Re-drawing the Boundaries of the Corporate Person and Democratizing Global Markets

This post comes out of the early career workshop ‘Law and Political Economy in Europe’which took place at the Centre for Socio-Legal Studies, at the University of Oxford, on the 7th of October 2019. For all the posts this series, click here.

Laura Dominique Knöpfel –

PoliticsineuropeThe French corporate law professor Jean-Philippe Robé does not grow tired of reiterating that legal scholars (but also political scientists and economists) constantly conflate the economic organisation of a business – the firm – with its legal organisation – the corporation. But, he states, “(l)’enterprise n’existe pas en tant que telle en droit”, the enterprise, the economic organization of a business, does not exist as such in law. What exists in law is the legal fiction of the corporate person, and not the entire economic organization necessary for the business. His astute observation has gained importance as our study of global capitalism turns to the importance of global value chains (GVCs). The concept of the GVC grasps the entire “life cycle” of a product ranging from its design, production, trade and consumption to its disposal and recycling. In a GVC, a lead corporation has the capacity to steer and govern the economic processes. To do so, it must exert a certain degree of control in the equity-based or contract-based relations that link various corporations into a GVC. The emerging global connections, in the words of anthropologist Anna Tsing, are “made up of uneven and awkward links”. At peripheries of GVCs, global capitalism manifests in “unequal encounters” of the global and the particular. In “fragmented but linked economic niches”, nature is turned into a commodity and humans into labour power.

Harms along GVCs have recently found their way into courts in European home state jurisdictions of lead corporations. However, law’s fabrication of the corporate person as an entity with clearly defined boundaries separating it from the societal environment, including GVCs, has prevented a just attribution of civil liability. The conception of the corporation as a separate corporate person interrupts the linkages the GVC creates between the unequal encounters at corporate frontiers and the lead corporation. Related thereto, is the exclusion of affected local communities from decision-making structures within GVCs.

Jean-Phillippe Robé’s insistence on the difference between the corporation and the firm allows a re-consideration of the separation of the corporate person from its societal environment. To illustrate this, let us move into an economic niche of a GVC in which unequal encounters between the global and the local evolve. Picture such an economic niche in the form of a coal mine in northern Colombia (The following empirical insights into an “economic niche” base upon empirical research undertaken by the author of this blog in the Colombian mining sector in the years 2015, 2017 and 2019). As all large coal mines in the country, that coal mine is integrated into a GVC based on an equity-relation with a transnational corporation headquartered in the Global North. Between signing the concession agreement and removing the first lump of coal, the competent state entity needs to grant an environmental license. In order to obtain the license, the mining company is asked to delimit its area of influence, define and describe the local communities within that area and draft plans on how to manage and compensate for the adverse impacts the mining exploitation may generate. As part of the compensation plan, the mining company is obligated to provide for the welfare of local communities, ranging from education, to economic development and health care. The social programs, materializing in tangible projects, create particular proximities between the mining company and local communities.

The particular proximities are not only created by state law but also envisaged in codes of conduct and multi-stakeholder initiatives of globally operating mining corporations. In what has commonly become to be referred to as “self-regulation”, corporations voice commitments to “their local communities”, human rights and the environment. Corporate persons, as good “neighbours”, declare to support the sustainable development of local communities in which they operate. In the social programs, the interactions of public and private regulations manifest.

The particular proximities, constituted by state law, contractual configurations and self-regulatory norms, are expression of reciprocal relations necessary for the smooth functioning of a mining project. Local communities provide land, labour and acceptance and the mining corporation social compensation in the form of welfare-state like tasks. The law, requiring mining company to identify “their” local communities and instituting social compensation programs, amplifies the reciprocity of the relations between the corporate person and its societal environment.

Those relations find no reflection in the manner in which law constitutes the corporate person. They, however, are part and parcel of the economic organization of a GVC in commodities. With Robé, we can start to think about the implications of the legally fabricated closeness for the governance of the relations between a corporation and local communities. As he explained, the government (‘gouvernement’) of the corporation is not the same as the governance (‘gouvernance’) of the firm. Foregrounding the economic organization centralizes those local communities which the law already imagines as forming constitutive parts of the GVC. As (often involuntary) parts of the enterprise of a GVC, its entire economic organization, we might be able to re-imagine the boundaries of the corporation, and supplement corporate external with more corporate internal protection mechanisms.

Laura Dominique Knöpfel is a PhD candidate and Research Fellow at the Transnational Law Institute of the Dickson Poon School of Law, King’s College London and Visiting Fellow at the Grupo de Investigación en Justicia Social, Teoría Jurídica General y Teoría Política of the Pontificia Universidad Javeriana, Bogotá.