Disciplining Multinational Enterprises: The Regulatory Power of Reputation Risk

A good corporate reputation has become an increasingly valuable commodity to large global corporations, or multinational enterprises (MNEs). This is reflected in the explosion of literature on the subject in the last few years and the extraordinary growth in risk management practices geared towards the protection of corporate reputations and the management of shareholder value. But does this represent genuine ideational change among the managerial class of MNE elites, or is it a cynical public relations ploy to please the public without affecting profits and MNE activities? This article argues that it represents both. In part it is an initiative forced upon MNEs by political and social activists demanding socially responsible conduct by MNEs, but it is also one that has increasingly come to frame and instantiate norms of corporate conduct. Consequently, we should not focus on traditional forms of state-regulatory capacity as the only medium able to discipline MNEs. Corporate reputation is beginning to function as a market mechanism constraining MNE activities and producing socially desirable outcomes. The article concludes with a brief analysis of what this means for traditional activists and for future strategies to ensure greater corporate social responsibility.