Environments, Externalities and Ethics: Compulsory Multinational and Transnational Corporate Bonding to Promote Accountability for Externalization of Environmental Harm

Developing nations often look to their bounty of natural resources or willing labor as a means of attracting international investors. While national and local governments frequently perceive the arrival of a multinational corporate presence as a boon to their economy, the potential for government instability, ineffectiveness or corruption may facilitate environmentally exploitive corporate practices. Furthermore, residents of the subject nation may be left without proper legal recourse. Legislators have made various efforts in both the United States and abroad to propound Corporate Codes of Conduct to address such concerns, but despite laudable intentions, features of the increasingly global economy “accentuate the difficulties of relying upon law as an external constraint to correctly structure the corporate relationship.? Furthermore, absent an international sovereign, national taxing authorities are often impotent to effectively tax corporations to raise money for social welfare or environmental protection efforts, and the law is often insufficient to provide redress once the damage is done. Both American and alien litigants have sought to utilize the Alien Tort Statute (“ATS?) (or Alien Tort Claims Act (“ATCA?)) to address instances of corporate malfeasance, though the ATS has not yet proven an effective remedy capable of sanctioning multinational corporations for their illegal or unethical behavior. As voluntary codes of business ethics and United Nations guidelines have also proven ineffective, the United States must develop or support a legal regime capable of providing an effective civil or criminal remedy to the victims of illegal or unethical corporate activity. Under the current understanding of the shareholder primacy paradigm, companies will never fully internalize the environmental and social costs of their productive processes and labor relationships in a globalized economy, without an ultimate sovereign. Any practicable regime capable of coercing internalization of environmental costs must transcend mere optimistic reliance on the shareholder wealth maximization theory — as it is currently understood — within constraints of domestic law and private contractual arrangements. This Article suggests that exploitative corporate behavior stems largely from a fundamental misconception of the shareholder wealth maximization theory, and proposes that the United States create a bonding system under which a federal regulatory agency would compel multinational corporations doing business in America to contribute to an environmental remediation bond, administered by the United States.