The Stewardship of Trust in the Global Value Chain

by Kishanthi Parella ~ May 20, 2017

Global governance has not yet caught up with the globalization of business. As a result, our headlines provide daily accounts of the extent and consequences of these “governance gaps.” The ability of corporations to evade state control also contributes to an unusual, even frightening, phenomenon: corporations are governing like states. Some governance functions traditionally delivered by state actors are now increasingly undertaken by transnational corporations. One area that is experiencing this substitution is dispute resolution of human rights. Corporations and other business enterprises, individually or collectively, are creating a variety of grievance mechanisms to address human rights and other conflicts associated — even caused — by their business activities.

When these roles are fulfilled by state actors, we rely on procedural fairness to guide, even discipline, decision-makers. Procedural fairness improves our faith in decision-makers and their institutions even if we might disagree with the outcomes reached. What does procedural fairness mean when it is undertaken by a corporation providing quasi-public governance? What factors might improve its disciplining potential on corporations and increase the likelihood that the watching public, local and global, might accept the outcomes reached? Current guidance to corporations is based upon public law traditions. Consequently, success has been limited because these approaches fail to address the characteristics and dynamics of governance by the business sector.

By contrast, this Article offers a new framework for procedural fairness that is based upon a neglected but significant source: contract law. This framework draws upon interdisciplinary research on relational contracts to develop a strategy for trust-building that can improve the quality of governance performed by the transnational business sector.

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