On April 4, 2018, Washington and Lee law professor Kish Parella presented her work in progress, Compliance as a Bargain, at a roundtable addressing “New Perspectives in International Legal Theory” at the annual meeting of the American Society of International Law.
From the abstract:
One of the most durable puzzles in international law is why nations obey it. Scholars and practitioners have debated the reasons for state compliance for centuries. This debate concerned compliance with international law that is legally binding, albeit not always enforced. More recently, scholars have examined the reasons why states comply with international norms that are not even legally binding, often known as “soft law.” This Essay examines an even deeper mystery: Why do corporate actors comply with non-binding international law? To the extent we witness compliance, what explains it? To the extent we do not, how can we encourage it? The time is ripe to examine this question because of the growing importance of corporate actors as targets of international regulation and the increasing reliance on non-binding institutions as the mechanism for that regulation.
Although this puzzle originates within international law, its answer is found within organizational theory. It is an accepted truth within organizational theory that to understand an organization you must first understand its environment. As organizations, corporate actors rely upon their environment to obtain the resources they need to survive. One important resource is public legitimacy. The important thing about legitimacy is that it is conferred by actors outside an organization. As a resource, an organization must do something in order to obtain it; nothing comes for free. In exchange for providing legitimacy, external actors will demand influence over that organization. It is this ability to provide or withhold legitimacy that gives external actors power over an organization.
This Essay explains this process with reference to transnational corporations. It explains that corporations comply with international institutions they are not legally obligated to obey because of an exchange between legitimacy and influence. Specifically, the information effects produced by legal institutions can result in reputational damage to a corporation. In order to repair its image and regain legitimacy, that corporation pivots to a more reputable organization than itself, regaining legitimacy through association in exchange for adopting the institutions associated with that organization. This analysis is applicable to the wide array of non-binding guidelines, declarations, codes of conduct, principles and other international institutions that increasingly govern the global conduct of corporations and other business actors.