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Who fills the Global Governance Gap?
Rethinking the Roles of Business and Government in Global Governance
Forthcoming in Organization Studies, 2019
Abstract
Political CSR (PCSR) has made great strides towards a better appreciation of the political
involvement of corporations in global governance. However, its portrayal of the shifting
balance between business and government in the globalized economy rests on a central,
yet largely uncontested assumption: that of a zero-sum constellation of substitution in
which firms take on public responsibilities to fill governance gaps left by governments.
This conceptual paper expands the PCSR perspective and makes three contributions to
the debate on the political role of business and the role of government in global
governance. Firstly, it deconstructs the problematic assumptions underlying the zero-
sum notion of governance gaps filled by corporations. Secondly, it offers a variable-sum
mapping of how private and public authority interact in global governance where
substitution is only one of four constellations. The mapping identifies ‘soft steering’ as
prominent mode of governments governing business conduct.
Thirdly, the paper theorizes ‘orchestration’, a ‘soft steering’ tool discussed in the global
governance literature, from an organizational, corporate perspective. It identifies the
mechanisms through which orchestration may address the barriers to corporate
engagement with the public good and applies these mechanisms to the case of the Global
Reporting Initiative.
Keywords
corporate social responsibility, government, global governance, orchestration,
regulation, state
Author:
Burkard Eberlein, Schulich School of Business, York University, Toronto, Canada
eberlein@yorku.ca
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Introduction
Globalization opens markets for corporations but outstrips the capacity of states to
regulate cross-border business conduct for the public good (e.g. Kobrin, 2015). This is the
consensus in the scholarly business literature, notwithstanding disagreements on how to
interpret the decline of state and the rise of business power in a globalized economy (for
a critical perspective on corporate power see Levy, 2008; Banerjee, 2014). The
burgeoning Political CSR (PCSR) stream has made significant strides towards a better
appreciation of the political involvement of corporations (Matten & Crane, 2005; Scherer
& Palazzo, 2007, 2011; Crane, Matten & Moon, 2008; overview in Frynas & Stephens,
2015). However, a central, yet largely uncontested assumption in PCSR is that of a zero-
sum constellation of substitution between business and the state: regulatory authority is
shifting from governments to corporations that ‘step in and fill the governance void and
take responsibility for issues of public concern’ (Scherer, Palazzo, & Matten, 2014, p. 148;
Scherer & Palazzo, 2011).
The image of state failure and ‘institutional voids’ (Khanna & Palepu, 1997) filled by
firms acquiring a ‘new political role’ (Scherer & Palazzo, 2011) suggests a zero-sum notion
of regulatory share that is held by either business or the state. This neglects the historical
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enmeshment of business and politics and downplays state responsibility (Djelic &
Etchanchou, 2015; Mäkinen & Kasanen, 2016). Specifically, it is incomplete in three
respects. Firstly, to assume a generalized erosion of government power and capacity
ignores important differences between issue areas and types of governments. Secondly,
it is unclear in the PCSR approach to which extent a) corporations are willing and able to
take on public responsibilities and b) those activities result in closing the governance gap.
Also, the political contribution of firms may depend on indirect government involvement,
such as support, or regulatory threat (Börzel & Risse, 2010).
Thirdly, the PCSR approach operates with a normative conception of the political
firm that centers on the notion of corporations as stewards of the public interest when
governments are absent or fail. This perspective sidesteps the empirical role of
corporations as self-interested political actors in global governance (e.g. Willke & Willke,
2008), where motivation, ability and complexity constitute barriers to corporate
engagement with the public good.
Against this background, the paper makes three contributions. Firstly, it
deconstructs the problematic assumptions underlying the substitution approach to the
business-government nexus. It challenges the assumption that corporations, as
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‘specialized economic organs’ (Ruggie, 2008, 2017), are willing and able to fully accept
public responsibilities (Whelan, 2012). Secondly, it proposes a novel mapping of four
ways how private and public authority interact in global governance. In addition to
substitution, which is the main approach under the PCSR label, it identifies three
constellations that capture the various roles of governments in business regulation:
support, shadow of hierarchy, and soft steering. Thirdly, it theorizes the prominent
constellation of soft steering, from an organizational perspective, using the tool of
‘orchestration’ as an example. It identifies mechanisms through which orchestration, a
form of indirect, soft governance of business conduct, may address the barriers to
corporate engagement with the public good. And it theorizes how corporations engage
with orchestration from a political management perspective.
With these contributions the paper responds to calls to better integrate state
power and regulation into PCSR accounts and offers an integrated critique and expansion
of PCSR (e.g. Frynas & Stephens, 2015; Mäkinen & Kasanen, 2015; Schrempf-Stirling,
2016). Furthermore, it theorizes how governments may still govern business conduct in
global governance arrangements where traditional hierarchical authority is less available.
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The paper is organized as follows. The first section reconstitutes the scholarly
antecedents of the PCSR stream. The second section unpacks the zero-sum assumption
underlying PCSR’s notion of governance gaps and how they are filled under the
constellation of substitution. The third section develops the mapping of four
constellations of government involvement in business conduct. The fourth section
theorizes the most prominent constellation, soft steering, from an organizational
perspective. It focuses on the tool of orchestration and illustrates theoretical mechanisms
drawing on the example of the Global Reporting Initiative. The fifth and final section
offers discussion and conclusions.
Antecedents of Political CSR: A legacy of neglecting governments?
In business scholarship, International Business (IB) has the longest tradition of
engaging with business-government relations, with a focus on the political risk of
multinational enterprise investment in foreign jurisdictions (Kobrin, 1979; Boddewyn &
Brewer, 1994). Yet, ‘the view of institutions in IB tends to be thin’ (Jackson & Deeg, 2008,
p. 541) as governments are reduced to external constraints in a risk environment. This IB
tradition extends to the broader nonmarket approach (Baron, 1995; for a review Mellahi,
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Frynas, Sun & Siegel, 2016). The corporate political activity (CPA) stream follows the logic
of political risk (e.g. Hillman, Keim & Schuler, 2004). To manage that risk, firms engage in
different political strategies, for example lobbying (Rajwani & Liedong 2015, p. 274).
Similar to IB, a severe limitation of CPA is an institutionally thin market model of
transactions between self-interested public officials and business firms.
The thin ‘nonmarket risk’ approach has hampered a more refined understanding of
the state-business nexus. This applies to CSR research to the extent that the search for
the instrumental ‘business case for CSR’ (Porter & Kramer, 2006) has been central to
mainstream scholarship (e.g. Barnett & Salamon, 2012). To be sure, several authors have
offered more complex conceptualizations of state-corporate interactions (e.g. Moon,
2002; Levy & Egan, 2003). Also, the evolving CSR scholarship shows how CSR practices
interact in complex ways with governments, corporate governance and national business
systems (Gond, Kang & Moon, 2011; Kang & Moon, 2012; Yamahaki & Frynas, 2016).
Several studies foreground the social embeddedness and political determinants of
corporations’ public responsibilities (Campbell, 2007; Matten & Moon, 2008; Knudsen &
Moon, 2017). Yet, these institutional contributions have not shifted the mainstream
scholarship towards a ‘thicker’ account of the state-corporate nexus.
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Political CSR: bringing political firms in to fill governance gaps
The rise of PCSR reflects the dissatisfaction with this instrumental conception of
CSR that has kept the political sphere at a distance. PCSR sees an increasing political role
for business firms, and for multinational corporations in particular, in a globalized
economy (Matten & Crane, 2005; Crane et al., 2008; Scherer, Palazzo & Baumann, 2006;
Scherer & Palazzo, 2007, 2011; Scherer et al., 2014). ‘Political’ is defined as firms
assuming public roles and responsibilities, notably (self-) regulation and provision of
public goods, that have previously been the sole prerogative of governments (Scherer &
Palazzo, 2011, p. 901, 903).
The assumption is that globalization erodes nation-state powers and regulatory
capacity. This post-national constellation is said to leave a ‘governance gap’ (Crane et al.,
2008, p. 205), or a ‘regulatory vacuum’ (Scherer & Palazzo, 2011, p. 899). Corporations
step in and ‘fill’ this presumptive empty space by assuming quasi-governmental
responsibilities (Valente & Crane, 2010). Corporations do not ‘replace governments
completely’, but ‘they take on some of the roles and responsibilities previously assigned
to government’ (Crane et al., 2008, p. 86). This zero-sum image of a relationship between
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state failure and business assuming orphaned public responsibilities is problematic in
several analytical respects, as summarized in Table 1.
Table 1 here
(1) The governance gap: how much have governments retreated?
Frynas & Stephens (2015, p. 502) question ‘the axiomatic assumption of leading
scholarly contributions on political CSR about the loss of power by national governments
in a globalized economy’. First of all, consider that governments have purposefully
outsourced public responsibilities (e.g., utilities and infrastructure) to private actors
(Mayer & Philipps, 2017, p. 148; also see Kinderman, 2012). Governments may choose to
privatize and deregulate, not because of a lack of power, but as a matter of political
choice, as much as this choice may be informed by neo-liberal scripts.
Furthermore, we need to distinguish between different issue areas. PCSR is
essentially concerned with the social and environmental externalities of global
production (Scherer, Rasche, Palazzo & Spicer, 2016; Schrempf-Stirling & Palazzo, 2016).
While there has been state retreat, or state absence (in the Global South) relating to
social and environmental protection, states may assert their authority in other areas such
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as trade and economic policy, immigration, security (e.g. Wood & Wright, 2015) so that
the assumption of a generalized loss of state power needs to be nuanced.
Secondly, a blanket loss-of-state-power assumption ignores vast power and
capacity differences, and, crucially, different political choices, between national
governments and regions of the world. Major global powers such as the U.S. command
sufficient market size, and political influence, to be global rule-makers in many instances
(Drezner, 2006). Domestic rules passed in powerful countries may have significant
extraterritorial effects on standards globally. By contrast, many poorer countries in the
Global South have little influence over the terms of globalized production, and their
regulatory capacities are lower. Yet, to assume that Southern governments simply align
with Northern buyer demands for either low or high standards, ignores increasing
evidence that some governments reassert control over standards that apply to their
domestic industries (Giessen, Burns, Sahide & Wibowo, 2016; Schleifer, 2015). At the very
least, governments retain some ‘negative’ power of disrupting market processes, and to
obstruct corporations to take on public responsibilities (e.g. Börzel, Hönke, & Thauer
2012, p. 25-26).
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In sum, states are not simply rendered ‘powerless’ by global forces (Weiss, 1998).
The state-business dichotomy informing PCSR overlooks that corporate and state powers
are deeply enmeshed and not necessarily in a relationship of substitution, as the notion
of the governance gaps suggests (Mattli, 2015). Rather, the boundaries between the
private and the public sphere are constantly negotiated (Davis, Whitman & Zald, 2008;
Djelic & Etchanchu, 2015). As such, the size of a governance gap is politically contested
and historically contingent.
(2) The governance gap: will corporations fill it?
Turning to the business side of the zero-sum equation we confront two areas of
concern in the PCSR approach: (a) the unclear scope and boundaries of governance
contributions by firms, (b) the motivation and ability of corporate commitment to the
public good.
(a) Scope and effectiveness of political contributions
Firstly, we know surprisingly little about the empirical extent to which corporations
have assumed ‘new’ public responsibilities. PCSR is not clear about the precise scope of
the political role of business, beyond stating the two areas: ‘voluntarily contributing to
self-regulation’ and ‘producing public goods that are not delivered by governments’
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(Scherer & Palazzo, 2011, p. 903). What is the required scope and depth of a truly political
role, as opposed to non-political CSR, or non-CSR business behaviour? If we just look at
business’ role in self-regulating the negative externalities of global production, it is
unclear which level of correction of externalities corporations need to accept so as to act
in accordance with public interest concerns (Tempels, Blok, & Verweij, 2017).
A second question is how effective corporations are in filling global governance
gaps. While we know little about specific PCSR firm activities, there is a vibrant literature
on the broader phenomenon: private governance arrangements through which firms
participate in the development of voluntary standards for business conduct (e.g.
Braithwaite & Drahos, 2000; Cashore et al 2004; Graz & Nölke, 2008; Abbott & Snidal,
2009). These standards are not backed up by law but by the scrutiny of global NGOs and
the supply chain exposure of branded retailers. There is significant doubt as to how
effective these standards are, both in terms of quality and compliance (Prakash, 2007;
Vogel, 2010; Bartley & Child, 2014).
The consensus in the literature is that private initiatives by themselves are not
sufficient to even partially fill the governance gap. Based on the most thorough
investigation to date of compliance efforts of major global corporations regarding labour
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standards in their global supply chains, Locke (2013, p. 174) concludes that ‘private
compliance programs appear unable to deliver on their promise of enforcing labor
standards in today’s new centers of global production’ (Locke, 2013, p. 174; also Bartley,
2010; Fransen, 2013). ‘The most effective and sustainable approach (…) will require a mix
of novel forms of private and public regulation’ (Locke, 2013, p. 2; also see Toffel, Short
& Quellet, 2015). A zero-sum substitution approach does not capture that private firm
initiative and public regulation depend on each other, because it locates regulatory
responsibility in either the firm or the government, not in both.
b) Corporate motivation and ability
Why would corporations accept public responsibilities beyond business cases for
CSR? We posit that motivation and ability as well as environmental complexity are the
key barriers to corporate engagement with the public interest, in addition to normative
legitimacy concerns well covered by PCSR.
The instrumental CSR approach can only account for CSR commitments that fall
under the business case for CSR (Porter & Kramer, 2006), including the reduction of
material and reputational risk. However, what if public responsibilities go against the
economic ‘logic of expected consequences’ (March & Olsen, 1989)? To be sure,
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corporations also seek ‘appropriateness’, responding to isomorphic industry pressures or
to normative expectations embedded in the social context (Matten & Moon, 2008). Yet,
the PCSR approach does not specify scope conditions under which corporations accept
certain societal expectations at the cost of instrumental concerns.
A second reason for rejecting public responsibilities is the complexity of the global
governance environment. It is characterized by the proliferation of non-state norms and
organizations that voice multiple expectations of corporate conduct (Haufler, 2018;
Weiss, 2013). This creates strong uncertainties for corporate decision-making (Duncan,
1972). It is difficult for companies to know, first, what the relevant regulatory gaps are;
second, which policies could contribute to reducing negative externalities; and third,
which contributions they could make, in terms of a business case or of expected
legitimacy gains. As a short cut, companies might simply focus on areas where NGO
pressure is strongest. In any case, the PCSR commitment of individual firms is likely to be
very selective. We should not expect firms to accept full public responsibilities and to
‘close’ governance gaps. In fact, the literature on the business-development nexus has
provided ample evidence in support of this conjecture (Frynas, 2005; Jenkins, 2005; Jamal
& Mirshak, 2010).
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(3) Political Conception of the Firm: Normative over Positive?
A central concern of PCSR is the normative justification of an enhanced political role
of corporations: how to make it more democratically legitimate? The answer is to embed
corporate political activities in Habermasian, deliberative processes and institutions that
ensure a public interest orientation (Scherer & Palazzo, 2007). The common good
orientation is key to PCSR’s normative definition of the political (Scherer, 2017).
Notwithstanding the larger question how effective deliberation is to tame the profit
motive (Sabadoz & Singer, 2017), the problem is that PCSR jumps directly to the
normative solution of corporations as stewards of the public interest, without prior
positive analysis of the corporate behavior to be democratized.
We know that corporations make some contributions to business regulation on the
global level, often through multi-stakeholder initiatives or global public policy networks
(Mena & Palazzo, 2012; Detomasi, 2007); hence, they play a political role of substitute
public actors in some instances. Yet, this role is limited by corporate ability and
motivation, so that deliberative public-interest mandates may in practice over-extend the
corporation’s character as ‘specialized economic organ’ (Ruggie, 2008, p. 16). In addition
to any public interest role, corporations pursue their own interests, as ‘political actors in
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the arena of (global) governance’ (Willke & Willke, 2008, p. 569). The larger point is that
careful positive analysis of the extent of corporate political engagement, and how it
interacts with governments, should precede the normative quest to democratize
presumed political activities.
Rethinking the political role of business and government in global governance
The PCSR stream has focused on one constellation of how private (firm) and public
authority interact, namely substitution where corporations act as substitutes for absent
or failing government action.
The broader global governance literature suggests a more complex picture. Clearly,
the state has lost its monopoly as governor to a plural pattern (Cerny, 2010) where firms
and industry groups, civil society actors, and multi-stakeholder institutions assume
regulatory roles. A popular approach maps this complex regulatory landscape onto three
actor types – states, firms, NGOs – in the ‘governance triangle’ (Abbott & Snidal, 2009).
A more interactive perspective highlights that private schemes compete, collide, or
collaborate with other non-state initiatives as well as with state- based law and regimes
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(Eberlein, Abbott, Black, Meidinger & Wood, 2014). Eschewing zero-sum notions, how
can we make sense of this shifting relationship?
The extant literature offers two options. The first is based on a division of regulatory
labor between actor groups. The concept of disaggregated and shared political authority
(Genschel & Zangl, 2014; Weber, 1978) suggests that we can think of different actor
groups as exercising different dimensions of political authority. For example,
corporations exercise a share of ‘regulation’, the authority to make collectively binding
decisions, when they develop self-regulatory standards that are recognized as binding.
However, they lack input legitimacy (a democratic mandate to make decisions), another
dimension of political authority. This multi-dimensional perspective – authority involves
different, at times diverging dimensions - allows overcoming zero-sum notions of shifts
in authority.
Typically, the different authority roles played by business, civil society, and
government actors reflect different competences, leading to a division of regulatory labor
in the global governance triangle (Abbott & Snidal, 2009, p. 66; Rasche, de Bakker, &
Moon, 2013). For example, large corporations bring superior expertise and operational
capacity to the regulatory table. But they are deficient in terms of independence and
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representativeness as they are not neutral parties. While intuitive as a framework to map
complementary actor competences and contributions, this approach tells us little about
how private authority dynamically intersects with public authority.
A second approach focuses on the relational character of ‘interaction’ and offers
broad typologies such as competition versus cooperation (e.g. Tosun, Koos & Shore,
2016; Eberlein et al., 2014). While it usefully addresses the interaction aspect directly,
this approach does not fully capture the hybridization of public and private authority,
where the focus is less on the nature of the relationship and more on the governance
implications of ‘blending’ public and private authority. Also, existing typologies do not
generate sufficient insight into how governments may still govern business conduct
where traditional authoritative control is diminished.
Therefore, our mapping (Table 2a) depicts government along two dimensions: its
role is either ‘hard’ when it invokes or uses traditional regulatory or judicial authority; or
it is ‘soft’ when it deploys non-coercive tools such as ideational or material inducements
or enrols voluntary private contributions. We combine this distinction with the political
role of business as either regulator, when it produces rules for corporate conduct, or as
regulatee, whose conduct is being regulated by governments for a public purpose.
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Table 2a here
In addition to ‘substitution’ this 2x2 mapping yields three analytical constellations:
support, shadow of hierarchy, and soft steering (Table 2b).
Table 2b here
(1) Substitution
This is a constellation where private and public are alternatives to each other. A
good example are the HIV/AIDS community health programs offered by multinational
automotive companies in South Africa where the national government failed to provide
adequate services (Thauer, 2013). In global governance, substitution typically relates to
corporate (self-)regulatory contributions, individually or through multi-stakeholder
institutions such as the Roundtable on Sustainable Palm Oil (RSPO), in situations where
governments abstain or fail to address a public interest issue. Our concept of substitution
expands the PCSR zero-sum, one-way approach to substitution in three respects. One is
to acknowledge that substitution is likely partial and selective, due to firms’ limited ability
and willingness. Two, political choice is an important source of government’s absence,
not only a lack of state capacity or authority. Three, substitution is not a one-way street.
Governments may step in and replace private regulatory initiatives by public policies and
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standards (reverse substitution). In fact, this is a significant trend in the Global South in
relation to Northern, buyer-imposed standards (Giessen et al., 2016; Schleifer, 2015).
Under substitution, then, governments can only induce responsible business conduct
either by democratizing private action through deliberative processes (as per PCSR), or
by directly assuming or taking back responsibility (reverse substitution).
(2) Support
Under this constellation, governments play an active role in enabling private
regulatory regimes (Bartley, 2018; Gulbrandsen, 2014; Knudsen & Moon, 2017). This goes
beyond a background government role where corporations are embedded in a set of
public institutions that broadly guide their conduct (Campell, 2007; Matten & Moon,
2008). The nature of the relationship is complementary, with private goals and public
objectives broadly aligned. Governments encourage, facilitate, or endorse private
regulatory initiatives, without prescribing or directing them (for a typology see Fox, Ward
& Howard, 2012, Gond et al., 2011). For example, governments enact public procurement
policies that support private certification schemes, act as client for certification, or offer
political endorsement (Gulbrandsen, 2014, p. 77). Here, the mechanism for governments
to encourage responsible business conduct is to enlarge the space for business-case CSR.
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(3) Shadow of Hierarchy
This constellation looks at private governance regimes as operating in the shadow
of direct government intervention (‘gorilla in the closet’, Verbruggen, 2013). Private
governance is ‘most likely to be effective if a strong state looms in the background which
sees to it that non-state actors contribute to the provision of the collective good’ (Börzel
& Risse, 2010, p. 113). If the host state is too weak to threaten regulation, functional
equivalents are necessary to counter opportunistic behaviour by corporations. These
could be external shadows, i.e., international organizations or courts that have leverage
in host countries (Börzel, Hönke, & Thauer, 2012, p. 29). Schrempf-Stirling & Wettstein
(2015) demonstrate how litigation in courts can lead corporations to adjust their human
rights policies even if they are not found guilty.
A first sub-category of this constellation is extraterritorial effects of domestic
legislation. Prominent examples are the global implications of US legislation post-
financial crisis, notably through the Foreign Corrupt Practices Act (FCPA), and the Dodd-
Frank Act in securities regulation (Morga, 2012). The former’s focus on anti-corruption
(including money-laundering) has had wide-ranging global implications, for example for
tax havens such as the Swiss banking system (Emmenegger & Eggenberger, 2018). The
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threat of US prosecution, or of losing access to US listing and markets, has a regulatory
alignment effect on companies outside of US domestic jurisdiction.
A second sub-category is the so-called ‘hardening’ of soft law. This describes a
situation where private codes and standards are referenced or incorporated in hard
domestic or international law (Newman & Bach, 2014). A good example is sustainability
reporting. Several national governments (e.g. Denmark, France, India, South Africa) and
the EU (EU Directive 2014/95/EU) require companies to report on their sustainability
performance according to a set of private reporting frameworks (KPMG, 2015). In a
similar vein, courts reference private standards such as the ‘Ruggie principles’ on business
and human rights and turn soft law over time into harder jurisdiction (Choudhury, 2017).
Hence, the dominant government tool is regulatory threat, or ‘hardening’, to elicit
corporate public interest contributions.
(4) Soft Steering
The fourth constellation, by contrast, does not involve any traditional authority.
Governments play a catalytic role, mobilizing, enrolling and leveraging voluntary private
contributions for a public purpose, as discussed under the label of meta-governance
(Kooiman, 2000; Torfing, Peters, Pierre & Sørensen, 2012). Different from the support
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constellation, governments do not simply complement but seek to initiate and steer
private governance. And they often do so indirectly, through ‘regulatory intermediaries’,
that in turn engage regulatory targets, i.e. firms (Abbott, Levi-Faur & Snidal, 2017). A good
example is climate governance where the UN Secretary General initiated the climate
‘voluntary commitment system’, promoting ‘multi-stakeholder cooperative initiatives
that could function as intermediaries, like partnerships and action networks, eliciting,
coordinating and managing individual commitments’ (Abbott, 2017, p. 11). As further
developed below, soft steering offers firms organizational benefits in exchange for
deeper commitment to the public interest.
While the four constellations are analytically distinct, a key premise of this
framework is that they can and will be combined, as available; for example in global
labour governance (e.g. Fransen, 2013): lending support to company codes of conduct or
industry agreements that align with public policy objectives; invoking court rulings
(shadow of hierarchy), and initiating and soft steering of intermediary private governance
schemes such as the Ethical Trading Initiative.
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This analytical framework paints an enriched, interactive picture of business-
government relations. Whereas the PCSR approach to business-government relations
locates regulatory authority and responsibility in either government or business, our
framework locates them in both. In PCSR the sum of regulatory share is fixed so that the
regulatory retreat or expansion of one party comes at the benefit or expense of the other
(zero-sum). Our framework, by contrast, allows for variable-sum constellations where
the loss (gain) of one party is not offset by the gain (loss) of the other (see Table 3).
Table 3 here
For illustration, consider that on many public-interest issues, a government loss of
traditional authority is not compensated by authority gains for business. This is because
corporations lack the ability, motivation or legitimacy to fully accept public
responsibilities (negative-sum); hence public issues remain under-addressed.
Alternatively, governments may on other issues retain some authority or compensate the
loss of authoritative control through indirect means to govern business conduct. At the
same time, these indirect means mobilize and enhance the political responsibility of
business as (self)regulator; here, both parties may gain in regulatory share (positive-sum)
and may be able to better address the issue at hand. Finally, our approach recognizes
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that regulatory share comes in different currencies that are not fully convertible: when
governments regulate through law and business through scale and supply chain control,
one form of authority does not convert exactly into another. For this reason alone,
authority losses on one side do not translate seamlessly into authority gains on the other.
In contrast to the zero-sum assumption, then, our framework reveals
constellations, of governments and corporations governing business conduct, that go
beyond either delegating governance fully to business (substitution) or taking back entire
public responsibilities via traditional public authority (reverse substitution).
However, in a global, ‘decentered’ arena, where authority and resources are
fragmented (Black, 2003), not all constellations are available to governments to the same
extent. State authority and capacity, which may be necessary to invoke a regulatory
shadow or offer support, are in short supply. Enrolling the voluntary contributions of
private parties to pursue a public purpose becomes, by necessity, a prominent strategy.
Therefore, soft steering merits particular attention to explore the larger question of how
governments can induce corporate engagement with the public good.
Theorizing Soft Steering and Orchestration from an organizational perspective
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The most influential representative of soft steering in the literature is the concept
of ‘orchestration’ (Abbott & Snidal, 2010; Abbott, Genschel, Snidal & Zangl, 2015; Abbott,
2017). Orchestration is a form of indirect, soft governance that relies on the voluntary
collaboration of regulatory intermediaries and targets. Public governors (international
organizations, national governments, etc.) enrol intermediaries by offering material and
ideational support, so that intermediaries engage with the regulatory target in view of a
public purpose. Typical intermediaries are civil society organizations, or multi-
stakeholder institutions.
Orchestration transcends the zero-sum assumption of substitution in that it locates
regulatory authority not in either government or business but in both. Even in the
absence of authoritative control, governments may still steer business behavior by
enrolling regulatory intermediaries that leverage voluntary contributions from business;
thus, business is both regulatory actor and target.
Abbott, Genschel, Snidal & Zangl (2015, p. 14-16) identify several techniques of
orchestration: convening (creating and bringing actors together); agenda setting
(mobilizing and guiding intermediaries in their policy choices); assistance (administrative
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and financial resources); endorsement (legal or political recognition); coordination
(synchronizing activities of intermediaries).
The rich orchestration literature in political science and public policy (review in
Henriksen & Ponte, 2017, p. 3-5) is curiously silent on the perspective of the regulatory
targets of orchestration, in particular business firms. This is because the orchestration
literature has privileged the vantage point of the public regulator. It has so far focused on
what public actors can do to address governance gaps, neglecting the engagement of
private regulatees in the process. We bring in the organizational perspective of the
corporation as regulatory target by asking how orchestration may address the identified
barriers to corporate engagement with the public good, and how we can theorize the
engagement of firms with orchestration.
Mechanisms of Orchestrated Governance: a corporate perspective
Orchestration establishes a relationship between a government and business firms
that is intermediated by a third party, often a multi-stakeholder institution (MSI), which
is convened, assisted or coordinated, in short: orchestrated in various ways by
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government. How can involving an intermediary further a public-good orientation of
business firms?
Informed by a resource dependence perspective, we elucidate how orchestration
may benefit corporate efforts to reduce environmental interdependence and uncertainty
vis-à-vis the political environment of the firm in global governance. While dependence
on the political environment cannot be ‘absorbed’, firms will attempt to ‘create’, through
‘political mechanisms’, a more favorable environment, by shaping public regulation
(Pfeffer & Salancik, 1978, p. 189-90). Orchestration may help them to do this, but it comes
at a cost.
Beginning, firstly, with the challenge for corporations to navigate complexity, and
hence heightened uncertainty, in global governance, regulatory intermediaries provide
valuable orientation for corporate actors about societal expectations. Large companies
know that social and environmental compliance has become a standard expectation.
However, they are uncertain about how to define, measure, and discharge this
responsibility. Proliferating company and industry codes for various public-interest issues
offer a lot of choice, and room for opportunism. But multiple frameworks amplify the
collective action problem for individual firms: which framework to adopt that satisfies
28
societal expectations while not putting my firm at a competitive disadvantage?
Government orchestration can help create ‘focal point’ institutions around which
expectations about what constitutes an appropriate public-interest commitment
converge. This is a net benefit to firms provided the expected commitments are not
overly onerous. Also, large, dominant firms are often able to spread compliance costs to
smaller players and hence welcome orchestrated convergence on industry standards.
Governments may be able to coordinate activities of different MSIs that co-exist in
one issue area. Or even champion one institution that becomes the monopoly supplier of
issue guidance for companies, effectively addressing the level-playing field problem.
Without orchestration, competition between various platforms, and hence confusion for
firms, would persist. Having a focal institution also relieves companies of the uncertainty
about who the addressee of political influence strategies should be, even if political action
such as lobbying or co-opting public officials (Pfeffer & Salancik, 1978, chap. 8) require
adaptation to a global governance context.
Secondly, companies benefit if they do not need to engage with governments or
international organizations directly but can do so through issue-specific intermediary
institutions. These combine broad representation and issue expertise, as they bring
29
together relevant civil society and private sector actors. This ‘embedded’ form of
governance creates an environment that promotes the sharing of thicker and more tacit
information, building on trust and reciprocity (Uzzi, 1996; Uzzi & Gillespie, 2002; Perrow,
2002, Williamson, 1985). Marx & Wouters (2018) contrast this embedded governance
model with the traditional, arm’s length type of regulation where there is a clear
separation between rule-maker (government agency) and rule-taker (firm) and
information exchange is thin. The embedded governance model allows corporate
participants to tap into a richer information environment, reducing uncertainty and
enhancing the potential for learning and knowledge creation (Marx & Wouters, 2018, p.
126). An orchestrated intermediary platform offers information benefits superior to a
non-orchestrated environment where information flows are less coordinated and less
dense because actors and flows may be more dispersed among various, potentially
competing fora.
Thirdly, the embedded character of orchestrated governance through
intermediaries allows companies to pursue influence strategies, within the limits of a
trust-based network. Corporations are important constituencies in intermediary
institutions. They command expertise and financial resources exceeding those of the
30
labor and civil society constituencies. They are in a good position to influence the debate.
In fact, the governance structure lends itself to the exercise of indirect ‘discursive’ power,
e.g. framing discussions in ways favourable to one’s interest (Fuchs, 2007; also see
Ruggie, 2017). This is different from direct ‘instrumental’ power (e.g. lobbying, co-
optation), which is more typical of domestic politics. Hence, in terms of political
management strategies, this new type of environment favors ‘proactive’ strategies that
influence the ‘norms and beliefs of stakeholders to shape how political standards are
defined’ (Oliver & Holzinger, 2008, p. 507). This can create ‘medium- to long-term
competitive advantage through redefinition of public policy to fit firm’s strengths and
interest’ (p. 513). While both orchestrated and non-orchestrated MSI would be
susceptible to corporate influence strategies, influence is amplified if the MSI enjoys a
more central position, thanks to orchestration.
Fourth, and finally, engagement through an intermediary, in particular the multi-
stakeholder type of platform, lends corporate influence a higher degree of legitimacy.
Decisions can be presented as emerging from open and equal exchange among multiple
constituencies. This does not mean that multi-stakeholder processes in fact deliberatively
tame corporate influence on public interest formation, as the PCSR approach hopes.
31
Rather, it may simply enhance the empirical legitimacy of corporate influence (Suchman,
1995). Again, the legitimacy benefits for corporations are generally higher, if the
regulatory platform is recognized as ‘central’, to which successful orchestration can
contribute.
In addition to these direct benefits, corporations benefit indirectly from operating
through an intermediary that is well supported by government actors, and that, hence,
can be more effective as regulatory platform. On the public side, government agencies
often lack direct access, expertise and legitimacy. They prefer to work through an
intermediary institution that can better reach and steer individual firms.
If orchestration offers so many benefits from a corporate perspective, how can we
expect it to steer corporations towards a deeper engagement with the public good? The
answer is: organizational benefits (reduced uncertainty, access and influence, legitimacy)
come at a certain cost. Also, firms have to put themselves into a social situation to receive
the benefits, and that has its own effects.
The main cost is that companies need to accept certain credible self-commitments,
consistent with the public purpose that orchestrator and intermediary pursue. Beyond
32
this interest-based deal, intermediary forms of embedded governance constrain
instrumental reasoning and empower civil society actors, but, indirectly, also the
orchestrators, to hold corporations to account (Reinecke & Ansari, 2016; Haack,
Schoeneborn & Wickert, 2012). Firstly, the trust-based network character of governance,
as mentioned, limits purely opportunistic firm behaviour. Secondly, when corporations
engage in such processes, they make certain commitments to processes the outcomes of
which they do not fully control. Process commitments work as ‘subtle lock-in
mechanisms’ (Marx & Wouters, 2018, p. 126).
Participation in networks has a socialization aspect: over time participants may
converge on certain understandings that differ from initial, interest-based positions.
Furthermore, on platforms that are connected to larger self-regulatory bodies such as the
UN Global Compact corporations are drawn into broader ‘webs of dialogue’ (Braithwaite
& Drahos, 2000). They make rhetorical commitments to norms that they find difficult to
disavow later in the process (‘entrapment’, Schimmelfennig, 2001). A ‘commitment
narrative’ towards deeper sustainability can take hold (Haack, Schoeneborn & Wickert
2012, p. 829). Civil society actors who are credited with the moral authority to evaluate
business behaviour can seize on those commitments and publicly demand compliance.
33
Note, finally, that the mechanisms described here – interest-based deal and social
commitment – are different from the PCSR approach that relies on embedding and
transforming corporations through deliberation. In our account, corporations remain
self-interested, ‘specialized economic organs’ who may choose not to submit their power
to deliberative processes. Yet they can be induced to accept a deeper - if still limited -
engagement with the public good, if offered the right incentives and a commitment-
friendly organizational environment.
A Vignette: the Global Reporting Initiative
The Global Reporting Initiative (GRI) is a poster child example of an intermediary
actor in the orchestration literature (Abbott & Snidal, 2013). The GRI organization and
framework emerged in a context where non-financial or ‘Sustainability Reporting’ (SR)
was a rapidly diffusing CSR practice that has become standard in large public companies.
The idea is that SR creates transparency about corporate sustainability performance,
allowing the public to hold corporations accountable. GRI was initiated in 1997 as a joint
venture between CERES, a US non-profit, and the Tellus-Institute, a think-tank in Boston
(e.g. Brown, de Jong & Lessidrenska, 2009; Dingwerth, 2007). The non-profit GRI was
34
developed into a multi-stakeholder organization that proposes SR guidelines, aided by
the input of stakeholder councils composed of business, civil society, and labor. A public
‘orchestrator’, the UN Environment Program (UNEP), an independent UN agency (Bauer,
2009), was instrumental in positioning GRI as an intermediary actor to serve as platform
towards mainstreaming and harmonizing SR in companies, the regulatory target. UNEP’s
vision was a single voluntary reporting platform that would enhance global corporate
accountability, whereas the reality was fragmentation, and confusion for corporations.
UNEP did not have the requisite capacity and legitimacy to build such a platform. It turned
to an intermediary.
GRI delivered on the organizational benefit of reducing uncertainty for
corporations. Its guidelines have established themselves as ‘the most popular voluntary
reporting guideline worldwide’ (KPMG, 2015, p. 42). The iterative, stakeholder-based
process of developing guidelines in a focal institution has offered a thicker information
environment for corporations, compared to regulatory conversations with governments.
Also, the inclusive multi-stakeholder setting allowed companies to claim legitimacy while
facilitating discursive influence strategies. These were apparently successful to an extent
that GRI has been criticized for not empowering civil society vis-à-vis the business
35
constituency (Levy, Brown & de Jong, 2010). At the same time, many large companies
accepted the self-commitment to publicly hold themselves to the GRI standards, at least
in terms of their reporting.
Abbott & Snidal (2013, p. 105) argue that it was UNEP support that led to the
‘recognition of GRI’s reporting guidelines as de facto international standards.’ UNEP had
a long-standing interest in environmental reporting, and a track record of engaging the
private sector (Van der Lugt & Dingwerth, 2015). When GRI emerged, UNEP offered itself
as co-founder and named GRI an UN collaborating centre. UNEP provided financial
assistance that was crucial in the formative period of GRI.
UNEP staff members gave key administrative support (Dingwerth, 2007, p. 104). As co-
founder, UNEP had agenda-setting influence on GRI’s early direction, co-chairing the first
steering committee. Finally, the broader UN system provided political endorsement,
inaugurating GRI at the UN headquarters (Brown et al., 2009 p. 185). GRI’s legitimacy was
boosted by its association with the UN Global Compact which endorsed GRI guidelines
for use by its members (Abbott & Snidal, 2010, p. 330).
Catalyzing intermediaries is a key aspect of orchestration. Orchestrators may
become less active over time (Abbott & Snidal, 2010). While this is true for the GRI, it
36
should be noted that the UNEP stayed on the board for many years, exercising some
influence on GRI’s work. UNEP was also instrumental in getting governments to offer to
sponsor GRI’s headquarter. GRI relocated from Boston to Amsterdam in 2002 after the
Netherlands submitted the most attractive bid. More recently, GRI has reached out to
governments, encouraging them to mandate the use of GRI guidelines. This can be
interpreted as inviting further government involvement (Kerr, Richardson & Eberlein,
2017).
In sum, UNEP orchestration has helped GRI to become a more effective MSI and to
successfully elicit broad business buy-in and participation – notwithstanding renewed
competition in the SR standards space and the movement towards integrated reporting
more recently. It is difficult to ascertain to which degree GRI’s relative success results in
meaningful corporate commitment to the public good. Formal SR compliance may
obfuscate business-as-usual practices and reinforce ‘unsustainability’ (Gray & Milne,
2004). The reporting process is rife with opportunities to decouple rhetoric from
corporate practice (Cho, Laine, Roberts, & Rodrigue, 2015). More generally, it is
important to acknowledge the limits of soft steering approaches that rely entirely on
voluntary contributions. We do not claim that orchestration removes the barriers to
37
corporate engagement with the public good. Nevertheless, the GRI example – and the
literature offers many more (e.g. Abbott & Snidal, 2010, 2013) - sheds light on how
orchestration may enhance corporate motivation and ability and reduce environmental
complexity.
Discussion & Conclusion
This paper contributes to a better understanding of how governments and
corporations interact in the global regulation of business conduct. It critically reviews the
PCSR account, challenging the zero-sum assumption of substitution between public and
private action. Expanding the PCSR perspective, we propose a variable-sum framework
of business-government constellations that locates regulatory authority in both
government and business. This helps us see how governments may still be able to steer
business conduct through indirect instruments, and how corporations are both
regulatory actors and targets. Orchestration, a prominent tool of indirect, soft
government steering, exemplifies how such a perspective transcends zero-sum accounts.
Governments play an indirect, catalytic role, and maintain regulatory share by working
through regulatory intermediaries such as the GRI. Corporations play a political,
regulatory role, accepting self-regulatory commitments in exchange for organizational
38
benefits including regulatory access. A major organizational studies contribution is that
we theorize orchestration from a corporate perspective, identifying mechanisms through
which orchestration may reduce barriers to corporate engagement with the public good.
Our contributions suggest the following research directions and opportunities for
PCSR and the political role of business more generally.
Firstly, we need a clearer scope of a ‘political’ role that allows for empirical
examination of corporate political engagement, across firms and over time. A group of
prominent management scholars calls for including ‘corporate political responsibility’,
defined as ‘a firm’s disclosure of its political activities and advocacy of socially and
environmentally beneficial public policies’ (Lyon et al, 2018, p. 8) into CSR metrics. While
this definition is debatable, it underscores the need for much more tangible boundaries
of a political role.
Secondly, research on the political role of corporations should incorporate the
various ways that governments continue to support, steer or counter-act corporate
engagement with public-interest issues, beyond the substitution constellation (e.g.
Knudsen & Moon, 2017). Private regulation can sometimes partially fill the governance
gap ‘but cannot fully replace public policy’ (Lyon et al, 2018, p. 8). Our framework of
39
business-government constellations in global governance can guide empirical research
into patterns of interaction in various issue areas. Which constellation, or better:
combination of constellations, proves to be most effective in addressing the barriers
(motivation, ability, complexity) to corporate engagement with the public good, and,
ultimately, in advancing the public interest in a given issue area? ‘A mix of novel forms of
private and public regulation’ (Locke, 2013, p. 2) indicates a promising direction for future
research. Certainly, more work is required to identify scope conditions under which one
combination is more likely than others to elicit the largest corporate contributions to the
public good.
While research into ‘smart’ combinations of constellations offers promise,
ultimately, under capitalism, barriers to corporate engagement with the public good
cannot be removed, they can only be reduced or, pun intended, softened. Soft steering
appears particularly well adapted to many global governance issues where traditional
state authority is in short supply. At the same time, it accommodates the reality of
corporations as self-interested actors pursuing their own political interest.
Thirdly, our contribution opens regulatory governance research to an
organizational, corporate perspective. The extant literature in political science, taking the
40
vantage point of the orchestrator, has neglected the perspective of the regulatory target,
in particular the corporate perspective. This paper offers some theoretical foundations
for such a perspective. Important empirical questions to be explored are how corporate
actors engage with soft steering, and with which effects for both regulatory impact and
the target organizations involved.
Bridging the gap between the regulatory and organizational perspective can, finally,
help rejuvenate the study of corporate political activity in the new global governance
environment. How to reconceptualize and investigate corporate political activity as we
move beyond the domestic, arm’s length model that was institutionally shallow to begin
with? In global governance, corporations are often insiders, directly involved in crafting
public policy, wielding influence based on a combination of expertise, financial clout,
global scale, and operational capacity. Lobbying from the outside may be less important
than exercising discursive power from the inside and ‘influencing the norms and beliefs
of stakeholders to shape how political standards are defined’ (Oliver & Holzinger, 2008,
p. 507; Flohr, Ried, Schwindenhammer & Wolf, 2010; Banerjee, 2014). Studying these
new forms of corporate power and politics poses an important challenge to
organizational analysis.
41
Table 1:
Unpacking the zero-sum governance gap assumptions in PCSR
Analytical Aspect
PCSR Assumptions
Problems/Weaknesses
(1) Role of the State
in Globalization/
Implications for
Global
Governance
Generalized decline of nation-state
authority and regulatory capacity
leaves governance gaps
Strong variation by issue areas
and governments/regions;
corporate & state powers
closely enmeshed; government
retains ‘negative powers’, or
may reverse (political)
delegation to private
governance
(2) Role of Business
in Relation to
State/
Government
Relation of zero-sum substitution:
firms compensate for government
absence/failure; they fill gaps, without
government incentives/ threats
Scope of political contributions
unclear; limits to willingness and
ability of firms to go beyond
business case CSR; private
governance insufficient to fill
gaps, requires mix of private and
public governance tools
(3) Political
Conception of
the Firm
Normative: provide public goods &
contribute to voluntary self-regulation;
firms transformed to stewards of
public interest through deliberative
processes and institutions
Normative perspective neglects
positive analysis of political role:
corporations play public-interest
roles but also pursue own
political interests
Table 2 a: Roles of Government and Business
Government
Business
Hard
Soft
Regulator
Substitution
Support
Regulatee
Shadow of Hierarchy
Soft Steering
42
Table 2b: Constellations of Public and Private Authority in Global Governance
(1) Substitution
(2) Support
(3) Shadow of
Hierarchy, incl.
- Extraterritorial
effects
- Hardening of Soft
Law
(4) Soft
Steering/
Orchestration
Role of
Government
Absent: unable or
unwilling to provide
certain public goods;
Political decision to
outsource
governance to
private actors;
but reverse
substitution as an
option
Encourage, fund,
promote private
initiatives,
without
prescribing or
directing them
Elicit corporate public
interest contributions
through regulatory/ judicial
threat; turning voluntary
practices into hard law
commitments
Catalytic role,
mobilizing, enrolling
and leveraging
voluntary private-
sector action; steering
regulatory targets
through
intermediaries
(orchestration)
Mechanisms to
induce responsible
business conduct /
How to address
Motivation, Ability
and Complexity?
Embed corporate
engagement in
deliberative
processes to ensure
public interest
orientation; or
governments take
(back) public
responsibilities
Material &
ideational
incentives to
enlarge space
for instrumental
CSR
Regulatory threats and
hardened law incentivize/
coerce corporations to
accept larger public
interest contributions
Intermediary,
embedded,
governance offers
corporations benefits
(reduced uncertainty,
information access,
regulatory influence,
legitimacy) in
exchange for self-
commitments
Anticipated
Corporate Political
Response
Corporations accept
public
responsibilities as
they are transformed
into stewards of
public interest; or
they lose public role
to governments
Corporations
accept public
responsibilities
within enlarged
instrumental
CSR space
Corporations accept public
responsibilities depending
on the extent and
credibility of threat/
coercion
Corporations accept
larger public
responsibilities in
exchange for
organizational
benefits, and as result
of social mechanisms
(e.g. entrapment,
socialization)
43
Table 3: Business-Government Relations: PSCR vs. 4 Constellations Framework
PCSR
4 Constellations Framework/
Orchestration exemplifies logic
Analytical Premise
Authority/Responsibility located
in either business or government
Authority/Responsibility located
in both business and government
Character of Business-
Government Relationship
Zero-sum substitution:
regulatory retreat/expansion of
one party comes at
benefit/expense of the other
Variable-sum constellations and
enmeshment of public and
private action: both parties may
lose, both may win, sum of
regulatory share not fixed;
depends on specific interactions
Implications for Global
Governance
Barriers to either public or
private action may leave many
public-interest issues unattended
Combinations of public and
private action offer more options
to enhance corporate
engagement and the public good
44
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