
it is also (crucially) an issue of managing time and space; a corporate practices allow corporations to decide which regimes
global corporation’s managers seeks to control its own political they might use, how they interpret them and if, as in the face of
geography to maximise its returns and remain a going concern no acceptable standards or rules they can and need to set their
(Dixon, 2014: 62–63). As Dallas contends the chief, and own for their network’s internal relations.
perhaps only really effective, lever that corporations have is A key challenge of governance for many corporations is that
their ability to mobilise and allocate resources across the space theirs may only be one among a number of supply chains serviced
they seek to control. Here we should understand “resources” by a particular supplier, and their ability to govern the actors
widely to include “social products” including influence, involved is therefore incomplete; moreover there is much less
legitimacy and preferences that the central managerial coali- clarity (than for states for instance) about the legitimate reach of
tion governing the supply-chain can deploy to shape more corporations’ jurisdiction as regards the other organisations in the
micro-level decision making (Dallas, 1988: 83–84). This can supply chain, and hence their need to work to maintain
also be seen as the institutionalisation of particular network- legitimacy within the network. One might expect that the more
specific relations, habits and socialised knowledge about what any sub-contracting network partner was dependent on the core
would be regarded as normal activity. Furthermore, a key corporation the more compliant they would be, although there is
outcome of corporations’ governance of their networks is the also an issue of specificity of their own technology and/or other
transfer of risk (another social resource) away from the central assets that might mitigate the asymmetry of power prompted by a
corporation and onto other stakeholders and/or partners in the narrow range of network engagements. This leads Macdonald
supply chain. Seeing corporations as global governance (2014) to characterise the governance of supply chains as
institutions requires a focus on ongoing relations within these exhibiting “decentralised, non-hierarchical dynamics, without
networks and not merely a view of a series of periodic intra- established deliberative processes or other norm- or procedure-
network transactions. governed mechanisms to determine outcomes or resolve conflict”
For example, global corporations set standards and rules in (179). For our purposes this then demonstrates the utility of
many market sectors directly via the contracts that are used to developing a critique of (global) governance in these circum-
pattern the supply chain, but also because many global sectors stances, identifying how parallel problems in other issues areas
actually function as effective oligopolies (Harrod, 2006: 25), and have played out. Thus for instance, where the governance of
as such are controlled by a small group of corporations whose labour standards has become an issue for the core corporation,
managers even if not colluding with each other share a broad set then there may be a political need for the governance function,
of interests.9 The acceptable and normal practices in often quite and the regulations to which it is applied to become a more
closely bounded markets segments are set by a small number of collective (which is to say “democratic”) endeavour among a
corporations. The corporation(s) at the centre of these supply number (sometimes quite a large number) of corporations/
chains seek to perpetuate their positon by re-creating this contractors and civil society actors. Here the internal governance
environment where and when possible, and as change/ function of the corporation and the realm of private authority, as
innovation is required, shaping it to maximise their capture of exemplified by civil society organisations (and civil regulation)
any associated advantages or benefits (Dallas, 1988: 98), while interact.
shifting the risks associate with change into the supply chain—
costs of transition are often borne by contracting partners not the
core corporation itself. Global governance by global corporations
Within these networks corporations construct regimes of If the supply chains of global corporations are effectively a realm
private law to govern the relations between the various elements, of global governance then how might we understand the practices
while also seeking to influence public law institutions; private law that characterise this governance function? A range of supply

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chain management mechanisms that are relatively widely facilitating a range of balancing points between competition and
recognised includes: cooperation, while also allowing for periodic re-organisation of
production networks to deal with new challenges.
 contractual contingency planning: recognising that contracts It is the three intervening types that reveal the sites of where
will be incomplete as they are unable to definitively predict all the (global) governance function of corporations (and large firms)
eventualities between contracting partners; is evident. These are:
 target setting: may be part of the initial contract or a continuing
set of negotiations between the contracting supplier and the  Modular: Suppliers work to the standard specifications of
core corporation (or a designated intermediate node in the purchasing agents in the chain; while these can be complex,
supply chain); communication between suppliers and purchasers allows these
 operational reviews: ranging from issues around quality of intermediate goods to be relatively easily specified.
product through to internal (or external) reviews related to  Relational: Relations are deeper, involving negotiations about
process and conduct, often linked to core corporations’ CSR burden sharing and knowledge transfer; these will be increas-
undertakings; ingly based on social ties between partners and burgeoning
 information sharing: including data utilisation, revised and new trust relations.
technological specifications as well as advice on efficient  Captive: Relations are (perhaps) pathological, with suppliers
processes/practices; increasingly dependent for their ongoing profitability on a few
 joint problem solving: building on data/knowledge sharing, (or even single) buyers/networks operating under conditions
core corporations may seek to develop solutions with particular that are relatively rigid and/or intrusive and may be specific to
partners to enhance efficiency or compliance with adopted a particular supply chain network (Gereffi and Lee, 2012:
standards; 25–26).12
 supplier support: here corporations may aid partners develop
their businesses through the provision of guidance and direct Crucially, in extended supply chains or production networks,
aid of various forms (utilising organisations like the Supplier different parts of the network may be characterised by different
Excellence Alliance for instance).10 types of interaction.13 In the past these general forms of supply
chain were mobilised around core production-focussed
While these are all important to the profitable and effective corporations but increasingly global supply chains (especially in
management of the supply chain, the overarching governance textiles and consumer technologies) have become organised by
function is intended to ensure that these practices remain and around key buyers, controlling global brands. The particular
uncontentious and acceptable to the contracting suppliers. relations within networks fall into one or more of these broad
This network governance function is manifest in four key categories at least partly on the basis of the possibility (or lack of
dimensions: firstly, the history of interactions between the possibility) of easily codifying requirements for the supplier. The
corporation and its supply chain “partners” will have some more complex the requirements (the more tacit knowledge and
influence over the manner in which the current relationship is coordination required) the more likely relations will move from
governed—current arrangements will reflect prior engagements; modular, to relational to captive at that point in the network
secondly, a range of economic issues from tooling costs to (Gereffi et al., 2005). Thus, governance failings and the lack of
investment in labour preparation (training, recruitment) and ability to achieve required supply outcomes may shift relations
other (potentially) relationship specific costs shape relations; into more explicitly integrated forms of governance and by
thirdly these are linked to technological issues around access to, doing so increase the direct exercise of power by the central
and development of, new technologies; and finally a range of coordinating corporation (but also its costs in time, organisation
political issues can shape any relationship (from external state and resources).
political concerns to internal micro-political considerations) When requirements are easily codified or even standardised
(Cousins, 2013). Governance therefore will be concerned both (commodity-like) supply requirements, governance of relations
with the generalised needs of the supply chain alongside the may be mostly through a combination of contracts and/or
particular requirements of specific interactions within it. Indeed, tendering standards, that at the limit are completely undertaken
popular demands that corporations act responsibly under the as spot market interactions. However, as the intermediate goods
rubric of CSR already recognise that corporations are effectively required in the supply chain become more complex then
governance institutions able to prompt shifts and changes in increasingly technical standards, quality control mechanisms,
practices (albeit imperfectly) within the political economic spaces service level agreements and other more developed contractual
they govern (Anderson, 2006: 34; Macdonald, 2014: 169). It is elements may be deployed to govern the relations. Seldom can a
relatively common then to recognise that corporations are contract effectively deal with the intricacies of ongoing supply
political institutions, as well as economic ones, but this is seldom chain relationships on its own, and thus effective governance is
pushed to assess the more general governance function that such crucial to the success of any network. This recognition that
recognition must imply! contracts are always incomplete (by virtue of the future being
Gary Gereffi and Joonkoo Lee have very helpfully developed a indeterminate) has often been treated as an argument for some
typology of general governance forms that pattern global supply (mission critical) functions to be brought within the formal legal
chains; their analysis aims to understand the manner in which borders of the corporation to allow for a flexible but hierarchical
governance practices allow the capture of value across the control. However, the need to control risk still may produce a
supplier network, often referred to as a global value chain preference for inter-firm contractual relations, leading to a need
analysis. Their five types of supply chain governance range from for a normative element to governance, to allow the corporation
hierarchical at one end (essentially fully integrated corporations to achieve its particular strategic requirements from the supply
with wholly owned subsidiaries) to market governance at the chain. Moreover, while seeking to govern the internal network
other, where all interactions in the chain are conducted via the relations, corporations may also seek to obscure these relations
market and governance is merely through the price mechanism from various external regulatory agents (Seabrooke and Wigan,
(spot market). Between these two extremes a new set of “specific 2014), leading to information asymmetries between them. Thus,
exoskeletal institutional arrangements” have been developed,11 the control of codification, alongside the definition and

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interpretation of acceptable practice all become important networks; they are patterned by power relations. In the first
elements of the global corporate governance function. instance, this is the core corporation’s ability to deny access to the
Many corporations therefore have developed detailed codes of supply chain itself. In this sense, the networked supply chain
conduct for their network “partners”. These codes reflect the resembles the pro-actively assembled group of partners that
direct needs and requirements of the core corporations around pattern almost all institutions of global governance: joining the
process, and often can reflect concerns about the perception of network requires the explicit acceptance of institutional rules or
how a corporation enacts is purported social responsibility. CSR conditions; prospective members must commit to the conditions
can be seen as a signalling function, to consumers (around brand of the network, but also to accept the governance of the lead
differentiation), to workers (to attract and retain certain sorts of corporation, as members of global governance institutions
prospective employees) and to governments (to forestall more expressly accept the leadership of the institutional secretariat
legalistic and formal regulation); corporations promoting CSR are (however constituted). Once a firm has joined the network, apart
trying to say something about themselves even if some critics from the threat of expulsion (for whatever reason), there is also
regards such invocations as being articulated in bad faith, and a the question of the allocation of resources, tasks and activities
mask for the operation of a rapacious global capitalism. Indeed which are the subject of the governance function and are the
sometimes it seems that the assessment of risk has moved from a result of power relations within the network (adapted from
primary concern with impact of actions on others, to a concern Baudry and Chassagnon, 2012). However, the final sanction of
for the risk that the publicity around adverse impacts may have removal from the network is hardly the basis of a nuanced
economic costs to the corporation itself. Where this aspect of risk governance regime, and thus a more complex analysis is required.
becomes central, critics understandably see CSR as merely Moving away from the threat of network-expulsion, and
marketing or a cynical interest in brand values. Thus, to add following the analytical approach adopted by Fuchs (2007), the
credibility to these codes (sometimes voluntarily, sometimes power of corporations in global governance can be disaggregated
under political pressure) the auditing of compliance can be into three elements: instrumental power—encompassing direct
outsourced to other organisations in what Vogel (2010) has influence, based on the deployment of corporations’ extensive
referred to as “civil regulation”. Responding to perceived publicity and diverse resources; structural power—revolving around rule-
effects and issues of brand integrity, some global corporations making and the establishment of agreed rules of practice; and
such as Levis or US Whole Foods have quite significantly shifted discursive power—by which certain settlements are politically
their practices (most often related to their supply chain) in legitimated outside the formal processes of rule adoption, and
response to codes of conduct emanating from civil regulatory corporations have been able to normalise various aspects of their
organisations. The approach of marrying internal codes of practices and needs (56–58). The first dimension Fuchs identifies
conduct to external regulatory competence has perhaps been relates to the exit-threat issue, and to corporations’ ability to
taken furthest in the (albeit controversial) UNGC,14 and the control access to their producer/supplier networks. The second
development in the mid-2000s of the UN’s “Norms on the dimension plays out in the supply chain through the multi-
Responsibilities of Transnational Corporations and Other faceted negotiation and surveillance activities that I have
Business Enterprises with Regard to Human Rights”. discussed above. This element is clearly strengthened by a
While there may be differences on the effectiveness of these (perhaps variable) ability to utilise the exit-threat in specific
norms, what is notable is that they imply a clear recognition of a instances (although when there have been significant sunk costs
direct governance function for the core-corporation over its in an on-going network relation a break would not be cost-
complex networked global supply chain. The required adminis- neutral for the core-corporation, and contractors are well aware
trative processes and evaluative mechanisms are at the very least of this). The discursive element in the governance of the supply
analogous to, and in many ways directly parallel, the more often chain is evident in the manner in which the corporations’ codes
recognised institutions of global governance. of conduct seek to normalise specific behaviours and practices,
but most importantly through supplier support and contractor
engagement intending to socialise partners into the particular
Global governance research and global corporate networks ways of working of the supply chain.16
Perhaps the most obvious link between an analysis that sees This can be then linked to Michael Barnett and Raymond
corporations as institutions of global governance and previous Duvall’s frequently cited typology of forms of power in global
political economic analysis is the work on private authority (see governance, which as noted above, encompasses four elements:
for instance Hall and Biersteker, 2002; Büthe and Mattli, 2011). compulsory, institutional, structural and productive power. While
Here the focus is on the manner in which private actors are able Barnett and Duvall allow that the resources that may be deployed
to shape and inform the practices and structures of global as compulsory power may include symbolic and normative
governance. However, this approach seeks to understand global resources, for our purposes this maps relatively easily on to Fuch’s
corporations as network actors deploying their authority (built up instrumental power. The second element, institutional power
through their market activities) to shape existing institutions of seeks to capture the manner in which certain actors can further
global governance. Global corporations may be deploying their their interests and end via sets of institutionalised rules and
authority to influence existing institutions or through standard practices (Barnett and Duvall, 2005: 16–17). If we regard the
setting (and other normative mechanisms) seek to establish new market as an institution, then market imperatives fit into this
institutions that reflect their collective interests, for instance by element, as do issues around legal regulation and (perhaps) codes
normalising market-based decision making. Global governance of conduct, although that is perhaps more ambiguous. Barnett
remains something corporations seek to inform, influence and and Duvall’s third element, which they call structural looks a little
shape beyond their own networks. Conversely, as I have different from Fuch’s conception, primarily due to their focus on
developed above, global governance is something global corpora- how this element of power constitutes socio-economic capacities
tions are doing within their own networked relations, suggesting by allocating these capacities differently, and influences actors
that they have less need to rely on external private authority and perception of their place and possibilities for action (Barnett and
are often directly governing their own networked supply chain.15 Duvall, 2005: 18). To some extent then this aspect of their model
The first element of this refocussing is to recognise that the brings in the discursive elements that Fuchs is keen to emphasise,
relations of the global corporate supply chain are like other social with the ability to normalise specific relations and network

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positions as a crucial manner in which corporations seek to not limited to basic market mechanisms the reciprocity captured
govern their supply chains. However, this discursive constitution by this phrase is likely to be of some importance. In global
of relations then also works for Barnett and Duvall as their fourth governance the response to such deficits has often been to
element of power in global governance, the productive (where empower, or seek to empower civil society, which directly
they explicitly include discursive elements) (Barnett and Duvall, parallels the moves in CSR monitoring and auditing (and indeed
2005: 21). is often used as an example in mainstream debates). Therefore,
Bringing this together to think about the global corporation as like other global governance institutions a fall-off of perceived
an institution of global governance suggests that such a focus legitimacy may prompt exit from the network—suppliers will
would not only require an analysis to take account of seek other more amenable supply chains where plausible. Where
instrumental or compulsory power differentials in supply chain lock-in issues are evident, then other resistance activities may be
networks, but to focus more fully on the manner in which deployed, and civil society organisations may be drawn in to
corporations seek to constitute and produce the socio-economic engage with the legitimacy of specific elements of the
and spatial terrain that the supply chain encompasses. Specifying governance function.
the required ends, however, requires more than an easy However, in supply chain networks the actors that might
presumption of profit maximisation; it is seldom if ever the case benefit from empowerment are not only civil groups (labour,
that a corporation has a single directing mind or a closely knit environmentalists, those seeking to promote human rights) but
management team with a single and defined set of governing also the smaller contractors themselves, whose interests and
principles and norms. While incorporation and contract relations requirements may often be quite different to the usual civil
might often give credence to a reified view of the identity/ society actors identified in accounts of global governance. Thus,
personality of the corporation, the corporation like many and interestingly, as Richard Locke points out in his discussion of
institutions of global governance is actually subject to “bureau- the manner in which labour standards have been promoted in
cratic politics” which is to say, internal bargaining, negotiation supply chain networks, whereas in early engagements auditing
and (internal) political resources actually shape decision making. and inspecting was seen as a process for gauging the need (or
Thus, and again following Dallas, it might be better to otherwise) for sanctions for non-compliance, more recently
understand the governance function of the global corporation as auditors (internal and contracted-external) have regarded their
being located within a “power coalition”; here power is exercised work as developmental. It now often encompasses not merely
by, and on behalf of a coalition of actors and groups. Therefore, judgement of the fulfilment of codes’ requirements, but also,
Dallas (1995) argues: when failings are identified, prompts support to enhance existing
and introduce new practices that are code-compliant (Locke,
while corporate goals derive from individual and group goals, 2013: 181 and passim).
no one individual or group is usually powerful enough to The negotiation and socialisation of network participants and
impose its goals on the corporation. Through corporate at least a partial recognition of their interests may be the manner
processes, corporate goals emerge that satisfy the parties or in which corporations most effectively govern these networks.
parties comprising the dominant coalition; these goals are This approach has been evident (and well publicised) in the
distinct from the goals of any one individual or group. garment supply chains of various large branded clothing
Furthermore, goals result from the communication among corporations (of which Gap, Levis and Nike are perhaps the
individuals and groups concerning opportunities and dangers most obvious examples) leading to a more direct engagement
represented by or to the organisational structure itself. (51–52) with suppliers in the chain to develop and promote schemes
intended to enhance the workers’ experience and build less
Taking this approach the governance of global corporations’ onerous (but more efficient) local working practices. However, as
supply chains starts to resemble the forms of on-going Locke discovered in a comparison of two of Nike’s strategic
(re)negotiation and alliance building that typify many of the partners in Mexico, individual plants/contracted suppliers can
(usually identified) institutions of global governance. This is not have quite different experiences within the same supply chain; in
to say that no corporations are driven by a singular focus on this case one supplier had a developmental relationship with Nike
profit maximisation when governing their supply chain, but staff, gaining support and advice for up-skilling and better labour
rather that other goals of governance may frequently arise from conditions; the other had a more formalised, distant and less-
different power coalitions within global corporate networks supportive engagement and as such retained many of the
(Dallas, 1995: 58–59). At the very least there are likely to be shortcomings phased out from the first site. Interestingly, while
considerable differences on how to maximise profit! Nike’s intent seemed to be the same with both, the greater
The approach outlined above suggests a number of aspects of distance to travel to the second site, leading to a great reliance on
a critical perspective on the governance of global supply chains. phone/email communication and fewer visits resulted, Locke
If governance is to be seen as legitimate by those who are within (2013) concludes, in very different responses to the “demands” of
the network, this approach implies that for governance practices Nike’s supply chain governance; one site moving towards
to be effective they must be regarded as transparent and have preferred practices, the more distant adopting a minimalist
modes of accountability to deliver the value that can be derived (partial) compliance position (Chapter 5). Again such practical
from these relations, over and above any basic market-based and spatial issues are well documented in mainstream global
form of contractual relations. However, the closer that the governance analysis, and suggest that as there, global supply chain
relations between network “partners” approximate market governance will vary not merely by intent but through
relations (and are governed via market mechanisms), the less accessibility and communicative effects, alongside surveillance
legitimacy will be required. The notion of the market will still opportunities and “diplomatic” relations.
need to command legitimacy but this is a wider issue and not
immediately effected by one corporation’s action within its
supply chain. While it may seem a little odd to refer to a Conclusion
democratic deficit in supply chain governance (although in itself Global corporations are often engaged in the management of
this may be the result of the discursive normalisation of market extremely complex networks of subsidiaries, affiliates and
relations as being “outside” democracy), where governance is contractors, and thus the realm over which they have influence

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(and power) is often global. As the UNGC, EITI and other both global governance and the practices or global corporations
moves to regulate labour standards (Locke, 2013) suggest, there themselves.
is a clear recognition in policy circles that corporations are
governing these networks not merely managing them. How-
ever, as production networks have fragmented, as markets have Notes
become globalised and technological developments have 1 For other ways of seeing global corporations, see for instance: Forsgren (2013) or
become less linear, hitherto hierarchical power relations Collinson and Morgan (2009), both of which offer a range of other “lenses” an analyst
between core/lead corporations and the companies in the could adopt.
(global) production networks have become less stable, less 2 For instance, contributions to Harland et al. (2013).
3 While not all globally active firms are corporations, the majority are likely to be due
settled and perhaps less unbalanced (Herrigel and Zeitlin, to the needs to mobilise large amounts of share capital to operate. Certainly there are
2010: 553–554). As such, the governance of production large privately owned firms (IKEA, Zara to name two) that operate global supply
networks has become less like direct command and control, chains, and large state owned corporations in some extractive sectors, but for the sake
and more like models of governance that have developed in of simplicity I assume that while these varying ownership structures might have some
other areas of the global system. impact on the political economy of the specific company, the governance issues and
power relations within the supply chain networks are likely to be relatively similar.
Given that we already understand global governance as a 4 See the case studies in Kristensen and Zeitlin (2005).
diverse set of institutions across a fragmented and discontinuous 5 This point draws on a confidential briefing from a CSR-team leader for a major US
political domain, it follows that we might also regard the retailer at the World Justice Project IV in the Hague, 2013.
management of a corporation’s global complex as fulfilling a 6 This tripartite schema is drawn from Suchman (1995).
similar (partial, but global) governance function. Therefore, the 7 Burnham used his analysis of the rise of managerialism to make a number of highly
inaccurate political forecasts, but even his critics recognise he presented an early
purpose of the argument above has not been to suggest that the account of an important social dynamic. For accounts of his wider work see Nichols
recognition of the global governance function fulfilled by (1969: 31–39) and Orwell (1946 [1968]).
corporations should replace the analysis of the impact corpora- 8 The drive for control as a (or even the) central aspect of the analysis of corporate
tions have on other institutions of global governance, nor the power, as opposed to property rights or efficiency concerns, is also a central motif of
discussion of how corporate practices may be shaped by Bowman (1996).
9 The approach on standards here differs from Büthe and Mattli (2011) who are
interactions with various international organisations. Rather, by concerned with the development of standards as part of an analysis of global private
adding a third dimension to the account of corporations in global authority and various private actors influence on this process (including corpora-
governance the account of how the contemporary global political tions). However, although their analytical model has a space for private, market-
economy is ordered and governed is made more comprehensive. based standards, they do not include the performance/quality standards deployed
This account is meant to go beyond approaches that recognise within corporations’ networks and as such miss the sort of governance I am
exploring here.
corporations as “partners” in global governance (Lamrad, 2012) 10 Adapted from Dekker et al. (2013) and for Supplier Excellence Alliance, see http://
to suggest that much of the time, within their own networks they www.seaonline.org/.
are the primary agent of governance and not necessarily 11 This term is borrowed from Herrigel and Zeitlin’s discussion of these issues
dependent on other actors or social institutions for their (2010: 533).
legitimacy. 12 This typology was adopted by the United Nations Conference on Trade and
Development in its World Development Report 2013, deploying Gereffi et al. (2005).
As Macdonald (2014) suggests a focus on the political economy 13 See for instance the analysis of the UK supply chain for fresh vegetables discussed in
of the supply chain allows analyses to recognise “the distinctive Dolan and Humphrey (2004).
forms of social power and organisation that exist within these 14 For a discussion of the UNGC, see May (2015: 73–77).
supply chains, and the contested distributional consequences of 15 For an earlier examination of corporations’ power to govern (focussing largely on US
such power”. Moreover, “simple assumptions about the effective corporations) see Eells (1962).
16 For an extended discussion of corporate power which this paragraph quickly sum-
subordination of economic power to state authority in global marises see May (2015: Chapter 4).
supply chains are becoming increasingly implausible” (11,
emphasis in original). Understanding global corporations’ control
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