September 3, 2020

Rethinking MSIS: Be Wary of the Fox(es), A Power Analysis of MSIs

Posted by Rebecca Tweedie JD'21 and Tyler Giannini

The opening blog in this series laid out two different paths MSIs could have taken:

The allure [of MSIs] was (and still is) obvious. If we bring the right players together, they can learn from each other and solve the given problem by setting up a democratic institution that can prevent future abuses and sanction violators, and governments will not have to pass hard laws and unnecessary regulations. The potential flaws were (and remain) just as obvious—the power imbalances amongst the players are acute and asking industry to voluntarily give up power and self-regulate is a fool’s errand that puts the fox in charge of the chicken coop.

The differences between the institutions that emerge from the two paths may not be as obvious as one may think. The first path describes MSIs as democratic governing bodies where different stakeholders with adequate representation come to agreement on reasonable and effective standards, and these standards are upheld because the governed have bought into the system in exchange for representation, the reputational benefits of membership, and the sanction of competitors who do not play by the rules. The second path still includes a governing body with multiple stakeholders, but the representation is skewed to favor one party (repeatedly industry actors), the standards the institution creates are weak, or its sanctions are ineffective or rarely used. The institutions down each of these roads look quite similar at first glance because there is a “representative” governing body in both, but the second is far less democratic. In the end, the persistent power imbalances in the second have resulted in MSIs that allow corporate actors to call the shots and reap the reputational benefits of multi-stakeholderism.

In hindsight, the road to corporate capture was predictable. MSIs’ flaws were baked in from the outset, and it comes down to power—the relative power of the different stakeholders and the power embedded in the MSIs as institutions themselves. MSIs were created without mechanisms to ensure meaningful power sharing or restraint of the outsized power of industry, all but ensuring that MSIs would not fulfill their promise to prevent and remedy human rights abuses and hold corporations to account.

It is easier to analyze them now, having watched these power dynamics play out over the years, and to think about how and why the fox has gained the upper hand. The experience with corporate capture and the inability to constrain corporate power can be compared to other democratic endeavors. For example, the trajectory of MSIs resembles that of failed democratic governments. In How Democracies Die by Steven Levitsky and Daniel Ziblatt, the authors examine how democratic regimes give way to autocracies and authoritarianism. In other words, when power concentrates in the hands of one or a few. They are particularly concerned with the “electoral road” to authoritarianism, which occurs when elected individuals undermine democracy through engaging in what appear to be legitimate legal processes. These processes can be “dangerously deceptive” as they are not a classic coup d’etat and are often cloaked in calls to “improve” the system. There is “no single moment” that “crosses the line” when the system is captured; instead, a “veneer” of democracy often remains while governance actually erodes in a way that is “almost imperceptible.” Unfortunately, this story has some eerily familiar warning signs for the field of MSIs. The electoral road to authoritarianism is one where a would-be autocrat comes to power through legitimate means, often with the aid of institutional elites who choose to overlook their autocratic tendencies, or believe the autocrat can be controlled by working with them. Once in charge, the autocrat is either checked by robust democratic norms, or they consolidate power, “rewriting the rules of politics to tilt the playing field against their opponents. The tragic paradox of the electoral route to authoritarianism is that democracy’s assassins use the very institutions of democracy—gradually, subtly, and even legally—to kill it.” (See How Democracies Die at 5–8.)

What is the parallel here? We can imagine this sentence: “The tragic paradox of MSIs is that human rights’ assassins use the very institutions of human rights—gradually, subtly, and even legally—to kill them.” Instead of a politician with authoritarian tendencies, we have corporations, often with dubious human rights records who are invited to participate in standard-setting bodies and accountability mechanisms. The theory goes that to be effective MSIs require broad buy-in from industry, giving other stakeholders reason to include these bad actors. But the experience of MSIs indicates that once at the table, industry can and does use the institution to push for weaker standards and then evade compliance with human rights. Without sufficient power to control industry, the institutions end up serving corporate interests.

The fox guarding the chicken coop analogy also helps us better understand why corporate capture is so predictable. As Levitsky and Ziblatt point out, established democracies have guardrails strong enough to reign in powerful threats. The ability for MSIs to weather bad actors is more in doubt than that of democracies, however. Many MSIs were born out of human rights crises, during which perpetrators of human rights abuses—certain brands and at times entire industries—were invited to participate in the creation of these new institutions. If there already were a coop and you invited the fox to guard it, we’d worry. But the case of MSIs is even more troubling: here, the foxes were not just invited to guard the coop, but they were invited to design and build it.

As a description of the power dynamics of many MSIs, the fox analogy suggests that MSIs may not only fail to be rights holder-centric; they may not even be rights-centric. The right to remedy is an established human right, but as MSI Integrity’s report, Not Fit-For-Purpose, makes clear, they have not been successful in providing remedies for harms. If these institutions do not uphold such fundamental rights like that to a remedy, then the power wielded by industry in MSIs may have undermined human rights in a more profound way than solely through the exclusion of rights holders. They may truly be institutions by and for corporations rather than human rights institutions.

Is this path of corporate capture inevitable? No, but preventing severe forms of corporate capture require some major adjustments to the power structures in this regulatory space—from mindset shifts to better gatekeeping of those with poor human rights records, to placing primary decision-making power in the hands of non-corporates.

Let’s play with the fox analogy a bit more. We see three alternative paths for building institutions that create better human rights outcomes.

First, the foxes become vegetarian.

Second, the farmer does its job.

Third, the chickens are in charge.

Vegetarian Foxes

This requires a clear and major mindset shift. There would need to be a change in culture—where the new generation of foxes are vegetarian. This is a normative shift away from the sole primacy of profit-maximization to a more human-centered capitalism. There is a need for a human-centered capitalism that mitigates the worst dimensions of the foxes and the structural issues that come with foxes dominating leadership and decision-making.

But asking foxes to become vegetarian is no small order. And even if they did for a while, could you trust them not to relapse? Indeed, no matter what one thinks of capitalism, it has at least some predatory elements. Even the most well-meaning vegetarian fox is going to be hard-pressed to survive out there in the wild when all its competition is eating meat. Such a fundamental change in mindset would need to be supported by new laws and policies that prevent the breakdown of voluntary shifts away from profit-maximization.

It may be more realistic to strive to get rid of rabid foxes. In this variation on option one, unless the group of foxes is willing to isolate and control its worst offenders based on fundamental human rights, no governing institution is likely to make it as an effective human rights body. Levitsky and Zablatt argue that one of the most important roles in a functioning democracy is the gatekeeping function of political parties. The gatekeepers in our MSI analogy are the industry bloc (the group of foxes). They must step up and embrace the need for remedies, for example, if the regulating institution is to be called a human rights institution.

The Farmer Steps Up

This, simply put, is government oversight. A more powerful player oversees and punishes bad actors and makes sure the system is sustainable and equitable. But it is hard to rely on government oversight in this realm of voluntary initiatives, especially as MSIs most often have been set up because the government has not been willing or able to act. The power imbalances at work in MSIs, however, highlight the need for government involvement and the dangers of abdicating such oversight to private governance.

Community Governance

The rise of worker-driven social responsibility and other models designed by rights holders and affected communities demonstrates the potential of private governance when there is a real shift in power among the stakeholders. The limits of the fox analogy are most acute here, as the helplessness of chickens does not connote the strength and agency of workers and communities, and the advantages they have in designing governing institutions that best fit the industry and the rights—their rights—that are at stake. The success of worker-driven consortiums makes this abundantly clear. Especially in the absence of government oversight, these models—where the fox does not build nor guard the coop—offer the most long-term promise for human rights protection.

We know that MSIs may not be perceived as authoritarian or undemocratic, and that many of our colleagues contest the extent of corporate capture in the field. For us, however, this is what makes authoritarianism a good analogue. The power that industry wields in MSIs can be subtle and seem reasonable. And yet, or precisely because of these qualities, there are few effective tools with which to check it. Indeed, it is this insidiousness that makes us wary of the fox.

Rebecca Tweedie JD’21 is a student in the International Human Rights Clinic at Harvard Law School and a former intern at MSI Integrity.

Tyler Giannini is a Clinical Professor of Law and directs the Human Rights Program and International Human Rights Clinic at Harvard Law School. He is the board treasurer and co-founder of MSI Integrity.

This is the fifth contribution in a joint blog series by the International Human Rights Clinic and MSI Integrity. The series will critically examine the role and value of MSIs in business and human rights; it coincides with a new report, Not Fit-For-Purpose, which compiles experience and insights over the last decade and explores cross-cutting trends and lessons learned about MSIs, as a field, from a human rights perspective.

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