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Who Fills the Global Governance Gap? Rethinking the Roles of Business and
Government in Global Governance

Article  in  Organization Studies · May 2019

DOI: 10.1177/0170840619847720

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 Who fills the Global Governance Gap?
Rethinking the Roles of Business and Government in Global Governance

Forthcoming in Organization Studies, 2019

Abstract

Political CSR (PCSR) has made great strides towards a better appreciation of the political
involvement of corporations in global governance. However, its portrayal of the shifting
balance between business and government in the globalized economy rests on a central,
yet largely uncontested assumption: that of a zero-sum constellation of substitution in
which firms take on public responsibilities to fill governance gaps left by governments.
This conceptual paper expands the PCSR perspective and makes three contributions to
the debate on the political role of business and the role of government in global
governance. Firstly, it deconstructs the problematic assumptions underlying the zero-
sum notion of governance gaps filled by corporations. Secondly, it offers a variable-sum
mapping of how private and public authority interact in global governance where
substitution is only one of four constellations. The mapping identifies ‘soft steering’ as
prominent mode of governments governing business conduct.
Thirdly, the paper theorizes ‘orchestration’, a ‘soft steering’ tool discussed in the global
governance literature, from an organizational, corporate perspective. It identifies the
mechanisms through which orchestration may address the barriers to corporate
engagement with the public good and applies these mechanisms to the case of the Global
Reporting Initiative.

Keywords
corporate social responsibility, government, global governance, orchestration,
regulation, state

Author:
Burkard Eberlein, Schulich School of Business, York University, Toronto, Canada
eberlein@yorku.ca

1
Introduction

Globalization opens markets for corporations but outstrips the capacity of states to

regulate cross-border business conduct for the public good (e.g. Kobrin, 2015). This is the

consensus in the scholarly business literature, notwithstanding disagreements on how to

interpret the decline of state and the rise of business power in a globalized economy (for

a critical perspective on corporate power see Levy, 2008; Banerjee, 2014). The

burgeoning Political CSR (PCSR) stream has made significant strides towards a better

appreciation of the political involvement of corporations (Matten & Crane, 2005; Scherer

& Palazzo, 2007, 2011; Crane, Matten & Moon, 2008; overview in Frynas & Stephens,

2015). However, a central, yet largely uncontested assumption in PCSR is that of a zero-

sum constellation of substitution between business and the state: regulatory authority is

shifting from governments to corporations that ‘step in and fill the governance void and

take responsibility for issues of public concern’ (Scherer, Palazzo, & Matten, 2014, p. 148;

Scherer & Palazzo, 2011).

The image of state failure and ‘institutional voids’ (Khanna & Palepu, 1997) filled by

firms acquiring a ‘new political role’ (Scherer & Palazzo, 2011) suggests a zero-sum notion

of regulatory share that is held by either business or the state. This neglects the historical

2
enmeshment of business and politics and downplays state responsibility (Djelic &

Etchanchou, 2015; Mäkinen & Kasanen, 2016). Specifically, it is incomplete in three

respects. Firstly, to assume a generalized erosion of government power and capacity

ignores important differences between issue areas and types of governments. Secondly,

it is unclear in the PCSR approach to which extent a) corporations are willing and able to

take on public responsibilities and b) those activities result in closing the governance gap.

Also, the political contribution of firms may depend on indirect government involvement,

such as support, or regulatory threat (Börzel & Risse, 2010).

Thirdly, the PCSR approach operates with a normative conception of the political

firm that centers on the notion of corporations as stewards of the public interest when

governments are absent or fail. This perspective sidesteps the empirical role of

corporations as self-interested political actors in global governance (e.g. Willke & Willke,

2008), where motivation, ability and complexity constitute barriers to corporate

engagement with the public good.

Against this background, the paper makes three contributions. Firstly, it

deconstructs the problematic assumptions underlying the substitution approach to the

business-government nexus. It challenges the assumption that corporations, as

3
‘specialized economic organs’ (Ruggie, 2008, 2017), are willing and able to fully accept

public responsibilities (Whelan, 2012). Secondly, it proposes a novel mapping of four

ways how private and public authority interact in global governance. In addition to

substitution, which is the main approach under the PCSR label, it identifies three

constellations that capture the various roles of governments in business regulation:

support, shadow of hierarchy, and soft steering. Thirdly, it theorizes the prominent

constellation of soft steering, from an organizational perspective, using the tool of

‘orchestration’ as an example. It identifies mechanisms through which orchestration, a

form of indirect, soft governance of business conduct, may address the barriers to

corporate engagement with the public good. And it theorizes how corporations engage

with orchestration from a political management perspective.

With these contributions the paper responds to calls to better integrate state

power and regulation into PCSR accounts and offers an integrated critique and expansion

of PCSR (e.g. Frynas & Stephens, 2015; Mäkinen & Kasanen, 2015; Schrempf-Stirling,

2016). Furthermore, it theorizes how governments may still govern business conduct in

global governance arrangements where traditional hierarchical authority is less available.

4
 The paper is organized as follows. The first section reconstitutes the scholarly

antecedents of the PCSR stream. The second section unpacks the zero-sum assumption

underlying PCSR’s notion of governance gaps and how they are filled under the

constellation of substitution. The third section develops the mapping of four

constellations of government involvement in business conduct. The fourth section

theorizes the most prominent constellation, soft steering, from an organizational

perspective. It focuses on the tool of orchestration and illustrates theoretical mechanisms

drawing on the example of the Global Reporting Initiative. The fifth and final section

offers discussion and conclusions.

Antecedents of Political CSR: A legacy of neglecting governments?

In business scholarship, International Business (IB) has the longest tradition of

engaging with business-government relations, with a focus on the political risk of

multinational enterprise investment in foreign jurisdictions (Kobrin, 1979; Boddewyn &

Brewer, 1994). Yet, ‘the view of institutions in IB tends to be thin’ (Jackson & Deeg, 2008,

p. 541) as governments are reduced to external constraints in a risk environment. This IB

tradition extends to the broader nonmarket approach (Baron, 1995; for a review Mellahi,

5
Frynas, Sun & Siegel, 2016). The corporate political activity (CPA) stream follows the logic

of political risk (e.g. Hillman, Keim & Schuler, 2004). To manage that risk, firms engage in

different political strategies, for example lobbying (Rajwani & Liedong 2015, p. 274).

Similar to IB, a severe limitation of CPA is an institutionally thin market model of

transactions between self-interested public officials and business firms.

The thin ‘nonmarket risk’ approach has hampered a more refined understanding of

the state-business nexus. This applies to CSR research to the extent that the search for

the instrumental ‘business case for CSR’ (Porter & Kramer, 2006) has been central to

mainstream scholarship (e.g. Barnett & Salamon, 2012). To be sure, several authors have

offered more complex conceptualizations of state-corporate interactions (e.g. Moon,

2002; Levy & Egan, 2003). Also, the evolving CSR scholarship shows how CSR practices

interact in complex ways with governments, corporate governance and national business

systems (Gond, Kang & Moon, 2011; Kang & Moon, 2012; Yamahaki & Frynas, 2016).

Several studies foreground the social embeddedness and political determinants of

corporations’ public responsibilities (Campbell, 2007; Matten & Moon, 2008; Knudsen &

Moon, 2017). Yet, these institutional contributions have not shifted the mainstream

scholarship towards a ‘thicker’ account of the state-corporate nexus.

6
Political CSR: bringing political firms in to fill governance gaps

The rise of PCSR reflects the dissatisfaction with this instrumental conception of

CSR that has kept the political sphere at a distance. PCSR sees an increasing political role

for business firms, and for multinational corporations in particular, in a globalized

economy (Matten & Crane, 2005; Crane et al., 2008; Scherer, Palazzo & Baumann, 2006;

Scherer & Palazzo, 2007, 2011; Scherer et al., 2014). ‘Political’ is defined as firms

assuming public roles and responsibilities, notably (self-) regulation and provision of

public goods, that have previously been the sole prerogative of governments (Scherer &

Palazzo, 2011, p. 901, 903).

The assumption is that globalization erodes nation-state powers and regulatory

capacity. This post-national constellation is said to leave a ‘governance gap’ (Crane et al.,

2008, p. 205), or a ‘regulatory vacuum’ (Scherer & Palazzo, 2011, p. 899). Corporations

step in and ‘fill’ this presumptive empty space by assuming quasi-governmental

responsibilities (Valente & Crane, 2010). Corporations do not ‘replace governments

completely’, but ‘they take on some of the roles and responsibilities previously assigned

to government’ (Crane et al., 2008, p. 86). This zero-sum image of a relationship between

7
state failure and business assuming orphaned public responsibilities is problematic in

several analytical respects, as summarized in Table 1.

Table 1 here

(1) The governance gap: how much have governments retreated?

Frynas & Stephens (2015, p. 502) question ‘the axiomatic assumption of leading

scholarly contributions on political CSR about the loss of power by national governments

in a globalized economy’. First of all, consider that governments have purposefully

outsourced public responsibilities (e.g., utilities and infrastructure) to private actors

(Mayer & Philipps, 2017, p. 148; also see Kinderman, 2012). Governments may choose to

privatize and deregulate, not because of a lack of power, but as a matter of political

choice, as much as this choice may be informed by neo-liberal scripts.

Furthermore, we need to distinguish between different issue areas. PCSR is

essentially concerned with the social and environmental externalities of global

production (Scherer, Rasche, Palazzo & Spicer, 2016; Schrempf-Stirling & Palazzo, 2016).

While there has been state retreat, or state absence (in the Global South) relating to

social and environmental protection, states may assert their authority in other areas such

8
as trade and economic policy, immigration, security (e.g. Wood & Wright, 2015) so that

the assumption of a generalized loss of state power needs to be nuanced.

Secondly, a blanket loss-of-state-power assumption ignores vast power and

capacity differences, and, crucially, different political choices, between national

governments and regions of the world. Major global powers such as the U.S. command

sufficient market size, and political influence, to be global rule-makers in many instances

(Drezner, 2006). Domestic rules passed in powerful countries may have significant

extraterritorial effects on standards globally. By contrast, many poorer countries in the

Global South have little influence over the terms of globalized production, and their

regulatory capacities are lower. Yet, to assume that Southern governments simply align

with Northern buyer demands for either low or high standards, ignores increasing

evidence that some governments reassert control over standards that apply to their

domestic industries (Giessen, Burns, Sahide & Wibowo, 2016; Schleifer, 2015). At the very

least, governments retain some ‘negative’ power of disrupting market processes, and to

obstruct corporations to take on public responsibilities (e.g. Börzel, Hönke, & Thauer

2012, p. 25-26).

9
 In sum, states are not simply rendered ‘powerless’ by global forces (Weiss, 1998).

The state-business dichotomy informing PCSR overlooks that corporate and state powers

are deeply enmeshed and not necessarily in a relationship of substitution, as the notion

of the governance gaps suggests (Mattli, 2015). Rather, the boundaries between the

private and the public sphere are constantly negotiated (Davis, Whitman & Zald, 2008;

Djelic & Etchanchu, 2015). As such, the size of a governance gap is politically contested

and historically contingent.

(2) The governance gap: will corporations fill it?

Turning to the business side of the zero-sum equation we confront two areas of

concern in the PCSR approach: (a) the unclear scope and boundaries of governance

contributions by firms, (b) the motivation and ability of corporate commitment to the

public good.

(a) Scope and effectiveness of political contributions

Firstly, we know surprisingly little about the empirical extent to which corporations

have assumed ‘new’ public responsibilities. PCSR is not clear about the precise scope of

the political role of business, beyond stating the two areas: ‘voluntarily contributing to

self-regulation’ and ‘producing public goods that are not delivered by governments’

10
(Scherer & Palazzo, 2011, p. 903). What is the required scope and depth of a truly political

role, as opposed to non-political CSR, or non-CSR business behaviour? If we just look at

business’ role in self-regulating the negative externalities of global production, it is

unclear which level of correction of externalities corporations need to accept so as to act

in accordance with public interest concerns (Tempels, Blok, & Verweij, 2017).

A second question is how effective corporations are in filling global governance

gaps. While we know little about specific PCSR firm activities, there is a vibrant literature

on the broader phenomenon: private governance arrangements through which firms

participate in the development of voluntary standards for business conduct (e.g.

Braithwaite & Drahos, 2000; Cashore et al 2004; Graz & Nölke, 2008; Abbott & Snidal,

2009). These standards are not backed up by law but by the scrutiny of global NGOs and

the supply chain exposure of branded retailers. There is significant doubt as to how

effective these standards are, both in terms of quality and compliance (Prakash, 2007;

Vogel, 2010; Bartley & Child, 2014).

The consensus in the literature is that private initiatives by themselves are not

sufficient to even partially fill the governance gap. Based on the most thorough

investigation to date of compliance efforts of major global corporations regarding labour

11
standards in their global supply chains, Locke (2013, p. 174) concludes that ‘private

compliance programs appear unable to deliver on their promise of enforcing labor

standards in today’s new centers of global production’ (Locke, 2013, p. 174; also Bartley,

2010; Fransen, 2013). ‘The most effective and sustainable approach (…) will require a mix

of novel forms of private and public regulation’ (Locke, 2013, p. 2; also see Toffel, Short

& Quellet, 2015). A zero-sum substitution approach does not capture that private firm

initiative and public regulation depend on each other, because it locates regulatory

responsibility in either the firm or the government, not in both.

b) Corporate motivation and ability

Why would corporations accept public responsibilities beyond business cases for

CSR? We posit that motivation and ability as well as environmental complexity are the

key barriers to corporate engagement with the public interest, in addition to normative

legitimacy concerns well covered by PCSR.

The instrumental CSR approach can only account for CSR commitments that fall

under the business case for CSR (Porter & Kramer, 2006), including the reduction of

material and reputational risk. However, what if public responsibilities go against the

economic ‘logic of expected consequences’ (March & Olsen, 1989)? To be sure,

12
corporations also seek ‘appropriateness’, responding to isomorphic industry pressures or

to normative expectations embedded in the social context (Matten & Moon, 2008). Yet,

the PCSR approach does not specify scope conditions under which corporations accept

certain societal expectations at the cost of instrumental concerns.

A second reason for rejecting public responsibilities is the complexity of the global

governance environment. It is characterized by the proliferation of non-state norms and

organizations that voice multiple expectations of corporate conduct (Haufler, 2018;

Weiss, 2013). This creates strong uncertainties for corporate decision-making (Duncan,

1972). It is difficult for companies to know, first, what the relevant regulatory gaps are;

second, which policies could contribute to reducing negative externalities; and third,

which contributions they could make, in terms of a business case or of expected

legitimacy gains. As a short cut, companies might simply focus on areas where NGO

pressure is strongest. In any case, the PCSR commitment of individual firms is likely to be

very selective. We should not expect firms to accept full public responsibilities and to

‘close’ governance gaps. In fact, the literature on the business-development nexus has

provided ample evidence in support of this conjecture (Frynas, 2005; Jenkins, 2005; Jamal

& Mirshak, 2010).

13
 (3) Political Conception of the Firm: Normative over Positive?

A central concern of PCSR is the normative justification of an enhanced political role

of corporations: how to make it more democratically legitimate? The answer is to embed

corporate political activities in Habermasian, deliberative processes and institutions that

ensure a public interest orientation (Scherer & Palazzo, 2007). The common good

orientation is key to PCSR’s normative definition of the political (Scherer, 2017).

Notwithstanding the larger question how effective deliberation is to tame the profit

motive (Sabadoz & Singer, 2017), the problem is that PCSR jumps directly to the

normative solution of corporations as stewards of the public interest, without prior

positive analysis of the corporate behavior to be democratized.

We know that corporations make some contributions to business regulation on the

global level, often through multi-stakeholder initiatives or global public policy networks

(Mena & Palazzo, 2012; Detomasi, 2007); hence, they play a political role of substitute

public actors in some instances. Yet, this role is limited by corporate ability and

motivation, so that deliberative public-interest mandates may in practice over-extend the

corporation’s character as ‘specialized economic organ’ (Ruggie, 2008, p. 16). In addition

to any public interest role, corporations pursue their own interests, as ‘political actors in

14
the arena of (global) governance’ (Willke & Willke, 2008, p. 569). The larger point is that

careful positive analysis of the extent of corporate political engagement, and how it

interacts with governments, should precede the normative quest to democratize

presumed political activities.

Rethinking the political role of business and government in global governance

The PCSR stream has focused on one constellation of how private (firm) and public

authority interact, namely substitution where corporations act as substitutes for absent

or failing government action.

The broader global governance literature suggests a more complex picture. Clearly,

the state has lost its monopoly as governor to a plural pattern (Cerny, 2010) where firms

and industry groups, civil society actors, and multi-stakeholder institutions assume

regulatory roles. A popular approach maps this complex regulatory landscape onto three

actor types – states, firms, NGOs – in the ‘governance triangle’ (Abbott & Snidal, 2009).

A more interactive perspective highlights that private schemes compete, collide, or

collaborate with other non-state initiatives as well as with state- based law and regimes

15
(Eberlein, Abbott, Black, Meidinger & Wood, 2014). Eschewing zero-sum notions, how

can we make sense of this shifting relationship?

The extant literature offers two options. The first is based on a division of regulatory

labor between actor groups. The concept of disaggregated and shared political authority

(Genschel & Zangl, 2014; Weber, 1978) suggests that we can think of different actor

groups as exercising different dimensions of political authority. For example,

corporations exercise a share of ‘regulation’, the authority to make collectively binding

decisions, when they develop self-regulatory standards that are recognized as binding.

However, they lack input legitimacy (a democratic mandate to make decisions), another

dimension of political authority. This multi-dimensional perspective – authority involves

different, at times diverging dimensions - allows overcoming zero-sum notions of shifts

in authority.

Typically, the different authority roles played by business, civil society, and

government actors reflect different competences, leading to a division of regulatory labor

in the global governance triangle (Abbott & Snidal, 2009, p. 66; Rasche, de Bakker, &

Moon, 2013). For example, large corporations bring superior expertise and operational

capacity to the regulatory table. But they are deficient in terms of independence and

16
representativeness as they are not neutral parties. While intuitive as a framework to map

complementary actor competences and contributions, this approach tells us little about

how private authority dynamically intersects with public authority.

A second approach focuses on the relational character of ‘interaction’ and offers

broad typologies such as competition versus cooperation (e.g. Tosun, Koos & Shore,

2016; Eberlein et al., 2014). While it usefully addresses the interaction aspect directly,

this approach does not fully capture the hybridization of public and private authority,

where the focus is less on the nature of the relationship and more on the governance

implications of ‘blending’ public and private authority. Also, existing typologies do not

generate sufficient insight into how governments may still govern business conduct

where traditional authoritative control is diminished.

Therefore, our mapping (Table 2a) depicts government along two dimensions: its

role is either ‘hard’ when it invokes or uses traditional regulatory or judicial authority; or

it is ‘soft’ when it deploys non-coercive tools such as ideational or material inducements

or enrols voluntary private contributions. We combine this distinction with the political

role of business as either regulator, when it produces rules for corporate conduct, or as

regulatee, whose conduct is being regulated by governments for a public purpose.

17
Table 2a here

In addition to ‘substitution’ this 2x2 mapping yields three analytical constellations:

support, shadow of hierarchy, and soft steering (Table 2b).

Table 2b here

(1) Substitution

This is a constellation where private and public are alternatives to each other. A

good example are the HIV/AIDS community health programs offered by multinational

automotive companies in South Africa where the national government failed to provide

adequate services (Thauer, 2013). In global governance, substitution typically relates to

corporate (self-)regulatory contributions, individually or through multi-stakeholder

institutions such as the Roundtable on Sustainable Palm Oil (RSPO), in situations where

governments abstain or fail to address a public interest issue. Our concept of substitution

expands the PCSR zero-sum, one-way approach to substitution in three respects. One is

to acknowledge that substitution is likely partial and selective, due to firms’ limited ability

and willingness. Two, political choice is an important source of government’s absence,

not only a lack of state capacity or authority. Three, substitution is not a one-way street.

Governments may step in and replace private regulatory initiatives by public policies and

18
standards (reverse substitution). In fact, this is a significant trend in the Global South in

relation to Northern, buyer-imposed standards (Giessen et al., 2016; Schleifer, 2015).

Under substitution, then, governments can only induce responsible business conduct

either by democratizing private action through deliberative processes (as per PCSR), or

by directly assuming or taking back responsibility (reverse substitution).

(2) Support

Under this constellation, governments play an active role in enabling private

regulatory regimes (Bartley, 2018; Gulbrandsen, 2014; Knudsen & Moon, 2017). This goes

beyond a background government role where corporations are embedded in a set of

public institutions that broadly guide their conduct (Campell, 2007; Matten & Moon,

2008). The nature of the relationship is complementary, with private goals and public

objectives broadly aligned. Governments encourage, facilitate, or endorse private

regulatory initiatives, without prescribing or directing them (for a typology see Fox, Ward

& Howard, 2012, Gond et al., 2011). For example, governments enact public procurement

policies that support private certification schemes, act as client for certification, or offer

political endorsement (Gulbrandsen, 2014, p. 77). Here, the mechanism for governments

to encourage responsible business conduct is to enlarge the space for business-case CSR.

19
 (3) Shadow of Hierarchy

This constellation looks at private governance regimes as operating in the shadow

of direct government intervention (‘gorilla in the closet’, Verbruggen, 2013). Private

governance is ‘most likely to be effective if a strong state looms in the background which

sees to it that non-state actors contribute to the provision of the collective good’ (Börzel

& Risse, 2010, p. 113). If the host state is too weak to threaten regulation, functional

equivalents are necessary to counter opportunistic behaviour by corporations. These

could be external shadows, i.e., international organizations or courts that have leverage

in host countries (Börzel, Hönke, & Thauer, 2012, p. 29). Schrempf-Stirling & Wettstein

(2015) demonstrate how litigation in courts can lead corporations to adjust their human

rights policies even if they are not found guilty.

A first sub-category of this constellation is extraterritorial effects of domestic

legislation. Prominent examples are the global implications of US legislation post-

financial crisis, notably through the Foreign Corrupt Practices Act (FCPA), and the Dodd-

Frank Act in securities regulation (Morga, 2012). The former’s focus on anti-corruption

(including money-laundering) has had wide-ranging global implications, for example for

tax havens such as the Swiss banking system (Emmenegger & Eggenberger, 2018). The

20
threat of US prosecution, or of losing access to US listing and markets, has a regulatory

alignment effect on companies outside of US domestic jurisdiction.

A second sub-category is the so-called ‘hardening’ of soft law. This describes a

situation where private codes and standards are referenced or incorporated in hard

domestic or international law (Newman & Bach, 2014). A good example is sustainability

reporting. Several national governments (e.g. Denmark, France, India, South Africa) and

the EU (EU Directive 2014/95/EU) require companies to report on their sustainability

performance according to a set of private reporting frameworks (KPMG, 2015). In a

similar vein, courts reference private standards such as the ‘Ruggie principles’ on business

and human rights and turn soft law over time into harder jurisdiction (Choudhury, 2017).

Hence, the dominant government tool is regulatory threat, or ‘hardening’, to elicit

corporate public interest contributions.

(4) Soft Steering

The fourth constellation, by contrast, does not involve any traditional authority.

Governments play a catalytic role, mobilizing, enrolling and leveraging voluntary private

contributions for a public purpose, as discussed under the label of meta-governance

(Kooiman, 2000; Torfing, Peters, Pierre & Sørensen, 2012). Different from the support

21
constellation, governments do not simply complement but seek to initiate and steer

private governance. And they often do so indirectly, through ‘regulatory intermediaries’,

that in turn engage regulatory targets, i.e. firms (Abbott, Levi-Faur & Snidal, 2017). A good

example is climate governance where the UN Secretary General initiated the climate

‘voluntary commitment system’, promoting ‘multi-stakeholder cooperative initiatives

that could function as intermediaries, like partnerships and action networks, eliciting,

coordinating and managing individual commitments’ (Abbott, 2017, p. 11). As further

developed below, soft steering offers firms organizational benefits in exchange for

deeper commitment to the public interest.

While the four constellations are analytically distinct, a key premise of this

framework is that they can and will be combined, as available; for example in global

labour governance (e.g. Fransen, 2013): lending support to company codes of conduct or

industry agreements that align with public policy objectives; invoking court rulings

(shadow of hierarchy), and initiating and soft steering of intermediary private governance

schemes such as the Ethical Trading Initiative.

22
 This analytical framework paints an enriched, interactive picture of business-

government relations. Whereas the PCSR approach to business-government relations

locates regulatory authority and responsibility in either government or business, our

framework locates them in both. In PCSR the sum of regulatory share is fixed so that the

regulatory retreat or expansion of one party comes at the benefit or expense of the other

(zero-sum). Our framework, by contrast, allows for variable-sum constellations where

the loss (gain) of one party is not offset by the gain (loss) of the other (see Table 3).

Table 3 here

For illustration, consider that on many public-interest issues, a government loss of

traditional authority is not compensated by authority gains for business. This is because

corporations lack the ability, motivation or legitimacy to fully accept public

responsibilities (negative-sum); hence public issues remain under-addressed.

Alternatively, governments may on other issues retain some authority or compensate the

loss of authoritative control through indirect means to govern business conduct. At the

same time, these indirect means mobilize and enhance the political responsibility of

business as (self)regulator; here, both parties may gain in regulatory share (positive-sum)

and may be able to better address the issue at hand. Finally, our approach recognizes

23
that regulatory share comes in different currencies that are not fully convertible: when

governments regulate through law and business through scale and supply chain control,

one form of authority does not convert exactly into another. For this reason alone,

authority losses on one side do not translate seamlessly into authority gains on the other.

In contrast to the zero-sum assumption, then, our framework reveals

constellations, of governments and corporations governing business conduct, that go

beyond either delegating governance fully to business (substitution) or taking back entire

public responsibilities via traditional public authority (reverse substitution).

However, in a global, ‘decentered’ arena, where authority and resources are

fragmented (Black, 2003), not all constellations are available to governments to the same

extent. State authority and capacity, which may be necessary to invoke a regulatory

shadow or offer support, are in short supply. Enrolling the voluntary contributions of

private parties to pursue a public purpose becomes, by necessity, a prominent strategy.

Therefore, soft steering merits particular attention to explore the larger question of how

governments can induce corporate engagement with the public good.

Theorizing Soft Steering and Orchestration from an organizational perspective

24
 The most influential representative of soft steering in the literature is the concept

of ‘orchestration’ (Abbott & Snidal, 2010; Abbott, Genschel, Snidal & Zangl, 2015; Abbott,

2017). Orchestration is a form of indirect, soft governance that relies on the voluntary

collaboration of regulatory intermediaries and targets. Public governors (international

organizations, national governments, etc.) enrol intermediaries by offering material and

ideational support, so that intermediaries engage with the regulatory target in view of a

public purpose. Typical intermediaries are civil society organizations, or multi-

stakeholder institutions.

Orchestration transcends the zero-sum assumption of substitution in that it locates

regulatory authority not in either government or business but in both. Even in the

absence of authoritative control, governments may still steer business behavior by

enrolling regulatory intermediaries that leverage voluntary contributions from business;

thus, business is both regulatory actor and target.

Abbott, Genschel, Snidal & Zangl (2015, p. 14-16) identify several techniques of

orchestration: convening (creating and bringing actors together); agenda setting

(mobilizing and guiding intermediaries in their policy choices); assistance (administrative

25
and financial resources); endorsement (legal or political recognition); coordination

(synchronizing activities of intermediaries).

The rich orchestration literature in political science and public policy (review in

Henriksen & Ponte, 2017, p. 3-5) is curiously silent on the perspective of the regulatory

targets of orchestration, in particular business firms. This is because the orchestration

literature has privileged the vantage point of the public regulator. It has so far focused on

what public actors can do to address governance gaps, neglecting the engagement of

private regulatees in the process. We bring in the organizational perspective of the

corporation as regulatory target by asking how orchestration may address the identified

barriers to corporate engagement with the public good, and how we can theorize the

engagement of firms with orchestration.

Mechanisms of Orchestrated Governance: a corporate perspective

Orchestration establishes a relationship between a government and business firms

that is intermediated by a third party, often a multi-stakeholder institution (MSI), which

is convened, assisted or coordinated, in short: orchestrated in various ways by

26
government. How can involving an intermediary further a public-good orientation of

business firms?

Informed by a resource dependence perspective, we elucidate how orchestration

may benefit corporate efforts to reduce environmental interdependence and uncertainty

vis-à-vis the political environment of the firm in global governance. While dependence

on the political environment cannot be ‘absorbed’, firms will attempt to ‘create’, through

‘political mechanisms’, a more favorable environment, by shaping public regulation

(Pfeffer & Salancik, 1978, p. 189-90). Orchestration may help them to do this, but it comes

at a cost.

Beginning, firstly, with the challenge for corporations to navigate complexity, and

hence heightened uncertainty, in global governance, regulatory intermediaries provide

valuable orientation for corporate actors about societal expectations. Large companies

know that social and environmental compliance has become a standard expectation.

However, they are uncertain about how to define, measure, and discharge this

responsibility. Proliferating company and industry codes for various public-interest issues

offer a lot of choice, and room for opportunism. But multiple frameworks amplify the

collective action problem for individual firms: which framework to adopt that satisfies

27
societal expectations while not putting my firm at a competitive disadvantage?

Government orchestration can help create ‘focal point’ institutions around which

expectations about what constitutes an appropriate public-interest commitment

converge. This is a net benefit to firms provided the expected commitments are not

overly onerous. Also, large, dominant firms are often able to spread compliance costs to

smaller players and hence welcome orchestrated convergence on industry standards.

Governments may be able to coordinate activities of different MSIs that co-exist in

one issue area. Or even champion one institution that becomes the monopoly supplier of

issue guidance for companies, effectively addressing the level-playing field problem.

Without orchestration, competition between various platforms, and hence confusion for

firms, would persist. Having a focal institution also relieves companies of the uncertainty

about who the addressee of political influence strategies should be, even if political action

such as lobbying or co-opting public officials (Pfeffer & Salancik, 1978, chap. 8) require

adaptation to a global governance context.

Secondly, companies benefit if they do not need to engage with governments or

international organizations directly but can do so through issue-specific intermediary

institutions. These combine broad representation and issue expertise, as they bring

28
together relevant civil society and private sector actors. This ‘embedded’ form of

governance creates an environment that promotes the sharing of thicker and more tacit

information, building on trust and reciprocity (Uzzi, 1996; Uzzi & Gillespie, 2002; Perrow,

2002, Williamson, 1985). Marx & Wouters (2018) contrast this embedded governance

model with the traditional, arm’s length type of regulation where there is a clear

separation between rule-maker (government agency) and rule-taker (firm) and

information exchange is thin. The embedded governance model allows corporate

participants to tap into a richer information environment, reducing uncertainty and

enhancing the potential for learning and knowledge creation (Marx & Wouters, 2018, p.

126). An orchestrated intermediary platform offers information benefits superior to a

non-orchestrated environment where information flows are less coordinated and less

dense because actors and flows may be more dispersed among various, potentially

competing fora.

Thirdly, the embedded character of orchestrated governance through

intermediaries allows companies to pursue influence strategies, within the limits of a

trust-based network. Corporations are important constituencies in intermediary

institutions. They command expertise and financial resources exceeding those of the

29
labor and civil society constituencies. They are in a good position to influence the debate.

In fact, the governance structure lends itself to the exercise of indirect ‘discursive’ power,

e.g. framing discussions in ways favourable to one’s interest (Fuchs, 2007; also see

Ruggie, 2017). This is different from direct ‘instrumental’ power (e.g. lobbying, co-

optation), which is more typical of domestic politics. Hence, in terms of political

management strategies, this new type of environment favors ‘proactive’ strategies that

influence the ‘norms and beliefs of stakeholders to shape how political standards are

defined’ (Oliver & Holzinger, 2008, p. 507). This can create ‘medium- to long-term

competitive advantage through redefinition of public policy to fit firm’s strengths and

interest’ (p. 513). While both orchestrated and non-orchestrated MSI would be

susceptible to corporate influence strategies, influence is amplified if the MSI enjoys a

more central position, thanks to orchestration.

Fourth, and finally, engagement through an intermediary, in particular the multi-

stakeholder type of platform, lends corporate influence a higher degree of legitimacy.

Decisions can be presented as emerging from open and equal exchange among multiple

constituencies. This does not mean that multi-stakeholder processes in fact deliberatively

tame corporate influence on public interest formation, as the PCSR approach hopes.

30
Rather, it may simply enhance the empirical legitimacy of corporate influence (Suchman,

1995). Again, the legitimacy benefits for corporations are generally higher, if the

regulatory platform is recognized as ‘central’, to which successful orchestration can

contribute.

In addition to these direct benefits, corporations benefit indirectly from operating

through an intermediary that is well supported by government actors, and that, hence,

can be more effective as regulatory platform. On the public side, government agencies

often lack direct access, expertise and legitimacy. They prefer to work through an

intermediary institution that can better reach and steer individual firms.

If orchestration offers so many benefits from a corporate perspective, how can we

expect it to steer corporations towards a deeper engagement with the public good? The

answer is: organizational benefits (reduced uncertainty, access and influence, legitimacy)

come at a certain cost. Also, firms have to put themselves into a social situation to receive

the benefits, and that has its own effects.

The main cost is that companies need to accept certain credible self-commitments,

consistent with the public purpose that orchestrator and intermediary pursue. Beyond

31
this interest-based deal, intermediary forms of embedded governance constrain

instrumental reasoning and empower civil society actors, but, indirectly, also the

orchestrators, to hold corporations to account (Reinecke & Ansari, 2016; Haack,

Schoeneborn & Wickert, 2012). Firstly, the trust-based network character of governance,

as mentioned, limits purely opportunistic firm behaviour. Secondly, when corporations

engage in such processes, they make certain commitments to processes the outcomes of

which they do not fully control. Process commitments work as ‘subtle lock-in

mechanisms’ (Marx & Wouters, 2018, p. 126).

Participation in networks has a socialization aspect: over time participants may

converge on certain understandings that differ from initial, interest-based positions.

Furthermore, on platforms that are connected to larger self-regulatory bodies such as the

UN Global Compact corporations are drawn into broader ‘webs of dialogue’ (Braithwaite

& Drahos, 2000). They make rhetorical commitments to norms that they find difficult to

disavow later in the process (‘entrapment’, Schimmelfennig, 2001). A ‘commitment

narrative’ towards deeper sustainability can take hold (Haack, Schoeneborn & Wickert

2012, p. 829). Civil society actors who are credited with the moral authority to evaluate

business behaviour can seize on those commitments and publicly demand compliance.

32
 Note, finally, that the mechanisms described here – interest-based deal and social

commitment – are different from the PCSR approach that relies on embedding and

transforming corporations through deliberation. In our account, corporations remain

self-interested, ‘specialized economic organs’ who may choose not to submit their power

to deliberative processes. Yet they can be induced to accept a deeper - if still limited -

engagement with the public good, if offered the right incentives and a commitment-

friendly organizational environment.

A Vignette: the Global Reporting Initiative

The Global Reporting Initiative (GRI) is a poster child example of an intermediary

actor in the orchestration literature (Abbott & Snidal, 2013). The GRI organization and

framework emerged in a context where non-financial or ‘Sustainability Reporting’ (SR)

was a rapidly diffusing CSR practice that has become standard in large public companies.

The idea is that SR creates transparency about corporate sustainability performance,

allowing the public to hold corporations accountable. GRI was initiated in 1997 as a joint

venture between CERES, a US non-profit, and the Tellus-Institute, a think-tank in Boston

(e.g. Brown, de Jong & Lessidrenska, 2009; Dingwerth, 2007). The non-profit GRI was

33
developed into a multi-stakeholder organization that proposes SR guidelines, aided by

the input of stakeholder councils composed of business, civil society, and labor. A public

‘orchestrator’, the UN Environment Program (UNEP), an independent UN agency (Bauer,

2009), was instrumental in positioning GRI as an intermediary actor to serve as platform

towards mainstreaming and harmonizing SR in companies, the regulatory target. UNEP’s

vision was a single voluntary reporting platform that would enhance global corporate

accountability, whereas the reality was fragmentation, and confusion for corporations.

UNEP did not have the requisite capacity and legitimacy to build such a platform. It turned

to an intermediary.

GRI delivered on the organizational benefit of reducing uncertainty for

corporations. Its guidelines have established themselves as ‘the most popular voluntary

reporting guideline worldwide’ (KPMG, 2015, p. 42). The iterative, stakeholder-based

process of developing guidelines in a focal institution has offered a thicker information

environment for corporations, compared to regulatory conversations with governments.

Also, the inclusive multi-stakeholder setting allowed companies to claim legitimacy while

facilitating discursive influence strategies. These were apparently successful to an extent

that GRI has been criticized for not empowering civil society vis-à-vis the business

34
constituency (Levy, Brown & de Jong, 2010). At the same time, many large companies

accepted the self-commitment to publicly hold themselves to the GRI standards, at least

in terms of their reporting.

Abbott & Snidal (2013, p. 105) argue that it was UNEP support that led to the

‘recognition of GRI’s reporting guidelines as de facto international standards.’ UNEP had

a long-standing interest in environmental reporting, and a track record of engaging the

private sector (Van der Lugt & Dingwerth, 2015). When GRI emerged, UNEP offered itself

as co-founder and named GRI an UN collaborating centre. UNEP provided financial

assistance that was crucial in the formative period of GRI.

UNEP staff members gave key administrative support (Dingwerth, 2007, p. 104). As co-

founder, UNEP had agenda-setting influence on GRI’s early direction, co-chairing the first

steering committee. Finally, the broader UN system provided political endorsement,

inaugurating GRI at the UN headquarters (Brown et al., 2009 p. 185). GRI’s legitimacy was

boosted by its association with the UN Global Compact which endorsed GRI guidelines

for use by its members (Abbott & Snidal, 2010, p. 330).

Catalyzing intermediaries is a key aspect of orchestration. Orchestrators may

become less active over time (Abbott & Snidal, 2010). While this is true for the GRI, it

35
should be noted that the UNEP stayed on the board for many years, exercising some

influence on GRI’s work. UNEP was also instrumental in getting governments to offer to

sponsor GRI’s headquarter. GRI relocated from Boston to Amsterdam in 2002 after the

Netherlands submitted the most attractive bid. More recently, GRI has reached out to

governments, encouraging them to mandate the use of GRI guidelines. This can be

interpreted as inviting further government involvement (Kerr, Richardson & Eberlein,

2017).

In sum, UNEP orchestration has helped GRI to become a more effective MSI and to

successfully elicit broad business buy-in and participation – notwithstanding renewed

competition in the SR standards space and the movement towards integrated reporting

more recently. It is difficult to ascertain to which degree GRI’s relative success results in

meaningful corporate commitment to the public good. Formal SR compliance may

obfuscate business-as-usual practices and reinforce ‘unsustainability’ (Gray & Milne,

2004). The reporting process is rife with opportunities to decouple rhetoric from

corporate practice (Cho, Laine, Roberts, & Rodrigue, 2015). More generally, it is

important to acknowledge the limits of soft steering approaches that rely entirely on

voluntary contributions. We do not claim that orchestration removes the barriers to

36
corporate engagement with the public good. Nevertheless, the GRI example – and the

literature offers many more (e.g. Abbott & Snidal, 2010, 2013) - sheds light on how

orchestration may enhance corporate motivation and ability and reduce environmental

complexity.

Discussion & Conclusion

This paper contributes to a better understanding of how governments and

corporations interact in the global regulation of business conduct. It critically reviews the

PCSR account, challenging the zero-sum assumption of substitution between public and

private action. Expanding the PCSR perspective, we propose a variable-sum framework

of business-government constellations that locates regulatory authority in both

government and business. This helps us see how governments may still be able to steer

business conduct through indirect instruments, and how corporations are both

regulatory actors and targets. Orchestration, a prominent tool of indirect, soft

government steering, exemplifies how such a perspective transcends zero-sum accounts.

Governments play an indirect, catalytic role, and maintain regulatory share by working

through regulatory intermediaries such as the GRI. Corporations play a political,

regulatory role, accepting self-regulatory commitments in exchange for organizational

37
benefits including regulatory access. A major organizational studies contribution is that

we theorize orchestration from a corporate perspective, identifying mechanisms through

which orchestration may reduce barriers to corporate engagement with the public good.

Our contributions suggest the following research directions and opportunities for

PCSR and the political role of business more generally.

Firstly, we need a clearer scope of a ‘political’ role that allows for empirical

examination of corporate political engagement, across firms and over time. A group of

prominent management scholars calls for including ‘corporate political responsibility’,

defined as ‘a firm’s disclosure of its political activities and advocacy of socially and

environmentally beneficial public policies’ (Lyon et al, 2018, p. 8) into CSR metrics. While

this definition is debatable, it underscores the need for much more tangible boundaries

of a political role.

Secondly, research on the political role of corporations should incorporate the

various ways that governments continue to support, steer or counter-act corporate

engagement with public-interest issues, beyond the substitution constellation (e.g.

Knudsen & Moon, 2017). Private regulation can sometimes partially fill the governance

gap ‘but cannot fully replace public policy’ (Lyon et al, 2018, p. 8). Our framework of

38
business-government constellations in global governance can guide empirical research

into patterns of interaction in various issue areas. Which constellation, or better:

combination of constellations, proves to be most effective in addressing the barriers

(motivation, ability, complexity) to corporate engagement with the public good, and,

ultimately, in advancing the public interest in a given issue area? ‘A mix of novel forms of

private and public regulation’ (Locke, 2013, p. 2) indicates a promising direction for future

research. Certainly, more work is required to identify scope conditions under which one

combination is more likely than others to elicit the largest corporate contributions to the

public good.

While research into ‘smart’ combinations of constellations offers promise,

ultimately, under capitalism, barriers to corporate engagement with the public good

cannot be removed, they can only be reduced or, pun intended, softened. Soft steering

appears particularly well adapted to many global governance issues where traditional

state authority is in short supply. At the same time, it accommodates the reality of

corporations as self-interested actors pursuing their own political interest.

Thirdly, our contribution opens regulatory governance research to an

organizational, corporate perspective. The extant literature in political science, taking the

39
vantage point of the orchestrator, has neglected the perspective of the regulatory target,

in particular the corporate perspective. This paper offers some theoretical foundations

for such a perspective. Important empirical questions to be explored are how corporate

actors engage with soft steering, and with which effects for both regulatory impact and

the target organizations involved.

Bridging the gap between the regulatory and organizational perspective can, finally,

help rejuvenate the study of corporate political activity in the new global governance

environment. How to reconceptualize and investigate corporate political activity as we

move beyond the domestic, arm’s length model that was institutionally shallow to begin

with? In global governance, corporations are often insiders, directly involved in crafting

public policy, wielding influence based on a combination of expertise, financial clout,

global scale, and operational capacity. Lobbying from the outside may be less important

than exercising discursive power from the inside and ‘influencing the norms and beliefs

of stakeholders to shape how political standards are defined’ (Oliver & Holzinger, 2008,

p. 507; Flohr, Ried, Schwindenhammer & Wolf, 2010; Banerjee, 2014). Studying these

new forms of corporate power and politics poses an important challenge to

organizational analysis.

40
 Table 1:

Unpacking the zero-sum governance gap assumptions in PCSR

Analytical Aspect PCSR Assumptions Problems/Weaknesses

(1) Role of the State Generalized decline of nation-state Strong variation by issue areas
in Globalization/ authority and regulatory capacity and governments/regions;
Implications for leaves governance gaps corporate & state powers
Global closely enmeshed; government
Governance retains ‘negative powers’, or
may reverse (political)
delegation to private
governance
(2) Role of Business Relation of zero-sum substitution: Scope of political contributions
in Relation to firms compensate for government unclear; limits to willingness and
State/ absence/failure; they fill gaps, without ability of firms to go beyond
Government government incentives/ threats business case CSR; private
governance insufficient to fill
gaps, requires mix of private and
public governance tools
(3) Political Normative: provide public goods & Normative perspective neglects
Conception of contribute to voluntary self-regulation; positive analysis of political role:
the Firm firms transformed to stewards of corporations play public-interest
public interest through deliberative roles but also pursue own
processes and institutions political interests

Table 2 a: Roles of Government and Business

Government Hard Soft

Business
Regulator Substitution Support

Regulatee Shadow of Hierarchy Soft Steering

41
Table 2b: Constellations of Public and Private Authority in Global Governance

(1) Substitution (2) Support (3) Shadow of (4) Soft

Hierarchy, incl. Steering/
- Extraterritorial Orchestration
effects
- Hardening of Soft
Law
Role of Absent: unable or Encourage, fund, Elicit corporate public Catalytic role,
Government unwilling to provide promote private interest contributions mobilizing, enrolling
certain public goods; initiatives, through regulatory/ judicial and leveraging
Political decision to without threat; turning voluntary voluntary private-
outsource prescribing or practices into hard law sector action; steering
governance to directing them commitments regulatory targets
private actors; through
but reverse intermediaries
substitution as an (orchestration)
option
Mechanisms to Embed corporate Material & Regulatory threats and Intermediary,
induce responsible engagement in ideational hardened law incentivize/ embedded,
business conduct / deliberative incentives to coerce corporations to governance offers
How to address processes to ensure enlarge space accept larger public corporations benefits
Motivation, Ability public interest for instrumental interest contributions (reduced uncertainty,
and Complexity? orientation; or CSR information access,
governments take regulatory influence,
(back) public legitimacy) in
responsibilities exchange for self-
commitments
Anticipated Corporations accept Corporations Corporations accept public Corporations accept
Corporate Political public accept public responsibilities depending larger public
Response responsibilities as responsibilities on the extent and responsibilities in
they are transformed within enlarged credibility of threat/ exchange for
into stewards of instrumental coercion organizational
public interest; or CSR space benefits, and as result
they lose public role of social mechanisms
to governments (e.g. entrapment,
socialization)

42
Table 3: Business-Government Relations: PSCR vs. 4 Constellations Framework
PCSR
Analytical Premise Authority/Responsibility located
in either business or government
Character of Business- Zero-sum substitution:
Government Relationship regulatory retreat/expansion of
one party comes at
benefit/expense of the other
Implications for Global Barriers to either public or
Governance private action may leave many
public-interest issues unattended
4 Constellations Framework/
Orchestration exemplifies logic
Authority/Responsibility located
in both business and government
Variable-sum constellations and
enmeshment of public and
private action: both parties may
lose, both may win, sum of
regulatory share not fixed;
depends on specific interactions
Combinations of public and
private action offer more options
to enhance corporate
engagement and the public good
43
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