haviours of participating businesses , their regulators and other stakeholders comply with the minimum , internationally acceptable standards of conduct ( control mechanisms ). If we simplify the problem by looking at political society dividing neatly into “ business ”, “ government ”, “ civil society ”, and a residual “ general public ”, where should the locus of control be and what is the best mechanism of control to deploy ? |
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Why Are Existing Mechanisms Insufficient ? Business always seems to prefer “ self-regulation ”, but self-regulation only works where three factors are present and effective ( Jones and Ryan 1997 ): The first of these is having a common standard against which to judge actual or anticipated behaviour ; second , something making the business desire to further some goals and avoid others and finally , the presence of some underlying motivational force to keep the entity focused on this objective . In zones of weak governance , where one can expect weak institutions , inadequate oversight , weak enforcement , and weak sanctions , one or more of these factors would be ineffective , so having business as a locus of control of this mechanism is unlikely to be an adequate response .
Some would argue that control of business should be located within markets , and ( Ouchi 1979 ) confirms that this is a viable mechanism provided , for instance , that the “ norm of reciprocity ” exists ( a norm of reciprocity assures that , should one party in a market transaction attempt to cheat another , that the cheater , if discovered , will be punished by all members of the social system , not only by the victim and their partners ). Prices must convey all the information needed for decision-making . Apart from the obvious fact that most businesses in zones of
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weak governance exist outside of the control of such formal markets like a stock exchange , the markets that do exist cannot be described as efficient or effective in either the provision of the “ norm of reciprocity ” or in perfectly conveying all information needed for decision making through prices . The locus of control cannot , therefore , be from within markets .
The government , for its part , prefers to retain the locus of control through its power to monitor , reward or sanction . However , in a setting where agendas are established , and powerful interest groups control political life , the control of corporate behaviour by the government is at best selective and biased against whatever is not in their interest . Even with the best will in the world , in zones of weak governance , capacity constraints and institutional weaknesses will limit the possible effectiveness of the bureaucratic mechanism of control . ( Ouchi 1979 ) tells us that to be effective , the bureaucratic mechanism of control needs the “ norm of reciprocity ” ( this
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time assuring , for example , that a government will issue effective sanctions to those cheating the system ), general agreement on the rational , legal authority of the bureaucracy , and finally clarity being conveyed through “ rules ” of the bureaucracy . The bureaucratic mechanism of control is also somewhat weak in such contexts . One cannot rely solely on its application to ensure that behaviours of stakeholders conform to a minimum , internationally acceptable standard . Placing the locus within government alone would therefore be problematic .
Civil society activism is often touted as a possible response . Shareholder or stakeholder activism ( Amao and Amaeshi 2007 ) is pushed as a panacea to corporate excesses . ( Welzel , Inlehart et al . 2005 ) suggest that “ emancipative forms ” of social capital are needed if citizens are to translate their social ties into some form of elite-challenging collective action implying a willingness to place one ’ s trust in other people in the process of working for a common purpose .
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