Corporate Accountability as a Club Good

One of the reasons I find Corporate Accountability Lab (CAL) so exciting is that it creates a space from which we can design and test interdisciplinary, praxis-driven experiments to stop corporate abuse. As we collectively struggle to properly diagnose the structural failures that have led to the current crisis of corporate impunity, I’m trying to work out whether or not it would be fair to understand corporate accountability in our justice system today as a club good, as opposed to a public good. If we can fairly characterize corporate accountability--holding corporations legally accountable for harms they’ve committed--as a club good, we can better expose the structural faults we collectively seek to repair. [Economists and political theorists, I would greatly appreciate your help and my apologies in advance for my elementary understanding of the economic theory that underlies such distinctions.]

Here’s what we know: following Citizens United v. FEC (2010), it became practically impossible to convince a corporate-funded lawmaker to pass or amend laws necessary to better protect people and the environment from corporate profiteering. Following Mohamad v. Palestinian Authority (2012), it became impossible to hold corporations accountable under the Torture Victim Protection Act for torture and extrajudicial killings committed in the course of executing the will of the state. And following Kiobel v. Royal Dutch Petroleum (2013), it became practically impossible to hold corporations accountable under the Alien Tort Statute for human rights abuses committed across their global supply chains, so long as the abuse was alleged to have occurred outside of U.S. borders.

Meanwhile, corporations are enjoying a U.S. justice system that offers draconian injunctive relief and global jurisdiction over virtually any harm to their business interests, so long as those business interests feed the demand of the U.S. market. Of course, human rights and environmental harms have never been brought to justice as harms to business interests. [CAL is working to change this; if you’re interested please contact us here.]

So how does the club good vs. public good distinction help us make sense of the crisis of corporate impunity? In economics, a club good is a non-rivalrous, excludable good. A public good (which the justice system purports to be) is both non-rivalrous and non-excludable. The concept of corporate accountability in the justice system today (whether it be for harms committed against another corporation or against the public) is non-rivalrous, or something that our justice system can produce without any additional marginal cost to run the system as a whole. This seems like a fair definition, and is a feature that a justice system must have if it is going to be sustainable and work efficiently.

But is corporate accountability excludable? The textbook definition of excludable--i.e., a good or service that can be kept from non-paying consumers--suggests that corporate accountability today functions as an excludable good. Consumers of corporate accountability can be divided into two groups: other corporations and the public. Other corporations consume corporate accountability when they haul a corporation into court for some business harm occurring across their supply chain. The public, on the other hand, consumes corporate accountability when members of the public (attempt) to haul a corporation into court for some human or environmental harm committed by a corporation.

As discussed above, the tale of corporate accountability from this perspective is truly a tale of two cities. Corporate consumers of corporate accountability have a robust and thriving justice system whereas public consumers of corporate accountability are left holding the proverbial bag. From my perspective, corporate accountability looks and acts exactly like a club good. And specifically, a club good formed when a public good (i.e., the product of a justice system to which we purportedly have equal and common access) becomes restricted to a specific group (i.e., corporate consumers). Is this analysis correct?

The implications of understanding corporate accountability as a club good are enormous for our justice system. In the wake of a corporate coup d’Etat that is openly hostile to any exercise of judicial discretion that goes against corporate interests, we must wonder what’s in store for everyone outside of the club, the public struggling to survive under the multi-trillion-dollar weight of corporate impunity. If corporate accountability has been reduced to a club good for corporations, we should put little hope in a post-Citizens United Congress or the Dept. of Justice, now headed by club member Jeff Sessions, to restore corporate accountability as a public good.

Better understanding corporate accountability as a club good is likewise extremely helpful to CAL, as we’re busy developing new legal tools capable of creating corporate accountability. Please stay tuned for a forthcoming piece on the promise of intellectual property to solve the crisis of corporate impunity in a world where corporate accountability functions as a club good.   

Chris Byrnes is a co-founder and legal designer for Corporate Accountability Lab.

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