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“If the program of Realists was to lift the veil of legal form to reveal living essences of power and need, the program of the Critics is to lift the veil of power and need to expose the legal elements in their composition” Robert Gordon “Critical Legal Histories”, (1984) 36 Stanford Law Review, 57-125, 109

  1. A vignette

In January 2020, and in the midst of turmoil sparked by investors, consumers and activists (led by the ‘Fridays for Future’ movement established by Greta Thunberg), the CEO of Siemens AG Joe Kaeser announced that “we have evaluated all the options and have concluded that we must fulfil our contractual obligations”. The turmoil had escalated out of a €18m contract signed by Siemens to provide the rail infrastructure for a coalmining project in Australia (the Carmichael mine), which openly contradicted the commitment made by Siemens to become carbon-neutral by 2030. The decision was received with contempt by the public  as well as Siemens’ shareholders, even though it was announced alongside a range of parallel measures pursuant to realising the firm’s declared commitment to mitigate climate change.

This event is just a vignette in an enduring saga of moral strains and social conflicts caused by the exercise of corporate power. Yet, as the current configuration of Multinational Corporations (MNCs) is one of the main causes of socio-economic inequality and environmental degradation, this vignette also epitomises why transforming MNCs towards more socially and environmentally sustainable pathways is currently crucial. This insight leads to several pressing questions. What explains that many MNCs (such as Siemens) still find it rational to engage in such polluting means of production, despite having made substantial commitments towards sustainability goals? How can the activities of MNC’s be effectively transformed towards more sustainable pathways? Building on the attention that these questions have gained through recent judicial decisions, in this post, I elaborate on why this transformation requires us to start ‘thinking infrastructurally’ about corporate law, a.k.a. ‘InfraCorp’.

  1. Beyond established paradigms: the ambition of InfraCorp

Driven by a professed ‘end of history’, the predominant mode of legal thinking among practitioners, policymakers, and scholars in corporate law has nowadays converged in micro-economic models which  explain the organisation and operations of MNCs. Grounded in a contractarian view of the firm that represents its social bases as a set of agency problems, these models have successfully dis-embedded MNCs from their social contexts by equating the purpose of the company with maximising shareholder value and subjecting this value to the disciplining role of capital markets for corporate control. The operations of MNCs have thus become effectively channelled towards the powerful efficiency demands of a financialised economy.

The mainstream response to this model in contemporary legal thought and progressive reform projects entails different approaches to re-socialising MNCs. In general, these approaches proceed through introducing ‘reflexive’ or ‘experimental’ mechanisms in MNCs operations (such as stakeholder consultation, social reporting, or human rights due diligence), seeking to stimulate MNCs ‘responsiveness’ to marginalised interests and thereby enhance their social and environmental sustainability. However, as the Siemens vignette illustrates, despite all the ‘structural-couplings’, these re-socialising aspirations have not only been utterly innocuous against the disciplining role and functional pressures of capital markets. Ironically, these couplings have also served as means to commodify those very same social rationalities through colonising modes of “market capture”.

InfraCorp seeks to overcome these structural constraints by elaborating an innovative account about the place and role of law in corporate activity. Instead of viewing Law as either an exogenous agent enabling or restraining corporate preferences – or reducing Law to an epiphenomenon of material relations of production –  in line with Gordon’s epigraph, InfraCorp critically examines the way that law constitutes or produces those corporate preferences (and can thereby transform them towards more socially and environmentally sustainable pathways). In other words, and returning to the Siemens vignette, the task is to uncover and scrutinise how the normativity evoked by ‘must’ in the CEO’s decision that ‘we must fulfil our contractual obligations” is already configured by legal means. This task involves building upon the constitutive place and performative roles of law, by extending these approaches to the practices of MNCs. Yet, I hold, realizing this task also requires  transcending the form-structure binomial that hitherto has organised much of critical legal thinking and to start “thinking infrastructurally” about corporate power in the global political economy.

  1. The targets of InfraCorp

Among other insights, InfraCorp unveils how the homo oeconomicus that the CEO of Siemens Joe Kaeser embodies does not take action in a vacuum. The calculative rationality that Kaeser deploys to justify Siemens’ decision to perform the coalmining contract (and to have signed the contract in the first place in spite of all the foreseeable reputational and mitigation costs) is rather crucially dependent upon certain legal-regulatory infrastructures that cognitively govern what counts as economically ‘rational’ action in the first place. The programme of InfraCorp foregrounds at least three specific legal-regulatory infrastructures currently shaping MNCs preferences in the global political economy. First, the legal-regulatory infrastructure provided by predominant accounting institutions (i.e. US GAAP, IFRSs, CAP), which govern what counts as income or wealth in financial markets. Second, the legal-regulatory infrastructure provided by predominant stock-exchange institutions (i.e. NYSE, NASDAQ, OTC), which govern how the price of shares and other financial instruments is determined. Finally, the legal-regulatory infrastructure provided by the global conglomerate of risk-governance institutions (including consultant firms such as Deloitte, PwC, or Ernst & Young), which govern perceptions of probability and uncertainty in contemporary governance. In thinking infrastructurally about the law of MNCs, my import is that these diverse institutions do not just report income, price, or risk, but performatively produce the modes of knowledge that they purport to describe, through private regulatory choices that actively create and distribute value in the global political economy by defining what can be economically valued and how it is valued.

InfraCorp thereby provides an original synthetic way to study and appraise the prevailing economic ‘rationalities’ that sustain MNCs operations, by taking three of the most determinant legal-regulatory infrastructures that constitute these ‘rationalities’ as a point of departure. In this sense, InfraCorp aligns itself with the agenda on a “new economic sociology of law”, by tracing how the prevailing ‘rationalities’ informing MNCs decision-making are constituted, entrenched, and mobilised through these three legal-regulatory infrastructures. The overarching aim of this socio-legal research is both cartographic and normative. Based on a granular understanding of the processes of value production and distribution in contemporary market economies, new means and sites of tactical interventions in those processes can be identified to channel MNCs operations through more socially and environmentally sustainable paths.

From a policy perspective, the main message that InfraCorp conveys is that if social and environmental sustainability criteria are integrated within these private regulatory choices, the very same business rationality of MNCs can be changed. As a consequence, these regulatory reforms can lead to an institutionalised transformation of the global economy towards social and environmentally sustainable pathways. Methodologically, instilling this transformation first requires  developing a socio-legal cartography of how these institutions operate. Normatively, this transformation entails appraising the nature and material impacts of their regulatory choices. Politically, it means that instead of protesting outside Siemens, ‘Fridays for Future’ may more productively protest outside the offices of some of these systemically relevant private regulators.

(Photo: Aditya Vyas)