On July the 4th, 1776, in the unanimous Declaration of the thirteen united States of America, Thomas Jefferson expressed how “all men are created equal” (The Declaration of Independence, 1776, [Online]). Although the circumstance in which it arose differed considerably, when coupled with the current financial crisis and its revelations of unethical practices, it is filled with irony. It is in this context that the report will adopt the position of internationl mandatory regulation as opposed to the voluntary option. For these ends it will employ several actors such as the Global Compact in order to demonstrate the organisations who are leading the way in Corporate Social ...view middle of the document...
It is in this context that we need to evaluate whether a more global stringent approach needs to be applied. The report will begin by evaluating the advantages of international regulation. It will then look at some of the international organisations who are advocating CSR. The next section will offer a balanced account of the positive and negative aspects of mandatory regulation. The final section will fittingly look at the United States where the recession began and examine the flaws within the system.
Why International Regulation Need to be Applied:
Since the second half of the 20th century, the world has seen plenty of changes that can be attributed to globalisation. As a result, there is no doubt that we live in a globalised world. Morrison (2011, p. 42), describes its hallmarks as the “interconnectedness and interdependence between people, organisations and governments” (see appendix for: Globalization processes and their outcomes, figure 1.a). As the economic integration develops, so does the interdependence between countries and businesses; thus this has resulted in outside investment and opened up national financial systems aided by the liberalization of trade. These trends have been interpreted as global capitalism.
Dicken (2003) states that Multinational Enterprises (MNE) seek to expand because of the advantages of differences between countries, including geographical differences, natural resources, availability of labour and government policies. Adhering to the latter advantage, Barclays Bank has been forced to admit that they paid just £113 (1%) million in UK corporation tax in 2009 whilst boasting profits of £11.6bn. The current rate of corporation tax in the UK is 28% but global banks such as Barclays – with hundreds of overseas subsidiaries, including many in tax havens – do not generate all of their profits in their domestic market (Treanor, 2011, [Online]). This categorically identifies a loop-hole in the system; banks are aware that by having overseas subsidaries, they are able to avoid large tax bills.
In 2000, Oatley (p.38) argued that, in banking, regulation obsolesces rapidly and he claims that national governments need to “retain the ability to regularly adjust the regulatory framework. International negotiations [he claims] are not well suited to the task”. Although Oatley (2000) makes a palpable claim, the financial crisis of 2008 clearly changed perceptions on this matter. Liu Chunhang (2011,[Online]), the Director General of the Statistics and Research Department at the China Banking Regulatory Commission (CBRC) emphasises that, in order for regulation to succeed, there needs to be international collaboration and cooperation in both financial regulation and financial supervision. He argues that although capital flows have become international, financial regulation remains very much domestically concerned. As a result major reform must be introduced to allow national regulators to collaborate amongst each...