Abstract: An Instrument of Moral Persuasion? Multinational Enterprises and International Codes of Conduct in the 1970s

Thomas Hajduk

Abstract

By the late 1960s, a seemingly new phenomenon called the multinational enterprise (MNE) grasped the attention and imagination first of economists and technocrats and later of politicians, diplomats, journalists, and activists. Although agreed facts on MNEs as well as basic statistics had yet to be generated, it was obvious to many observers that the rise of the postwar MNEs in the United States and Western Europe marked a new era in international business. Given the initial paucity of agreed MNE concepts, the nature and effects on society of MNEs were contested and at best seen as ambiguous. On the one hand, they were considered the harbingers of wealth and development, as champions of the efficient management of capital, innovations, and people. On the other, they were deemed a threat to organized labor and even to sovereign governments, particularly in the developing world. This ambiguity, what I call the ''multinational dilemma,'' was at the center of a political debate about MNEs in the early and mid-1970s. Given their global reach, a large portion of the MNE debate took place in international organizations, where governments reacted to the MNE dilemma by arguing over rules for multinationals. In the course of this political and ideological confrontation, the first norms of behavior for business or so-called codes of conduct were adopted by governments, and thereby the idea of ''corporate responsibility'' (CR) was institutionalized, at least on the international level. In this paper, I trace the global origin of CR in three steps. I first explain the ''MNE dilemma'' through two central UN reports on the nature and role of MNEs. The reaction to these reports took the form of international codes of conduct. I analyze the development and conceptual substance of the two most eminent and antagonistic codes, drafted at the United Nation Economic and Social Council (ECOSOC) and at the Organisation of Economic Co-operation and Development (OECD). Finally, I conclude with a few observations on the legacy of the codes and link my historical insights with today's debate on global norms for business.