Legal dimensions of international corporate social responsibility of multinational enterprises - Статья

УДК 346.1:339.9 Vinnytsia Institute of Trade and Economics, Vinnytsia, Ukraine LEGAL DIMENSIONS OF INTERNATIONAL CORPORATE SOCIAL RESPONSIBILITY OF MULTINATIONAL ENTERPRISES A. KYRYCHUK, A widespread practice today is that many multinational enterprises have annual turnovers higher than that of the GDP of a significant number of less developed countries put together. At the same time, a global liberalization of trade, mounting external debt, and lack of financial capital in developing countries have forced their government to promulgate enticing foreign investment legislation, support corruption, and provide a lax control over the operations of MNEs. Since the addressees and bearers of human rights, labor, and environmental obligations under traditional treaty and customary international law have been states, MNEs have been able to hide behind the state “veil, asserting that globalized companies have no legal status, so they are not subject to a common legal system, and are not liable for damage they cause or risks they generate on a social level. Initiatives taken under the heading of social responsibility may be considered a response to the problem. It is, thus, possible to put forward the hypothesis that social responsibility is the first form of regulation applicable to globalized enterprises. Nowadays, an actual question remains a legal dimensions of corporate social responsibility and the models of its implementation, enforcement, and monitoring. The main purpose of the work is to discover the need for international regulation of transnational companies, and to analyze a legal character of CSR. A notion of corporate social responsibility is discovered in the works of many Ukrainian and foreign researchers. Evolution of the notion is revealed in the works of G. Akerlof, P. Drucker, L. Hrytsyna, S. Lytovchenko. The development of legal character of corporate social responsibility was studied by F. Kotler, F. Kolot, L. Petrashko, I. Bantekas, J. Ruggie. National law is only applicable within individual countries and its effectiveness depends on the resources available to national organisations for monitoring application of the norms. Transnational companies take advantage of the diverse levels of protection they offer workers in dif- © A. Kyrychuk, O. Shevchuk, 2015 ferent countries. The effectiveness of national law is also determined by the value placed by society on legal norms. In contrast, international law is agreed by states, with scrupulous respect for their sovereignty. The impact of international law on national legal systems depends on a formal commitment by each state and the real resources they are able and/or decide to devote to the practical implementation of these international commitments. States remain key players in international law whereas they have ceded their significant role in the globalized economy to transnational companies. There is a real paradigm shift between the legal world, with its borders and states, and the business world, where constraints and obstructions due to national borders have been removed to facilitate the free circulation of capital, goods, and services. The need for regulation of transnational company appears as a result of their capacity to influence government policy and practice. The financial strength of most MNEs and the desire of developing countries to attract foreign investment give the former a significant advantage in investment negotiations with the host state. It means the MNE may impose favourable concessions regarding minimum wages, security measures, limitations in technology transfers, taxation, and others. The larger the investment is, the greater the economic dependence of the host state [1]. Similarly, the larger the democratic deficit of states public governance, the more likely it is that corruption will be rife and pressure to sustain the particular investment status will be maintained. The company will likewise apply significant pressure to the home state in order to achieve the same results at an inter-governmental level, to win contracts, or to promote a political regime that will safeguard the interests of the subsidiary. On a more global level, it has been multinational enterprises that have persistently lobbied industrialized states toward trade liberalization through the lifting of tariffs and domestic subsidies. Generally, there could be following characteristics of global business [2]: a) MNEs are necessary participants in the structure of international law, but that current “soft law does not by itself constitute a sufficient platform by which to recognize international legal personality; b) MNEs substantially outstrip less developed countries in financial and technological terms, and as a result; c) they are able to influence the policy and practice of LDCs. Moreover, they operate across a range of national borders, their operations directly or indirectly affecting a multitude of stakeholders, including individuals and state