Corporate governance in the cause of peace: an environmental perspective.

ABSTRACT

This Article examines the role of multinational corporations in creating global peace. Part I discusses the role of multinational corporations in the global economy, emphasizing the relationship between multinational corporations, governments, and the environment. Part II explores whether corporations have a moral duty to oppose ill-conceived laws and policy proposals and to support well-conceived laws that encourage efficiency and sustainability, but may hinder short-term profitability. Part III expands and further explores the argument set forth in Part II by examining the continuing dependency of the United States and other industrialized democracies on oil from the Middle East. Part IV concludes the Article by noting that multinational corporations have both the power and responsibility to create products and services that materially enhance human well-being by preserving the natural environment.

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Peace is an uncommon subject for a law review article on corporate governance. An article on corporate governance from an environmental perspective also differs from the usual concerns about making management more accountable to shareholders. (1) Combining concepts of peace, corporate governance, and environment into one article will require both the author and reader to think more holistically about how corporations are governed, both internally and externally, and how corporations may help to co-create the conditions of peace and environmentally sustainable economies.

The idea that corporations may "co-create" the conditions of peace is contrary to the more customary view that in matters of creating or maintaining peace "the role of government completely dominates." (2) Yet, while many corporations may have an insignificant role in co-creating peace--or in disturbing it--larger companies do seem to have an impact. This Article contends that many large corporations have an important role to play in establishing and revising the rules of the global economic game. Moreover, corporations should support those rules providing structural efficiencies (3) that promote full-cost pricing, phase out perverse subsidies, and provide more meaningful information to investors and consumers. In so doing, corporations, consumers, and governments can create more peaceful, sustainable societies even while allowing maximum freedom of movement of people, goods, and services across international borders. (4)

Implicit in this view of corporations as "co-creators of peace" is that corporations are properly viewed as created by society (5) to serve public as well as private interests, (6) and that they are more than a "nexus of contracts." (7) Accordingly, well-traveled ideas on corporate governance from Milton Friedman (8) and his adherents deserve respect, but fail to place corporations in their wider social and political context.

Part I will discuss the role of multinational corporations (MNCs) in the global economy, with emphasis on the relationship between MNCs, governments, and the environment. Special attention will be paid to the oil industry, which provides numerous examples of corporate power vis a vis developing nations' governments. Often, collaborations between corporations and these governments do not adequately respect human rights, extant communities, or the natural environment. Instead of co-creating conditions of peace, these companies have instead contributed to environmental degradation, poverty, and social unrest.

Part II seeks to sort out the legal and ethical implications of Part I by asking whether corporations have a duty not just to obey the law, but also to support laws that may hinder their short-term profitability. The basic contention is that where corporations can make a difference, they are morally obliged to oppose ill-conceived laws and policy proposals and to support well-conceived laws that encourage efficiency and sustainability. It is not socially responsible for a large corporation to use its influence just to oppose those laws and proposals that threaten its short-term economic interests. The reader may well question this proposition; even more problematic will be the task of distinguishing laws and proposals that deserve support from those that require concerted opposition.

One of the major hurdles in believing that a corporation might have a duty to support a law or legislative proposal that would impair earnings in any way is the prevailing belief that corporations are relatively powerless to do so. One aspect of this prevailing belief comes from the conviction that the sole and ultimate purpose of a corporation is to maximize profits. The other aspect is a well-entrenched notion that corporations play a game in which government laws and market mandates--from consumers--largely dictate available strategies. (9) Consistent with this belief, Norman Bowie has said that governments set the rules and consumers command the market: accordingly, corporations have no special responsibility to the environment beyond what is required by law or demanded by consumers. (10)

The Bowie view, however, is at odds with the power of MNCs relative to governments in developing nations. It is also at odds with the role that corporations play in developed economies, where companies exercise free speech to inform consumers and suppliers in the market and also work to establish or reform certain governmental rules and regulations. Corporations have a role to play in co-creating peace by proactively collaborating with NGOs, governments, international institutions, consumers, and the public to create rules of the international trading game that globalize not just trade in goods, but make more available basic human needs, recognize fundamental human rights, and preserve critical habitat and natural resources for future generations. In so doing, these corporations can help to establish the pre-conditions for peaceful economic and human relationships. In theory, of course, business people everywhere should want such stable conditions, but under present arrangements they are systematically driven by short-term economic considerations to maximize current revenue (11) and ignore the natural environment that is the very basis for our economies. (12)

Part III continues this argument by looking at the continuing dependency of the United States and other industrialized democracies on oil from the Middle East. Readers whose primary concerns about peace relate to the attacks of September 11, 2001 and the resulting "War on Terrorism" (13) may wish to look first to this part. Its basic thesis is that, despite the shock of sharply increased oil prices in the 1970s, the United States has failed to diversify the energy basis for its economy and is paying a high military, diplomatic, and economic price for continued dependence on Persian Gulf oil. U.S. national and corporate policies have been closely aligned (14) and must change together to reduce dependence on fossil fuels, both for reasons of national security and, ultimately, for the sake of sustainable economies in many developing nations.

Part IV concludes by noting that MNCs have both the power and the responsibility to create products and services that materially enhance human well-being by preserving the natural environment that sustains life on Earth. This responsibility is more than the prudent pursuit of profit that makes companies strive to be--or seem--"environmentally friendly." It also includes an obligation to attend to the structural inadequacies of the economic and legal system. The rules governing that system--the "rules of the game"--are not only shaped by voting citizens and politicians, but by increasingly powerful corporations that have claimed a voice in public affairs and in the legislative arena. (15) In promoting or opposing national and international rules of the game, corporations should comply with and promote the kind of rules that level the global corporate playing field without leveling rainforests or degrading fisheries and other ecosystems. They should oppose rules or laws that promote unsustainble, uneconomic practices. Ideally, they should promote rules and practices that exemplify sound economics and sustainable values, rejecting "wild capitalism" (16) and its variants.

I. MULTINATIONAL CORPORATIONS IN THE GLOBAL ECONOMY

Throughout history, economic progress has often led to environmental regress. (17) Since the end of the Cold War and the hope of a New World Order during the first Bush Administration, U.S. and European economies enjoyed a relatively prosperous decade. (18) New levels of affluence and well-being were reached, at least by significant numbers of people worldwide as part of global economic integration; Lee Tavis notes that "[i]n the twenty-two years between 1975 and 1997, global real per capita income increased substantially. Both developed and developing countries shared this growth, with industrialized countries gaining fifty-three percent (from a base of $12,589 in 1985) and developing countries gaining fifty-one percent (from a base of $600)." (19) MNCs were a substantial force in the global economy during that period. (20) At the same time, however, environmentalists were warning of increased degradation of the environment, limits to growth, and a collision between economic dreams and ecological realities. (21)

A. Thoughts on Prosperity, Peace, and Corporate Culture

The principles and institutions of economic globalization were designed to promote global prosperity and thus end or greatly reduce armed conflict. (22) U.S. and European corporations were not architects of that system, but have generally supported the GATT and subsequent incorporation of GATT principles into the WTO. (23) Key institutions of the international economic order include the World Bank, International Monetary Fund, and, more recently, the World Trade Organization, all of which have been criticized as compromising the social and environmental fabric of developing nations. (24) In environmental terms, Kevin Gallagher claims that many richer nations are better off

   because we now import pollution-intensive goods from poorer countries. A
   recent World Bank study shows that pollution-intensive industry is steadily
   decreasing in wealthier countries while increasing in the developing
   countries. Unlike the U.S. and other industrialized countries, developing
   nations do not have the luxury of having poorer countries do their dirty
   work. (25)

There is little doubt that productivity, as measured by standard economic indicators, increased dramatically in the second half of the twentieth century. Some, however, have clearly been left behind. (26) Lee Tavis' Article discusses the "global social void" that has developed in spite of post World War II development. (27) Moreover, even if the rising tide of productivity has lifted all boats, or enough of them that we could confidently say that most people are better off--in terms of improved housing, life expectancy, literacy, and health care--we collectively face a natural environment that has been seriously degraded in the process.

Many economists have begun to question the basic assumptions of the economic models underlying our principle policies and institutions. Resource economists, sometimes known as ecological economists, are now achieving greater prominence. (28) Herman E. Daly, former senior economist at the World Bank, has been particularly influential in pointing out the deficiencies of the paradigm that has guided industrialized nations' thinking about global free trade. (29) Daly reminds us that economies are subsystems of the natural environment, even though economists have historically viewed the natural environment as an infinite source and an equally infinite sink. (30) The natural environment is neither, of course, but modern economics was born at a time when labor was scarce and natural resources were abundant; (31) now, human labor is plentiful--and underutilized--while natural resources are increasingly scarce. (32) Lester Brown, chairman of WorldWatch, has been issuing State of the World reports since 1984. He claims that as we work to maximize short-term economic benefits we are depleting Earth's natural capital. (33) Surveying older civilizations as well as our own, he concludes that:

   As the twenty-first century begins, humanity is being squeezed between
   deserts expanding outward and rising seas encroaching inward. Civilization
   is being forced to retreat by forces it has created. Even as population
   continues to grow, the habitable portion of the planet is shrinking. Aside
   from climate change, the economic effects of environmental destruction and
   disruption have been mostly local--collapsing fisheries, abandoned
   cropland, and shrinking forests.... In an increasingly integrated global
   economy, local ecosystem collapse can have global economic consequences.
   (34)

In A Green History of the World, Clive Ponting describes numerous ancient civilizations in which human economic activities outran the natural resource base, resulting in decline. (35) Lester Brown cites Joseph Tainter's The Collapse of Complex Civilizations as showing how "environmental flaws" in the design of these economies led to collapse: failure to drain irrigated water to prevent accumulation of salt in soil (Sumerian), deforestation and soil erosion that undermined agriculture (Mayan), and tree-cutting that exceeded sustainable yields (Easter Island). (36)

Our collective natural resources have been diminishing for hundreds of years, but the pace has greatly accelerated in the past fifty years. (37) Daily reports of shrinking forests, eroding soils, expanding deserts, dying coral reefs, rising sea levels, melting glaciers, more destructive storms, higher temperatures, more and more toxic substances, the depletion of aquifers, and decreasing access to clean, drinkable water all spell trouble for business and the well-being of humankind. (38) During the twentieth century, our global economic institutions have come into conflict with Earth's natural systems, a conflict that must be resolved in the twenty-first century in favor of more sustainable economic practices. Failure to do so threatens to increase the likelihood of armed conflict, especially within developing nations, in which certain groups may be marginalized or denied access to basic human needs. (39)

B. Environmental Preservation and Social Peace

In denying certain groups of people access to land and resources, or in degrading the environment of selected groups by favoring the economic plans of MNCs, government policies and business activities may unintentionally create the conditions for violent conflict. Thomas F. Homer-Dixon has studied the conflicts engendered by environmental degradation, and has found that logging, dam construction, and factory emissions are often indirect causes of ethnic and civil strife. (40) Some of the key findings of the project that Homer-Dixon leads at the University of Toronto are that: (1) scarcity of renewable resources--cropland, fresh water, and forests--created intermediate social effects such as poverty and migration; (2) scarcity often encourages powerful groups to capture valuable environmental resources, leaving marginal groups to migrate to environmentally sensitive areas; (3) resource capture and ecological marginalization reinforce environmental scarcity and raise the potential for social instability; (4) adaptation to environmental scarcity in transitional economies can only be accomplished in countries with efficient markets, competent government bureaucracies, research centers, and uncorrupt legal mechanisms; and (5) in the absence of adaptation, environmental scarcity will sharpen existing distinctions among social groups and weaken state governance, which in turn can cause ethnic conflicts, insurgencies, and coups d'etat. (41) World Bank lending should preferably be sensitive to these factors, but some would say it has not been. (42)

The aggregate consequences of overconsumption (43) in the United States and other industrialized nations, poor inter-governmental development decisions--in the IMF and World Bank--and corporate opportunism--maximizing profit within legal limits--are ominous. Refugees from environmental disaster and degradation have created tension and sometimes violent conflict. (44) The degradation of Ogoni land by Royal Dutch/Shell was a significant factor in motivating the Ogoni people to demand more autonomy from the Nigerian government and more protection of the Ogoni environment. It was these demands that led to violence between the government and the Ogoni people. (45) Competition for scarce resources such as water can also be a potent source of violent conflict. Global warming and the melting of polar ice cover is predicted to raise ocean levels worldwide, directly impacting on island nations who plead most strongly for restraint of fossil fuel consumption by industrialized nations. (46) It is difficult to say how many civil wars are caused by resource capture and environmental marginalization, but since the end of World War II, more than twenty million people have died in armed conflicts, and only "three of the eighty-two armed conflicts between 1989 and 1992 were between states." (47) As the next section indicates, sometimes the armed conflicts involve energy MNCs, whose presence in developing nations may serve the interests of one internal group against another. (48) In passing, it should also be noted that some U.S. companies are actively involved in exporting the military hardware used in those conflicts; as of 1999, "developing nations remained the largest market for new weapons, accounting for about two-thirds of the total." (49)

C. The Role that Energy MNCs Play in Keeping or Disturbing the Peace

Multinational energy companies are among the world's largest corporations. (50) These companies provide numerous cases of cooperation with governments who may terrorize and oppress their citizens. Tom Donaldson and Tom Dunfee begin their book on business ethics and social contract theory by discussing Royal Dutch/Shell's problems in Nigeria. (51) There appears to be growing corporate use of private military groups against any commercially disruptive elements, including unions. (52) In Sudan, Talisman Energy of Canada has been roundly criticized for its involvement with the government, which may have aided "a repressive government suspected of harboring and helping Al Qaeda, the terrorist network held responsible for the Sept. 11 attacks in the United States." (53) A U.S. federal indictment from 1998 claimed that in 1991, Osama bin Laden set up headquarters for Al Qaeda in Khartoum, Sudan's capital. (54) The indictment "also said Al Qaeda had forged alliances with the National Islamic Front, the ruling party in Sudan." (55)

Talisman's chief executive defended its role in Sudan, claiming that it was "socially responsible for a corporation to invest in certain places that some elements of popular opinion find objectionable." (56) He also noted that Talisman had worked with its partners in Sudan to adopt a code of ethics and put programs in place to address community development, human rights, and environmental concerns. (57) Critics, however, say that Talisman colludes with Sudan's repressive regime to "crack down on insurgents who threaten the daily production of crude, or to clear oil areas of unwanted inhabitants" and build "roads and airstrips that allowed government forces to pursue war ..." (58)

In Burma (Myanmar), Unocal has worked with a military regime that has undermined democracy and human rights. (59) Global Exchange, among other NGOs, has claimed that Unocal's operations in Burma are "connected to the forced relocation of Indigenous peoples, forced labor, rape, torture, and murder." (60) In June 2000, ExxonMobil was named in a U.S. lawsuit "as responsible for murder, torture, and kidnapping in Aceh, a region on the northern tip of Sumatra, Indonesia." (61) The suit was filed on behalf of eleven Aceh residents and claims that Indonesian government troops hired by ExxonMobil may be responsible for numerous killings and disappearances. (62) ExxonMobil has denied the allegations, which include claims that the company "provided barracks where victims were tortured and heavy equipment was used to dig mass graves." (63)

In Colombia, the Occidental Petroleum Company has been criticized for its plans to drill for oil on what the U'wa Indians consider as their ancestral lands. (64) In February 2000, there were demonstrations at Fidelity Investments' offices in Boston, Atlanta, New York, Chicago, San Francisco, Los Angeles, Prague, Geneva, Tel Aviv, and ten other cities to protest the mutual fund company's holdings in Occidental. (65) The protest was organized by Rainforest Action Network and other environmental organizations. (66) Fidelity responded by noting that the Colombian government was the appropriate institution to resolve the disputes between the U'wa tribe and Occidental. (67) An investment firm dealing primarily in "socially responsible investments," Trillium Asset Management, commented that Fidelity--with its eight percent stake in Occidental--could and should influence the petroleum company to back off the project. (68) The U'wa position, however, is not politically potent in Colombia, where oil shipments represent thirty percent of total export earnings. (69)

A pattern emerges: energy MNCs, seeking new sources of oil and natural gas--especially outside of the Middle East--are cooperating with governments who seek foreign exchange, even where those governments may be violating human rights in order to make way for corporate operations. (70) The Center for International Environmental Law notes that the

   link between human rights and environmental protection has become
   increasingly clear in recent years. Environmental damage is often worse in
   nations and in areas with human rights abuses. Where human rights are weak,
   civic groups are not able to raise environmental concerns effectively.
   Rights of free association, access to justice, access to information and
   freedom of expression are critical for the success of a country's
   environmental and human rights movements. (71)

D. Breaking the Cycle of Exploitation

The activities of some MNCs in many developing nations and their indirect support for the leading institutions of the global economy--World Bank, IMF--have sometimes contributed to environmental degradation, poverty, and social unrest. For ongoing research and discussions of the role corporate governance can play in co-creating the conditions of peace, it is important to understand whether the corporate-military-governmental collaborations described above are exceptions to the general rule of beneficial development of emerging economies through free trade or are symptoms of a global economic order that tends to exploit less powerful nations and peoples. (72) The truth is not necessarily somewhere in between, and if critics of the current global economic order (73) are correct, important changes must be undertaken to break the cycle of exploitation. Breaking the cycle will require explicit recognition among citizens, governments, and corporations of their mutually reinforcing roles. The notion that corporations merely follow the law and strive to maximize profits for shareholders does not recognize the reality that MNCs may lend support and financial credibility to the governments of transitional economies, may in fact collaborate in ways that deprive local populations of basic human needs, and may influence both national and international bodies that set the terms of global trade.

II. CAN CORPORATE COMPLIANCE WITH LAW BE SUFFICIENT?

This Part of the Article considers whether a corporation can have an important voice in arranging--or re-arranging--the rules of the business game. If it can, would it have a responsibility to support environmental laws that might limit profits in the short-term? In brief, this Article contends that MNCs do have a significant voice and that they not only have a responsibility to exercise their freedom of speech to oppose ill-founded laws and regimes, but also to abide by well-considered laws and to support structurally sound proposals for modifying the legal environment of business. If abiding by such laws means reduced profits, corporate civil disobedience would not be warranted just because of such revenue losses. (74)

The idea that corporations may have a duty to support positive changes in the law is somewhat at odds with the prevailing paradigm of a relatively powerless publicly-held company, caught between "the market"--consumer demands, supplier problems, attention to shareholders, competitors, and creditors--and "the government"--local, state, federal, and, for MNCs, nation-states beyond the principal place of business. This paradigm is captured in the comments of auto and oil company CEOs, the outlook of Milton Friedman, the governance principles of the American Law Institute, (75) and the thoughts of business ethicist Norman Bowie. (76) Because this Article pays particular attention to oil companies and industrial democracies' dependence on fossil fuels, (77) Bowie's claims about the ethical obligations of auto companies deserve particular attention.

In Markets, Morality, and Motor Cars, Bowie states that business "does not have an obligation to protect the environment over and above what is required by law; however it does have a moral obligation to avoid intervening in the political arena in order to defeat or weaken environmental legislation." (78) The implication of this is that (1) business is relatively powerless relative to the government, and (2) environmental legislation that might be defeated or weakened by business intervention is, on the whole, socially and environmentally desirable. Neither (1) nor (2), however, is invariably true. Much environmental legislation may be misguided or in need of amendment. Also, many MNCs do seem to have significant influence or power relative to governments of developing nations. (79) Even in developed economies, companies often exercise free speech to inform consumers in the market and to make governmental rules and regulations more to their liking. (80) One may reasonably ask, if corporations are powerless to influence public opinion and public policy, why so many spend money on advertising, public relations, and lobbying? Assuming that these expenditures of corporate time and money are meant to enhance shareholder earnings, it is difficult to accept the notion that large corporations possess no power to influence governments and consumers.

Moreover, the implication that all environmental laws are worth abiding by does not stand up to reason or experience, nor does the notion of business non-intervention with poorly-considered proposals "for the environment." For the sake of argument, suppose that Bowie means not only existing legislation, but also environmental bills in the legislative hopper, or even proposed regulatory standards. If he is correct, then all corporate efforts from oil and auto companies to defeat ratification of the Kyoto Protocol, however flawed, would be morally impermissible, as would all efforts from oil companies to defeat additional fossil fuel energy taxes, as would all efforts from auto companies to defeat more stringent fuel efficiency standards. But this cannot be. Oil and auto companies routinely engage in free speech activities, lobby hard to weaken certain environmental legislation and regulation, show no signs of slacking off, and generally have shareholder--and sometimes union--support. Moreover, some lobbying may result in positive changes. In short, there is nothing about corporate lobbying per se that is morally suspect. Bowie, however, leads us to something important, and this Article hopes to present a slightly more nuanced set of guidelines for corporate obedience and opposition to environmental law.

A. Government Rules, Market Forces, and Corporate Responses

Before revisiting Bowie's thoughts, it may be helpful to look at existing government policies and market forces that affect oil and auto companies. Neither the public nor U.S. politicians give explicit recognition to the interplay between government policies and market forces. The rhetoric of both left and right contributes to this confusion. From the left, the notion is that government can capably control the decisions of many market participants. From the right, the notion is that if left to its own devices, the market can allocate resources perfectly well. The words "market failure" seldom issue from the lips of the most ardent advocates of this view, but economists are well aware that government must sometimes act to create and maintain properly functioning, competitive markets. Cass Sunstein--and others--have by now made it clear that by enacting laws, government does set the parameters for the market, and that markets require law; (81) stable laws regarding contract, property, and tort are minimal conditions for assuring that promises are kept, that people are able to utilize land and other property in ways that enrich human life, yet do so without causing uncompensated harm to others.

Governments--and related institutions--have, however, often done more than provide such minimal services to establish markets and continue to do so. For the oil industry, the U.S. government provides subsidies of at least five billion dollars annually, largely in the form of depreciation allowances, accelerated depreciation, and other tax incentives for fossil fuel industries. (82) The OECD has found that U.S. consumption patterns are based on "low density housing, extensive use of motor vehicles, and a high generation of waste," (83) all largely supported by subsidies such as road construction and free parking provided by employers--whose expense is tax deductible (84)--and failure to include the full social and environmental costs in the price of gas. (85) While the United States has imposed some energy taxes, their salutary effect has been "nullified" by energy production tax incentives. (86) The oil industry pays an effective income tax rate of eleven percent compared to the non-oil industry average of eighteen percent. (87) Without such a differential rate, the oil industry would have paid an additional two billion dollars in 1991. (88) Moreover, state and local governments tax gasoline at about half the rate they tax other goods--roughly three percent versus six percent. (89)

The subsidizing of non-renewable energy, however, is just part of the global picture. A 1997 study by the Earth Council entitled "Subsidizing Unsustainable Development" found at least $700 billion of taxpayer money annually to

   encourage the use of water, the burning of fossil fuels, the use of
   pesticides, fishing and driving. The report documented countless examples
   of taxpayers subsidizing the use of water in countries where water tables
   are falling.... Additional billions are being spent to expand the world
   fishing fleet when its capacity is already nearly double the sustainable
   catch. (90)

Subsidies are anathema to economists, who understand that subsidies, like negative externalities, represent forms of market failure by undermining efficient resource allocation. (91)

For the auto industry, state and federal governments have combined to provide highway construction, bridges, tunnels, traffic signs and signals, policing, traffic courts, civil courts to hear auto accident claims, and a variety of other services that are only partially funded by license taxes, tolls, and gasoline taxes. Oil companies benefit from these government services as well because crude oil is refined into gasoline, which is the primary fuel for U.S. motor vehicles. (92) Both oil and auto companies benefit from substantial and costly U.S. military commitments in the Middle East. The cost of gasoline does not reflect its full social or environmental costs, either; Norman Myers has estimated that internalizing all direct environmental and social costs of gasoline would lead to a two dollars per gallon tax and that if Americans internalized "all costs of their car culture" they could be paying at least ten dollars per gallon. (93)

Sensible laws, following sound economic theory, would seek to make markets work better by eliminating the distortions of subsidies that encourage unsustainable behaviors and would seek to make markets work better by letting prices reflect their full social and environmental costs. The strategy is unexceptional, in economic terms, (94) but in political terms, subsidies are sometimes sacrosanct, and the hidden tax of negative externalities is more popular with voters--by default--than any direct tax.

It would be unfair to leave the impression that auto companies get only benefits from the current infrastructure and laws. The auto companies are also subject to a variety of U.S. federal and state laws that dictate engineering and design decisions and raise the cost of any vehicle sold. (95) Yet, some of the most significant legislative and regulatory mandates have been strongly resisted by auto companies; (96) moreover, the overall tendency seems to be resistance to any proposal or initiative that would decrease profits. (97) In the following sections, this Article will posit U.S. policy needs for addressing issues of global warming, energy dependence, and overconsumption, and will then focus on three general policy approaches: energy taxes, fuel efficiency standards, and mandated zero emission vehicles. The conclusion to this Part is that auto companies are clearly justified in opposing ZEV mandates in the law, somewhat justified in opposing fuel efficiency standards, and not justified in opposing higher taxes on fossil fuels. This follows from a broad mandate for corporations to support structural legal reforms that fit sound economic theory and promote structural efficiencies: that the price of a product or service reflects its full social and environmental costs and that barriers to free competition--including subsidies that perpetuate the use of non-renewable resources--are gradually eliminated.

B. Auto Industry Environmental Issues: A Sampling

There are many environmental issues that involve the auto industry, both in the United States and other industrialized nations: global warming, energy dependence, air pollution, and overconsumption must take their place along with toxic byproducts and discharges--such as mercury--recycling, and urban sprawl. For simplicity, the Article will posit that problems of global warming, energy dependence, and overconsumption are problems that the United States needs to address, and that the solution to these problems must come not just from government or consumers--from laws and "the market"--but from corporations as well.

1. Global Warming

The increase in observed temperatures worldwide began to attract serious scientific and political attention in the 1980s and 1990s. Human-based greenhouse gas (GHG) emissions had increased markedly, especially during the latter part of the twentieth century, and many scientists believed there was a causal connection between increased GHG emissions and global warming or global climate change. (98) The cause of this warming is still debated, (99) but most scientists and governments believe it to be the result of human activities, particularly those involving the use of fossil fuels. (100) Fossil fuels provide roughly eighty-five percent of the world's commercial energy, (101) and the automobile industry--the world's leading industry (102)--is highly dependent on the oil industry--a close global second to the auto industry. (103) Seven of the ten largest industrial corporations in the United States are either oil or auto companies. (104) A substantial percentage of carbon dioxide emissions come from motor vehicle exhaust. (105)

In 1992, the United Nations Framework Convention for Climate Change (UNFCCC) (106) was adopted at Earth Summit in Rio de Janeiro. The UNFCCC set voluntary guidelines for reduction of GHG emissions. (107) In subsequent discussions on the UNFCCC, it became clear that voluntary guidelines were not working, and in 1997, the Kyoto Protocol was adopted, committing industrialized nations to reduce six kinds of greenhouse gas, the most prominent being carbon dioxide. (108)

Since the Earth Summit in 1992, U.S. gasoline use has increased markedly. (109) In essence, the U.S. public is consuming more and more, generating more and more GHG emissions, and the transportation sector leads the way. (110) An Energy Department report in 1997 indicated that the United States, with less than one twentieth of the world's population, accounted for almost one fourth of all greenhouse gases; U.S. emissions of carbon dioxide from transportation had grown 8.5 percent since 1990. (111) The number of vehicles worldwide multiplied by a factor of eight from 1950 to 1989, (112) and by 1999, the transportation sector globally was responsible for twenty-one percent of worldwide carbon emissions. (113) If current trends continue, the global automobile population could double in as little as twenty-five to fifty years. (114) Moreover, regulatory controls on motor vehicle emissions have focused on carbon monoxide, hydrocarbons, nitrogen oxide, and ozone, and highway emissions of carbon dioxide and other gases "remain largely unaddressed." (115) In both the European Community and the United States, the transportation sector was responsible for the largest increases in carbon dioxide emissions after the Rio de Janeiro Earth Summit. (116) Thus, if the United States and European nations are to reduce GHG emissions, doing so in the transportation sector seems mandatory.

The Kyoto protocol was the result of years of preparation and eleven days of grueling final negotiations. (117) The accord would require industrialized nations to cut greenhouse gas emissions to between six percent and eight percent below 1990 levels. (118) The reductions would be achieved between 2008 and 2012. (119) The differing percentage levels reflect different targets for the European Union, the United States, and Japan. (120) The European Union would reduce its emissions by eight percent below 1990 levels, the United States by seven percent and Japan by six percent. (121) Twenty-one other industrialized countries would meet similar binding targets within the same 2008 to 2012 timeframe, (122) and all industrialized nations committed to cutting even deeper after that. (123) Together, these nations will be reducing their greenhouse-gas emissions by slightly more than five percent from 1990 levels. (124)

The Kyoto Protocol of 1997 was intended to set mandatory reduction targets for GHG emissions from industrialized nations. (125) Considerable opposition to this Protocol emerged in the United States, with "business interests" leading the charge. (126) The Global Climate Coalition (GCC) was created by major MNCs to battle any reduction commitments. (127) Its members initially included the American Petroleum Institute, Ford, GM, Chrysler, Dow Chemical, DuPont, Exxon, Mobil, the American Automobile Manufacturers Association, Chevron, Shell, Texaco, and Union Carbide. (128) According to CorpWatch, a non-profit organization promoting corporate environmental accountability, (129) the GCC used various strategies to defeat U.S. ratification of the Protocol. These strategies included: (1) raising public concerns about unemployment resulting from emissions regulations, (2) releasing reports with "dubious scientific legitimacy" that questioned whether global warming was taking place, (3) attending climate negotiation meetings "en masse," (4) sending a letter "signed by 119 of the U.S.'s most prominent business leaders" to President Clinton, asking that all current climate proposals be rejected, and (5) insisting that developing countries commit to the same stringent reductions as industrialized nations. (130) At the same time, however, developing countries are lobbied "to reject any environmental obligations that might hinder their development." (131)

Corporations have been joined by some unions in campaigning against the Kyoto Protocol. The Global Climate Information Project includes trade associations like the American Petroleum Institute and trade unions such as the United Mine Workers of America and the AFL-CIO; (132) their advertising campaign warns of a general increase in prices that would result from a climate agreement and the unfairness of exempting the developing world from binding commitments. (133) Predictions of massive job losses and economic slowdowns are the stock in trade of the American Petroleum Institute, and the Western Fuels Association sponsors "expert witnesses" who contest prevailing scientific opinion and argue that climate change would be a good thing. (134)

Assuming CorpWatch is a credible source, it seems clear that some of these corporate-sponsored organizations will use any arguments, experts, or statistics that will defeat or weaken environmental laws that would impair jobs and profits. Many shareholders--and union members--would even applaud this strategy, particularly if it helped to maintain share prices or preserve jobs. Nor would all agree that deliberate distortions are morally suspect; the experience of advocacy within the rules of courtroom litigation provides a model in which zealous and sometimes extreme claims are made. Even so, deliberate lying is penalized as perjury, and groundless or frivolous claims can be sanctioned. (135) Moreover, in the context of public debate, deliberate distortions may be legal, but are neither honest nor responsible. They may, in the short term, protect profits, but in a society in which people as citizens as much as consumers need accurate information to make sound decisions, strident and distorted advocacy is irresponsible. (136) For auto companies, the primary means of achieving U.S. reductions in carbon dioxide emissions would be alternate fueled vehicles with greatly reduced or no carbon dioxide emissions, much higher taxes on gasoline--to discourage consumption and emissions--increased fuel efficiency mandates for internal combustion vehicles, and mandated use of technologies such as "zero emissions vehicles." Yet, for most of the 1990s, the auto industry has endorsed none of these, while visibly advocating no policy alternatives. At best, this is consistent with the idea that a corporation can be socially responsible in opposing any environmental proposal or law that might impair profits, regardless of its benefits to society.

There could be many good faith reasons for opposing the Kyoto Protocol; it is well beyond the scope of this Article to discuss all these reasons. The involvement of MNCs in the political process, however, is undeniable. If the Protocol has serious flaws, companies have a right--even a duty--to oppose it with arguments based on sound science and economic projections. Preferably, alternative proposals could be offered that would support meaningful re-direction of a fossil-fuel based economy.

Currently, the confluence of corporate political contributions and official U.S. energy policy suggests that the public interest is being ill-served. An international drive to "phase out fossil fuel subsidies and increase financing for nonpolluting energy sources worldwide" is opposed by the Bush administration, which bases its opposition on a "desire to let the marketplace, rather than [the] government, decide how quickly renewable energy resources are adopted worldwide." (137) Given the strong subsidies provided by the U.S. government for promotion of fossil fuel resources, (138) the administration's position seems more driven by ideology--or perhaps campaign contributions (139)--than by practicality. The Bush-Cheney energy plan, released in May 2001, (140) does not mention the Kyoto Protocol, and primarily focuses on increasing energy supply using coal, oil, gas, and nuclear energy. (141) Recommended actions for renewable energy sources, efficiency, equity, and the environment are allegedly "minor, and place all of these issues at the margins of energy policy." (142) Meanwhile, the United States sat on the sidelines in 2001 as delegates from 164 countries decided on the final details of the Protocol's implementation. (143)

2. Energy Dependence

Energy dependence will be discussed at length in the next Part. It is enough to note here that U.S. energy independence has been a concern since the "oil shocks" of the 1970s. Complete U.S. energy independence from OPEC is most unlikely, even with stringent conservation and increased domestic production. (144) Nonetheless, purposeful public strategies to wean the United States from Middle East oil supplies are needed, both to defuse Islamic extremists (145) and to protect the economy from another series of oil shocks. (146) Increased reliance on conservation and renewable energy sources could also help to reduce trade deficits. (147) U.S. trade for Saudi or Iraqi oil may also provide revenues used contrary to U.S. foreign policy goals. In a prescient piece published in 1996, Joseph Romm and Charles Curtis noted that

   Persian Gulf nations' oil revenues are likely to almost triple, from $90
   billion a year today to $250 billion a year in 2010--a huge geopolitical
   power shift of great concern, especially since some analysts predict
   increasing internal and regional pressure on Saudi Arabia to alter is
   pro-Western stance. That represents a $1.5 trillion increase in wealth for
   Persian Gulf producers over the next decade and a half. That money could
   buy a tremendous amount of weaponry, influence, and mischief in a
   chronically unstable region. (148)

Moreover, U.S. dependence on oil and current U.S. consumption of oil provides a model of economic development that is clearly unsustainable (149) and has enormous economic repercussions on the U.S. economy as well. (150)

3. Overconsumption

Overconsumption is not generally recognized as an environmental problem per se, or as a national security problem. Overconsumption does not lead directly to extinction of a particular species, destruction of a specific forest ecosystem, degradation of tillable soil, or loss of fisheries, aquifers, coral reefs, or stable climate patterns. Yet, overconsumption results in these losses and will continue to do so because it is built into our notions of material progress, standard economic theory, and law. (151) Moreover, the mentality that promotes overconsumption can create a society that is restless, edgy, and aggressive, which is contrary to a societal and global goal of a world more at peace. Lester Brown, Paul Hawken, Amory Lovins, and others have made clear that current consumption patterns are depleting natural capital and undermining future well-being. (152)

William Rees has pioneered the concept of an "ecological footprint," approximating the varying average impact of humans on the environment, depending on which country they live in. (153) He finds that Japan has a 2.5 hectare/capita footprint, and that the Netherlands has a 3.3 hectare/capita ecological footprint, giving them "national ecological footprints about ten and twenty-one times larger than their respective domestic productive land bases. Each is running a large eco-deficit and accumulating a non-repayable debt with the rest of the world." (154) If you accept the viewpoint that economic progress is colliding with finite resource limits--and there are those who do not (155)--it is difficult to deny Rees' conclusion that "there is simply not enough natural capital on the planet to sustain present international development trends using prevailing technology." (156) Rising material expectations and an increase over Earth's present population of six billion would require "absolute reduction in material standards of living" or "massive increase in material and energy efficiency." (157) Far greater efficiencies could be found, (158) but only if we minimize perverse subsidies and begin to tax material and energy consumption rather than labor. (159)

Instead, major industrialized nations continue to tax labor through income taxes and treat consumption of natural capital as an economic "freebie," retaining perverse subsidies and avoiding consumption taxes that would help reduce negative externalities. Moreover, the current version of corporate global free trade favors the use of machinery over human labor, favors consolidation, and requires long lines of transportation that encourage fossil fuel use. (160) Proponents of the current system must also acknowledge alleged inequities in current consumption patterns, such as the claim that the prosperity of the "new world order" after the fall of the Soviet Union was "limited to a tiny percent of the world's people, and to an ever smaller number of people even in the United States," (161) even while sacrificing small farmers, farmlands, forests, wetlands, prairies, ecosystems, and watersheds. (162) The U.S. motorists' appetite for oil poses particular problems, yet is still not clearly seen by citizens, corporations, and government as worthy of concerted action. (163)

Thus, overconsumption poses a fundamental problem for global governance and corporate governance: if all nations followed the consumption patterns of the United States, Europe, and Japan, there would be ecological disaster, yet our national and international legal regimes--including the WTO--do not reflect this fundamental premise, while consumers, corporations, and governments appear needlessly locked into overconsumption of fossil fuels in a path-dependent pattern (164) that is resistant to fundamental changes, even changes that are market-oriented and economically sound.

These changes may be more mandatory than not. Wes Jackson, of the Land Institute in Salina, Kansas, has commented that "as long as we regard the resources of the world as ours at a minimal cost, there will be children born who, when adults, will willingly lay down their lives to bring us down in the name of social and economic justice." (165) Ideally, science, public interest, and legal thought will converge on solutions that move the U.S. and other economies toward energy independence and consumption at sustainable levels.

C. Environmental Legislation and Auto Companies' Responses

Ever since the OPEC-induced oil price spikes of the 1970s, U.S. auto companies have faced numerous legislative initiatives that would boost fuel economy, eliminate or reduce carbon dioxide and other emissions, and move consumers toward more energy-conscious choices. (166) This Article focuses on three different kinds of legislation: corporate wide fuel-efficiency standards, mandates for a certain percentage of "zero emission vehicles" (or ZEVs), and higher gasoline taxes.

1. Corporate Average Fuel Economy (CAFE) Standards

Even before concerns over global warming, the U.S. Congress was greatly concerned that U.S. energy dependence on oil left the economy vulnerable to "price shocks" based on OPEC price controls or embargoes. (167) Because the U.S. was importing a third of its oil, the Arab oil ministers' 1973 decision to cut supplies to the United States (168) soon led to long lines at gasoline pumps, missed or delayed fuel deliveries, public school closures for lack of heat, and violence on the highways. (169) As a response, the federal government enacted the Energy Policy and Conservation Act (EPCA), (170) which included three measures to promote fuel conservation. In the EPCA, Congress set a national speed limit of fifty-five miles per hour, (171) imposed a "Gas Guzzler Tax," (172) and authorized fuel efficiency standards in Title V. (173) The fuel efficiency standards set in Title V required that all companies selling autos in the United States must reach a sales-weighted corporate average fuel economy (CAFE) of eighteen miles per gallon by 1978, twenty-two miles per gallon by 1981, and 27.5 miles per gallon by 1985. (174) Miles per gallon averages would include a weighted average of city and highway EPA mileage ratings. (175) The Department of Transportation (DOT) was responsible for setting the precise levels for the 1981-85 model years and for 1986 and beyond. (176) The current standard of 27.5 miles per gallon has not been exceeded since 1990. (177)

When the CAFE standards were set, Congress allowed an exception for "light trucks" and entirely exempted very large trucks. (178) The basic idea was to make some allowances for farmers and ranchers to have pickup trucks with more horsepower and, necessarily, lower fuel efficiency. (179) In the 1980s, Detroit automakers were able to capture a significant market share by producing minivans and light trucks for urban and suburban motorists. (180) For various reasons, throughout the 1980s and 1990s--including lower gasoline prices (adjusted for inflation), an aging "baby boomer" market that increased demand for larger cars, and the increasing use of light trucks for passenger rather than commercial use,--fuel efficiency began to decline. (181) Under pressure from U.S. automakers, and using the discretionary authority provided it by the EPCA, the Department of Transportation rolled back the 27.5 standard to twenty-six for the 1986 model year and held it there for two years. (182) The standard rose to 26.5 miles per gallon for the 1989 model year. (183) Early during the first Bush administration, however, the standards were returned to 27.5 miles per gallon. (184) There were some proposals in the early 1990s to increase CAFE standards to an average of forty miles per gallon. (185) partly in response to the threat of global warming. (186) These proposals, however, were defeated in Congress; (187) during the Clinton presidency, Republicans attached riders to a number of bills that insured a freezing of CAFE standards. (188)

The attacks of September 11, 2001 may provide new impetus for motor vehicle fuel efficiency. Initially, there was not much interest in Congress in exploring conservation and alternative energy sources. (189) There was a continuing push from House Republicans to encourage oil exploration in the Arctic National Wildlife Refuge (ANWR) matched by an alternate energy bill sponsored by Senate Democrats that avoided ANWR exploration. (190) By early 2002, however, legislation was introduced in the Senate that would raise average fuel efficiency standards to 36 mpg by 2015, a standard that would classify minivans and SUVs as passenger vehicles rather than light trucks. (191) Senate debate on a comprehensive energy package began in March of 2002. (192) The prospect of tightened fuel efficiency standards has resulted in renewed lobbying of legislation and the public by the U.S. auto industry. (193)

There are some strong arguments against mandated fuel efficiency standards. There is also some strident rhetoric that stretches the notion of a "right." (194) Auto company lobbying on this issue has been remarkably effective, at least partly because many of the arguments make practical and economic sense. The principal arguments against fuel economy standards are as follows: (1) lighter vehicles are not as safe; (195) (2) a doubling of fuel-economy in the United States will not appreciably alter GHG emission levels, because moving from twenty-seven miles per gallon to forty miles per gallon would not appreciably reduce GHG emissions if motorists simply drove more; (196) (3) even if vehicle miles traveled did not increase, forty miles per gallon is only half as fuel efficient, making emission reductions almost insignificant; (197) (4) global warming is not a problem, and even if it were, U.S. carbon dioxide emission reductions would be pointless against increased vehicle emissions from developing nations, where large increases in vehicle fleets are predicted; (198) (5) consumers want choice, and do not want to be forced by government regulations into smaller, less safe vehicles; (199) (6) existing CAFE regulations are an inefficient means of enforcing conservation because a bureaucracy must measure miles per gallon for each vehicle the corporation sells and then levy fines; (200) (7) an increase in gasoline taxes would be far more efficient, and tax incentives for purchase of fuel efficient vehicles or alternate fueled vehicles would preserve consumer choice; (201) and (8) market forces will regulate far better, anyway, because when consumers want fuel-efficient cars, they will buy them. (202)

The vigorous efforts to defeat more stringent CAFE standards are partly motivated by reason, and partly motivated by money. U.S. automakers' profitability in the late 1980s and 1990s was due in no small part to the market success of larger vehicles, which produce a far better profit margin than smaller ones. (203) This partly explains why the United Auto Workers would join with automakers to oppose stricter CAFE standards. (204)

Some of the arguments automakers make against CAFE standards are better than others; some of the arguments seemingly lack good faith. For example, the argument that smaller vehicles are not as safe is certainly true in one respect: SUVs as manufactured in the 1990s were unsafe, primarily for small car owners that collided with them. (205) The argument that consumers had a right to choose larger, safer, more comfortable vehicles--SUVs--is a potent one--why should government dictate how comfortable and safe you can be?--but is undercut by the automakers' failure to adequately inform SUV owners of rollover tendencies that drivers would not and did not expect. (206) Moreover, if consumers' right to choose safer vehicles is vitally important, then full disclosure by automakers of safety and crash data would also be important. The industry record in this regard, however, has not been impressive. (207)

There is also some merit to the "market forces" argument: U.S. drivers willingly buy larger, less fuel-efficient vehicles. (208) Seemingly, many drivers also buy for image rather than safety. (209) In polls, the public seems concerned about global warming and favors fuel efficiency standards; in showrooms, they choose size and power. (210) Auto analyst Maryann Keller points out that consumers' car purchases are "dictated by their desires for performance, comfort, and safety, not by any ecological standard." (211)

The consumer's choice, however, does not take place on a blank slate. As we have seen, the context of consumer choice for personal transportation takes place in a context of subsidies to oil companies and the market's failure to fully price gasoline. (212) In addition, insurance companies tend to provide a flat rate insurance that charges drivers the same whether they drive a lot or a little. (213) Bradsher has also shown how current laws favor SUVs and light trucks, (214) and the phenomenon of path-dependence (215) effectively limits consumer choice to different brands of vehicles with internal combustion engines. (216) Generic appeals to "the market," in short, are a lot less straightforward than they seem. Appeals to "the market"--as a self-regulating mechanism always and automatically preferable to government regulation--lack the good faith articulation of structurally efficient principles that this Article recommends as a foundation for responsible corporate advocacy.

The denial of global warming or global climate change as a serious policy problem was part of U.S. automakers' approach to corporate advocacy well into the 1990s. (217) Detroit automakers reacted to the Kyoto Protocol in 1997 by denying that global climate change was a problem that needed to be addressed. (218) Other arguments against CAFE have merit, but are also open to debate. It is true that doubling fuel efficiency for all vehicles--including light trucks--would not necessarily conserve gasoline if people drove twice as much. The majority of driving, however, is done by commuters; presumably, commuters would not drive to work twice as often, but they might live further from work. Still, commuting times may already be approaching their maximums in a number of U.S. metropolitan areas. (219) The safety of smaller cars can be enhanced by decreasing numbers of very large vehicles, and technologies exist to make smaller cars even safer than they are today. (220) In claiming that developing nations' emissions will far outweigh any savings that may be generated in the United States, there is both a denial for past European and North American contributions to carbon emissions and an assumption that the automobile future in nations like China must be similar to the U.S. past. Major automakers will play a part in the kinds of vehicles sold in China, however, and those need not be based on the internal combustion of gasoline unless there are truly no good economic alternatives. That, in turn, depends on what is meant be "economic" if alternate fuels have a viable infrastructure, if the full costs of gasoline are factored into its price, and if subsidies to oil could be phased out, other kinds of vehicles could very well be economical. (221)

The best arguments against CAFE address the relative inefficiency of these mandates compared to more economic-minded alternatives: "feebates" for those who choose smaller vehicles (222) or other incentives to help automakers sell alternate fueled vehicles. Occasionally, an auto company executive will say that higher fuel taxes are the most sensible economic policy solution, but it is not said too often, or too emphatically. (223) In sum, opposition to CAFE standards has not been linked to advocacy for structurally efficient reforms. (224) The CAFE legislation does have flaws, and even the basic idea is somewhat flawed. It assumes that doubling gas mileage will cut fuel use in half, even though such doubling may just encourage more driving. Moreover, it allows drivers to put the onus on auto companies: people polled about global warming greatly prefer solutions that do not cost them anything and require the auto companies to come up with some new technology that solves the problem. (225) With such flaws, we should certainly expect corporate advocacy directed toward consumers and government; corporate compliance, without strenuous argument, would be disappointing not only to shareholders, but to the driving public. Yet, the real hope is neither silence nor specious or self-serving argument, but instead, the kind of advocacy that provokes searching and honest conversations among corporations, consumers, and the government.

2. Gasoline Tax Increases

If questioned as to how Detroit could help reduce C[O.sub.2] emissions, a Big Three CEO or other high-ranking officer might say that only far higher fuel prices would shift consumer demand away from larger vehicles. (226) This can be said, however, without risking the status quo: while several studies have demonstrated that only a steep increase in gasoline taxes will shift gasoline consumption downward, U.S. politicians are not about to risk the public's well-known antipathy toward energy taxes of any kind. (227) They have learned to avoid suggesting even modest increases in gasoline taxes, much less proposing them or voting for them, because U.S. drivers believe--erroneously --that they already pay enough for gasoline. (228)

U.S. drivers' preferences for cheaper gas and larger vehicles, however, reflect a number of unusual market distortions. Norman Myers has pointed out that the total social costs of gasoline use are barely reckoned into the market price, (229) leading to what economists call "negative externalities." (230) In addition, many employers offer free parking as a non-taxable benefit to employees, the oil industry benefits from subsidies under U.S. tax laws, and larger vehicles are now favored by the law in numerous ways. (231) Finally, both the driving public and the auto industry benefit enormously from having a system of roads and highways built and paid for with public funds, and the costs of maintaining that system--including traffic enforcement--are only partly covered by licensing or registration fees and gasoline taxes. (232)

Restructuring the market so that external costs are taken into account is more easily said than done. (233) Eric W. Orts points out at least four "conventional economic approaches" to market-oriented environmental laws: energy taxes or pollution charges, extending rights of ownership in the natural environment, tradeable pollution rights, and providing truthful information about products and their environmental effects. (234) Energy taxes are problematic because government must set a fee based on estimates of potential harm, and reasonable people are bound to disagree; there are also ongoing tasks of oversight to adjust taxes, raising taxes when there are too many emissions and lowering them when there are too few emissions. (235) In the United States, proposals to significantly increase federal gasoline taxes would have to be accompanied by reductions in federal income tax in a process of tax shifting that might prove politically confounding. If enacted, the tax shift could result in underfunding of government in some years, and a surplus in other years.

3. Zero Emission Vehicles

Another strategy for reducing fossil fuel emissions from vehicles is to shift to alternate fueled vehicles. Various choices include electric, natural gas, methane, and fuel cell vehicles. The federal government has provided some limited support for the development of alternate fueled vehicles, (236) while California has mandated that companies selling vehicles there market a certain percentage of zero emission vehicles, or ZEVs. (237)

Auto companies have worked hard to defeat and delay this requirement. (238) Indeed, there are good reasons for such opposition; the existing technological means of achieving zero emissions are electric vehicles (EVs). (239) Hybrid cars such as Honda's Insight or the Toyota Prius, while more fuel efficient, still have carbon dioxide and other emissions. (240) While there have been advances in fuel cell research, the marketing of significant numbers of fuel cell powered vehicles is still several years away. (241) As for EVs, the sources of electricity for EVs are mostly coal-fired or nuclear powered electric utilities; coal-fired plants add carbon dioxide emissions to the atmosphere, and nuclear power raises other environmental concerns. (242) Consumers reject vehicles that cannot be conveniently refueled on the road, and drivers cannot find facilities away from home to quickly recharge an electric vehicle.

Vehicles powered by natural gas burn clean with no harmful emissions, but drivers do not want the inconvenience of seeking out the few natural gas pumps that could refuel their vehicles; such pumps are hard enough to find in metropolitan areas, and in rural areas are rare indeed. (243) And this is not likely to change: service stations will not put in natural gas pumps until there is enough demand--natural gas-powered cars--and drivers will not buy cars powered by natural gas until there are plenty of pumps to make refueling convenient. The phenomenon of "path dependence" continues to provide a seeming mandate for gasoline powered internal combustion engines that steers both manufacturers and consumers along the path of least resistance. (244)

D. Motor Cars and Morality Revisited

Norm Bowie has written that automakers have no special responsibility toward the environment beyond what is required by law. (245) Yet, many MNCs operate in countries where "law"--as understood in the United States--is so poorly developed that obedience to the law may be ethically empty. For example, Shell Nigeria's actions in Ogoniland did not violate Nigerian law or international law, but were socially and environmentally irresponsible nonetheless. (246) Shell has even acknowledged as much. (247) An oil company or an auto company operating in a nation where environmental laws and regulations are relatively weak or unenforced cannot claim the moral high ground. Bowie also cautions that a business should avoid "intervening in the political arena in order to defeat or weaken environmental legislation." (248) This cannot be entirely correct, either; under Bowie's injunction, auto company campaigns against higher CAFE standards, ratification of the Kyoto Protocol, and zero emission vehicles are all equally suspect. Yet, the previous sections in this Part were meant to show how corporate opposition to poorly conceived lawmaking could be consistent with good corporate governance. (249) This opposition, however, should combine the mandate of profit maximization with advocacy for sound, market-oriented reforms, and avoiding advocacy for the sole sake of short term profitability.

If California proposes that each automaker must insure that at least fifteen percent of the vehicles it offers for sale in California have zero emissions by 2003, a strong case for opposition emerges, and not only in terms of maximizing shareholder wealth. If a company knows that the law will mandate the production of vehicles that (a) are not likely to be purchased by consumers, (b) will not advance environmental integrity, (c) will significantly reduce profits to the company, and (d) will shift resources away from better, long-term solutions, it surely has a duty to oppose the law. The argument here is that corporate responsibility to oppose unwise or ill-conceived legislation or regulation can be founded on self-interest--short term profit maximization--but is also grounded in a civic responsibility to ensure that the market is governed by structurally efficient rules. (250) In either case, opposition should be tendered to politicians and the public in good faith, meaning that specious, hypocritical, or solely self-serving arguments are morally suspect.

The argument can be tested in light of the industry's consistent opposition to the CAFE standards. As noted earlier, there are some good faith reasons to oppose government mandates on fuel efficiency. Several of the automakers' arguments against CAFE, however, lack consistency with other aspects of their corporate conduct. (251) Advocacy for increases in energy taxes, or for tax incentives for consumers to buy alternate fueled vehicles, are more appropriate and responsible arguments. Those arguments, in fact, seem to be made with greater frequency. (252)

One of Bowie's arguments fits very well with the paradigm of corporations being squeezed between government regulators and consumer demands. This is the paradigm in which corporations are relatively powerless, warranting Bowie's prescription to obey environmental laws, oppose no environmental laws, and wait on the demands of individuals as citizens and consumers to make needed changes. Business, says Bowie, will "respond to the market." (253) It is the consuming public that has the obligation to make the trade-off between cost and environmental integrity." (254) It is true that if the consuming public demanded zero emission cars, then auto companies would have to make them or go out of business; but, again, the consumer's choice does not take place on a blank slate. The context of consumer choice for motor vehicles is one of subsidized oil, subsidized roads and highways, cheap gas, insurance rates that are the same no matter how much people drive, laws that favor large vehicles, and an understandable consumer preference to drive a vehicle that will not be overpowered by a larger one. It is, therefore, doubtful that "the market" as presently configured could do much of anything to reduce U.S. carbon dioxide emissions from motor vehicles or end U.S. over-dependency on Persian Gulf oil. Markets are not perfectly competitive; they are path dependent, imperfect--externalities and subsidies--and highly politicized--rewarding campaign contributions with "access" or a seat at the table.

A more nuanced version of Bowie's recommendations for ethical corporate governance in auto companies is selective environmental compliance and defiance. Auto companies--and, arguably, all companies--should obey democratically-created laws and regulations, but oppose--in court, in administrative hearings, and in public pronouncements--any law that is contrary to sound economics, and advocate laws that are consistent with making the market more structurally sound. Attention to what Eric Orts has called "reflexive environmental law" will be useful here, as some market-oriented policies will serve particular problems better than others; (255) an emissions-trading system for U.S. motor vehicle owners, for example, is probably unworkable, whereas some form of energy taxes or "feebates" seems more sensible. (256) Thus, there will be room for argument and advocacy in any law or proposal. This Article's recommendation for responsible corporate governance is a good faith articulation of the benefits and pitfalls of any particular proposal and the advancement of alternative proposals, rather than the more "traditional" opposition of a company to any environmental law or proposal that may adversely affect profits. (257)

Telling the truth consistently requires that automakers should be willing to not only criticize government laws and regulations that have misguided aims and ineffective means, but to support laws that foster efficient markets and sound policy goals. If auto and energy companies deny that fossil fuel dependence is a national security problem, or deny that carbon dioxide emissions may be a global climate problem, or plan for a world in which all nations consume gasoline, land, and other resources in order to drive personal vehicles, both efficiency and truth are poorly served.

Auto companies have taken some positive steps. In 2000, the Ford Motor Company acknowledged that its SUVs created more safety and environmental problems than its cars. (258) In December 1999, Ford withdrew its support for the Global Climate Change coalition, an industry-sponsored public relations and lobbying effort that routinely dismissed global warming as a serious problem. (259) In January 2000, DaimlerChrysler also quit the coalition, noting that it had become an impediment to pursuing environmental initiatives in a credible way; while continuing to oppose the Kyoto protocol, GM left the coalition two months later, acknowledging that carbon dioxide buildup could be changing the world's climate. (260)

Detroit automakers have also been working on new, more environmentally friendly technologies. Since 1993, the U.S. government and Detroit automakers have spent $1.6 billion to develop an eighty mile per gallon family car through the Partnership for a New Generation of Vehicles (PNGV). (261) Alliances with companies working on fuel cell technologies may have begun the process of making the internal combustion engine obsolete. (262) DaimlerChrysler expects to market a fuel-cell Mercedes in 2005. (263) These are responses not only to the market and to anticipated rises in gasoline price as supplies diminish, but also to anticipated regulation.

Responsible corporate advocacy requires not only honesty, but also a commitment to addressing legal and regulatory concerns proactively. For example, if there are infrastructure barriers to fuel cell technologies, automakers have the responsibility to address those publicly. If gas prices relative to other markets are encouraging over-consumption and negative externalities, auto companies should say so. If reasonable market-oriented changes in law can encourage reduced fossil fuel consumption, auto companies should say so. If government needs to provide greater incentives to the private sector for exploring new forms of energy, auto companies should say so.

Educating the public and espousing the creation of public goods is a legitimate, even necessary function for large public corporations. Bowie's inclination is to accept a fairly clear separation between public and private spheres, but such a separation seems less and less realistic. Regulators make career moves to private industry through the "revolving door," and formerly public functions are privatized or de-regulated; companies and trade associations contribute heavily to politicians and parties, lobby extensively for statutory and regulatory changes, and work assiduously at cultivating public opinion. In the context of U.S. law and policy, automakers must acknowledge their influence and use it positively. Because of the U.S. position as a major power, U.S. law and policy will also impact the development of international law and may contribute to--or detract from--the hope of a more peaceful world.

III. OIL, THE ENVIRONMENT, AND PEACE

Over the past fifty years, Arab leaders have come to realize that oil is the economic Achilles heel of the industrialized democracies, and have proposed to use oil as a "weapon." Daniel Yergin's monumental book, The Prize, notes that Egypt's Gamal Abdel Nasser was one of the first to realize the potentially disruptive power of Arab oil:

   Nasser, too, wished to carve out a great empire, and in his book, he
   emphasized that the Arab world should use the power that came with the
   control over petroleum--"the vital nerve of civilization"--in its struggle
   against "imperialism." Without petroleum, Nasser proclaimed, all the
   machines and tools of the industrial world are "mere pieces of iron, rusty,
   motionless, and lifeless." (264)

This section of the Article therefore asks whether the industrialized democracies' continuing dependence on Persian Gulf or Middle East oil (265) is an active cause of conflict between Islamic peoples and "the West," particularly the United States. By implication, it also asks whether decreased dependence on oil generally--or Persian Gulf oil specifically--might effectively disarm the Arab "oil weapon" and decrease the likelihood of aggressive interactions between Islamic groups and industrialized democracies. Giving a tentative "yes" to both then requires us to ask whether corporations could--or should--have a role in reducing that dependence.

A. A Faustian Bargain?

There is little doubt that the Persian Gulf war and the United States "war on terrorism" after the attacks of September 11, 2001 represent major, armed encounters between very different-minded groups, and may well represent what Samuel Huntington has called the "clash of civilizations." (266) As such, relations between the United States and Middle Eastern nations and sub-groups--such as Osama bin Laden's Al Qaeda network--are likely to remain tense and hostile for some time. (267) Nonetheless, the U.S. private sector's dependence on oil provides a continuing motive for U.S. military intervention in the region, and a stimulus to further terrorist responses. (268) To the extent that consumers, corporations, and the U.S. government could, over time, reduce their collective reliance on Middle Eastern oil--or reduce their reliance on oil generally--the prospects of peace may well be enhanced.

The energy-intensive economies of Europe, the United States, and Japan are largely dependent upon imported oil, and much of that oil is from the Persian Gulf states. (269) U.S. oil dependence on Persian Gulf oil has grown since the oil price shocks of the 1970s. (270) Overall oil imports to the United States, the European Union, and Japan are predicted to increase between 2002 and 2020. (271) As of early 2002, Congress has no proposals pending that would significantly reverse that dependence for the United States. (272) Unless that dependence is reversed or at least significantly reduced, the United States--with or without assistance from Japan or the European Union--must commit military, political, and diplomatic resources to maintaining some semblance of "stability" in the Middle East. (273) The cost of that commitment is considerable, yet not easily calculated, and is not included in the price of oil--or gas at the pump. U.S. military presence in the Gulf, especially in Saudi Arabia, is a significant motivating factor behind the Al Qaeda network's attacks on U.S. embassies in Africa, the World Trade Center towers, and the Pentagon. (274)

Moreover, the U.S. alliance with King Fahd's fragile government in Saudi Arabia is, at best, an inherently unstable one. (275) The U.S.-Saudi relationship has been variously described as "cold blooded" (276) or as a "Faustian bargain." (277) In exchange for U.S. military support, Saudi Arabia provides bases for U.S. forces, attempts to stabilize world oil prices, and gives preferential prices to U.S. importers. (278) Yet, the Fahd regime also has maintained "tangible connections to Islamic fundamentalist terrorism" (279) and Saudi citizens have been implicated in numerous attacks on U.S. interests during the 1990s, (280) including attacks on U.S. embassies in Kenya and Tanzania, and the attack on the U.S.S. Cole in 2000. (281)

It is grimly ironic, therefore, that U.S. dollars for Saudi Arabian oil have been converted into direct aid for Al Qaeda, and that Osama bin Laden's network is likely to have trained and financed the actions of fifteen Saudi citizens in the attacks of September 11, 2001. (282) It is also troubling that Saudi cooperation after September 11 was somewhat halting. (283) With or without Saudi cooperation, the U.S. public expected its government to "root out" the wrongdoers and either kill them or bring them to justice; yet there was no reason to think that extirpating bin Laden or his chief aides--or Saddam Hussein, for that matter--would bring an era of peace in the Middle East. Other matters must also be addressed.

B. Consumptive Capitalism and Islamic Culture

U.S. military action against Islamic terrorists may provide retribution and at least temporary respite from further attacks, but peace will be served only when the roots of unrest are examined. How does the United States--its corporations, consumers, and government--evoke so much unrest and resentment in other parts of the world? (284) Part of the answer is U.S. inward focus, its inability to see itself as others do. (285) For example, U.S. motorists seem largely unaware that their high levels of gas consumption have helped to fund bin Laden's network. (286) Not coincidentally, the U.S. public seems unaware that its relatively high levels of fossil fuel consumption do any harm to the environment, that the price of gasoline is actually far less than its social and environmental costs, or that the United States may be "the least generous nation on the planet." (287)

If more and more members of the U.S. motoring public were to voluntarily use less gasoline, and if as citizens they supported higher gasoline taxes, stricter fuel economy standards, and the phase out of subsidies for oil and its related industries, the United States would be less dependent on oil generally, and Persian Gulf oil in particular. Yet, consumers must be better informed, and cannot act alone; corporate and national policies must be in accord. Granted, adopting these more economically-minded policies would not by themselves guarantee peace in the Middle East or bring about stable, democratic regimes there. (288) A continuing strategy of political and military action to insure "stable" oil supplies from the Middle East, however, is a sure invitation to further conflict. (289) Instead, the United States and oil MNCs could seek oil elsewhere, or could seek to develop other energy sources. (290)

Finding new oil fields outside the Middle East is one answer to unwanted dependence on that region, but oil seems to exacerbate local conflicts wherever it is sought. (291) The pursuit of other energy sources, moreover, has not heretofore been a high priority for the United States or its principal corporations. (292) Despite the OPEC induced oil-price shocks of the 1970s, no sustained strategies for alternative energy have been pursued since the Carter administration. (293) The explanation for this lies largely in the continuing abundance and low price of oil and the existence of an elaborate service infrastructure for oil and gasoline. (294)

The relative lack of U.S. energy policy to encourage alternatives to a fossil-fuel economy, however, is helped considerably by a sell imposed shortsightedness that refuses to count the ecological and political costs of continued dependence on oil. The ecological costs may include global warning and the global effects of overconsumption; (295) the political costs could be ignored as part of the long-standing U.S. bargain with the Saudis. (296) Even after September 11, the dominant message from Capitol Hill was not energy conservation or renewable energy, but more exploratory drilling for oil in the Arctic National Wildlife Refuge, one of the last remaining pristine wilderness areas in the United States. (297)

Would reducing dependence on Middle Eastern oil at least partially defuse Islamic fundamentalists and enhance the opportunities for peace in that region and in the world? The question cannot be answered with complete confidence, but well-educated guesses remain. Even if U.S. and EU consumption of Middle East oil is not the primary cause for the animosity that led to the September 11 attacks on the Pentagon and World Trade Center, the U.S. military presence to insure that supply may well be. (298) The existence of Israel, a Western-style democracy and functioning economy in the midst of the Arab world, may be a more significant issue, but even if a permanent peace could be brokered between Israel and its neighbors, particularly Palestine, and even if Western economies did not need Middle Eastern oil, it must be conceded that peace in and from the Middle East seems unlikely. Ethnic and religious tensions abound, some nations in the Middle East have or will have weapons of mass destruction, and many Islamic fundamentalists seek to extend their influence beyond the Middle East. (299)

C. The Clash of Civilizations and the Corporate Response

If the power to resolve conflicts lies with nations, not corporations, and conflicts are inevitable, it is tempting to say that MNCs have very little say or sway in the course of future conflicts. (300) At a time when the power of nation-states and traditional notions of sovereignty have been eroded, however, non-state actors--including MNCs--cannot be relieved of all responsibility quite so quickly. Samuel Huntington predicted serious and endemic conflict between "the West" and Islamic fundamentalists in his 1996 book, The Clash of Civilizations and the Remaking of World Order. (301) His principal thesis is that the end of the Cold War unmasked a multipolar global order based on culture and civilization rather than ideology. (302) He provides convincing evidence that many of the post-colonial armed conflicts involve warring ethnic and religious groups--including armed conflicts in Yugoslavia, Lebanon, Cyprus, East Timor, Sri Lanka, Kashmir, and the Israeli-Palestinian conflict--rather than conflicts motivated by ideology. (303) By contrast, armed conflict among the industrialized democracies, which have comparable cultures and value systems, is relatively rare. (304)

Relevant to the conflict between Islam and the West, Huntington notes a number of apparent realities that escape many in the United States, but which are prominent in the minds of many people in the Middle East. (305) These include the subjugation of the world by Western powers through violence, (306) the inherent tensions between "Western values" and Islamic culture, (307) the reality of U.S. imperialism over the past hundred years, (308) the link between "Western values" and "modernity," (309) and the resurgence of Islam as a reaction to modernity. (310) In short, the post-Cold War sense of a New World Order based on U.S.-dominated free markets is apt to be short-lived. (311) Moreover, Huntington sees a link between U.S.-style consumer-driven capitalism and a "decadence" that Asian and Islamic peoples oppose. (312)

Yet, what possible difference can MNCs make? Two potential contributions may be noted: First, as argued in the previous Part, MNCs can--and morally, should--use their increasingly potent political speech and influence to advocate domestic and global legal systems that are fair, transparent, ecologically sensible, and allow competition in accord with the best economic and ecological thinking available. To some extent, this is already taking place; corporate advocacy for generalized rules against bribery, or collaboration in transnational systems such as ISO 14000, set standards and practices that are not merely local. (313) Second, U.S. and EU-based MNCs can realize that they share, relative to much of the world, a common culture and civilization; they may strive to be borderless, but are not valueless. (314) Given that MNCs will invariably transmit ideas, values, and ways of life that are alien to many cultures, they must own up to their values and hold them consistently.

Democratic values may very well be part of that mix. (315) One tentative hypothesis about peace is that democratic nations tend to be more at peace with one another. (316) If so, then do corporations have any stake in promoting democracy or democratic values? This question is particularly salient with respect to corporations chartered in the United States. As William Greider has asked: "Where does loyalty reside for those American corporations that have rebranded themselves as `global firms'?" (317) Does the national interest truly lie in "making the world safe for globalizing commerce and capital?" (318) According to one view, the concept of "borderless companies" promoted by General Electric--much admired as a model of good corporate governance (319)--would elevate maximizing shareholder return over any allegiance to the corporation's charter country or its principal place of business. (320) Pledging such allegiance can undermine a MNC's short-term profits: Citibank, for example, has "lobbied to weaken the new regulatory rules required to halt the flows of terrorist money in the global financial system." (321)

Under a very different view, one espoused in this Article, we can refuse to accept that economic survival overwhelms any ability of corporations to use their influence to promote values of honesty, openness, transparency, and accountability. We can refuse to accept that anything legal and profitable is corporately correct, an acceptance that allows corporations to gain advantage by unfairly forcing costs on others--negative externalities, by using political influence to favor themselves over others, by accepting perverse subsidies, or by avoiding accountability--in the unrestricted and unexamined movement of capital in secret offshore bank accounts. Rather, under the view advocated here, corporate free speech and political action should be used not only to advance the company's interests but to promote conditions under which many ideas, products, and services can compete and collaborate to bring about dynamic, sustainable societies. It is, ultimately, toward the "telos of peace" (322) and sustainability that corporations and nations should strive. (323) Yet, according to the usual "maximizing profits" view, corporations have no such responsibilities, and it is not realistic to expect them to be responsible to anyone or anything beyond their own bottom lines. (324)

D. Corporations, War, and Sustainable Economies

War is bad for the environment and other living things. (325) During the past twelve years, U.S. arms have been repeatedly striking targets in the Middle East, with promise of more to come. (326) That the motivation for doing so could in any way be linked to U.S., EU, and Japanese thirst for oil from that region should be disconcerting at the very least. (327) Still, very few U.S. voices, particularly corporate ones, have been raised in objection to the larger implications of U.S. presence in that region. (328) Yet those voices should be raised, because U.S. over-dependence on inexpensive oil from the Middle East can compromise its ability to consistently invoke the rule of law, to be viewed as an objective broker for peace in the region, or to model principles of conservation, restraint, and fairness to people in that region. Corporations, no less than citizens, politicians, and the media, contribute to the ongoing discussions and debates that shape U.S. foreign policy. (329)

Setting forth the oil dependence problem as a national security issue for the United States is not new. (330) The "oil weapon" has been used against the United States before. (331) Gradually removing this "weapon" will not in itself bring peace, but may nonetheless help. (332) It seems fair to say that de-funding terrorist groups like Al Qaeda would likely reduce conflict, as would de-militarizing U.S. presence in the Middle East, (333) as would greater generosity toward less fortunate societies, as would a demonstration of sincere self-discipline relative to free markets and the principles espoused by the United States and the European Union. If MNCs do have political clout, and if a more stable, peaceful world were an explicit corporate goal, then MNCs would not politically support U.S. military intervention for securing oil supplies, (334) would generally support free trade and development policies that better secured the sufficiency and prosperity of developing nations, and would support aid to developing nations that did not necessarily bring benefit to global corporate profits. Moreover, such MNCs would refuse bailouts, perverse subsidies, and ongoing policies that encouraged negative externalities from oil and gasoline use. The apparent inability of citizens and corporations to do so manifests the ideology of self-interest--that we can all do what we want to do and that it will all work out for the greatest good. Even Adam Smith would not have made such a claim. (335) A thorough rethinking of underlying assumptions and models is probably overdue; such self-criticism is a considerable strength of liberal democracies, and is not just a luxury for scholars but is also imperative for good governance. (336)

The age of sovereignty may be vanishing before our eyes. (337) With non-government actors--Al Qaeda, for example--and corporations assuming greater relative power, a period of relative anarchy may be at hand, with all that entails for increases in violent conflicts. (338) The collective action problem for corporations is to find ways to contribute to the rule of law and the ascendancy of market arrangements that help to secure sustainable, peaceful societies. If, on the other hand, corporations feel obliged to pursue short-term financial interests at all costs, then the ultimate costs could be considerable.

IV. WITH POWER COMES RESPONSIBILITY: ADVOCATING STRUCTURAL MARKET REFORM IN THE CAUSE OF STABILITY AND PEACE

What should be the agenda for corporate governance and the pursuit of peace? One threshold question is whether corporations should even care about peace. There are those companies that find war profitable, even if not entirely desirable. (339) U.S. companies lead the world in arms exports. (340) MNCs that have extensive contracts for the U.S. Department of Defense may find maximum profits in times of war, cold or otherwise. (341) From an environmental perspective, however, world war would be a disaster. (342) The localized fault-line wars such as Huntington describes--Kosovo, Cyprus, Armenia, Indonesia, and Kashmir--tend to degrade the forest, water, and soil resources that sustainable local societies require, leading to resource conflicts. (343) Middle East conflict since 1990 has also been hard on natural environments in Kuwait, Iraq, and Afghanistan. (344)

Assuming that this threshold question has been crossed, and that most companies generally care to find opportunity in lands and economies where peace and relative abundance prevail, an important inquiry is whether corporations have any significant sway in establishing or maintaining stable, peaceful economies. This Article has tried to convince the reader that many corporations do have the power to influence the rules of the game, both within their country of origin and beyond. If the reader is not convinced, that inquiry remains the most pertinent: do MNCs have significant power to affect changes in the way business is done globally? For readers that are convinced, there are several further inquiries that may usefully be addressed.

First, within well-developed regulatory regimes, do MNCs have any particular obligations to promote sustainable, environmentally-friendly economic activities beyond what is required by law? Is there an obligation to advocate legal rules and mandates that are systematic and rational? This Article has argued in the affirmative to both, with a corollary command that corporations should avoid the solely self-interested gambits and strategies motivated by the goal of short-term profit maximization for one firm or one industry. (345) Standard corporate governance theory would hold just the opposite, sometimes with the caveat that long-term strategies may require promoting a corporation's environmental bona fides, or that paying attention to environmental issues is helpful in increasing profits or in avoiding losses caused by poor public relations. (346)

Second, with regard to transitional economies, do MNCs have any particular obligation to engage governments in the role of "diplomat" or political player, advocating human rights, environmental protections, and equitable distribution of joint ventures with host country governments? Framed somewhat differently, do MNCs have any particular obligation to avoid benefiting from war economies, to avoid using private militias that may kill in defense of property and business operations, or to disengage from corrupt or repressive regimes? Part II of this Article pointed to ongoing issues of this sort, especially where MNCs were engaged in natural resource extraction--timber, oil, and natural gas. It is with regard to these governments and peoples that MNC power is greatest, and where the contrast or contest between people and profits is clearest.

This Article has argued that only the narrowest view of corporate governance requires a company--such as Talisman Energy (347)--to stay in Sudan, to maximize profits in Sudan, and to exercise the right to remain silent regardless of any atrocities that Sudan's government may undertake. (348) A somewhat more expansive view of corporate governance would hold that Talisman should pay close attention to moral attitudes in the market and guard against a more global public opinion that might jeopardize profits. (349) An even more expansive view of good governance for MNCs would ask Talisman to exemplify "constructive engagement" in the best possible sense, using best-known environmental practices even though not required--, advocating for fair distribution of government profits, and employing and training host country workers at a fair relative wage. The perils and possibilities of constructive engagement, however, are not completely documented or widely understood, (350) and further studies on constructive engagement are much needed. (351)

Third, with regard to U.S. military policy, what influence--if any--do MNCs have? Part III made explicit the connection between U.S. foreign policy in the Middle East--a flashpoint for violent conflict--and U.S. and European oil consumption. (352) It is deliberate that U.S. military force is engaged for economic reasons as well as political or strategic ones, but could MNCs discourage ongoing military engagement in the Middle East? They could, this Article has argued, by actively supporting alternative energy policies; (353) oil is not going to be replaced, but systematic reductions in its use can greatly reduce its potential as a weapon for militant factions and "rogue nations" in the Middle East. (354)

Fourth, with regard to sovereignty, national power, and globalization, where do MNCs stand? In the twenty-first century, are corporations going to remain "stateless," indifferent to the fates of their home nations--typically, the United States, the European Union, or Japan? Huntington's work suggests not so much that nations trading with one another tend not to go to war, but that nations with similar, democratic institutions are more likely to be at peace with one another. (355) If so, the basic values of the societies from whence these companies grew are values that need defending. (356) If MNCs leave that task to individuals, or to government, that defense will be far less robust. Moreover, as William Greider points out, MNCs do the United States a disservice by proclaiming their borderless, stateless natures in peaceful times then professing great patriotism in accepting government largesse in times of war. (357)

Fifth, and on a more general level, globalization, free trade, and development must become more directed toward long-term, sustainable development in transitional economies. For example, it does very little good for the maquiladoras of Mexico to thrive for twenty or so years, then lose factories and jobs to China or nations in Southeast Asia paying lower wages. "Development" that is only temporary brings renewed human misery and often leaves environmental damage in its wake. To the extent that MNCs confuse economic activity and growth with development, or support trade policies that selectively garner the benefits of free trade for industrialized economies,"the West" will have a continuing reputation for exploitation.

Thus, the agenda of peace and corporate governance has need of balanced, objective assessments of whether global prosperity offers the best chance for world peace, and whether free trade as it is presently constituted is pointing us all toward greater prosperity. The heart of the argument throughout this Article is that by failing to address negative externalities and perverse subsidies, the world's largest MNCs do not participate in a system of global free trade that is sustainable. For reasons of stability, clarity, and sustainability, they should want such a system, but doubtless feel impelled by short-term exigencies to make the best of a system that seems fairly ungovernable.

Globalization, the general availability of sophisticated weapons and weapons of mass destruction, and the violent clash of different cultures and values should tell us that open markets and open borders are likely to bring more conflict rather than less. (358) In a fully connected world of trade among all nations, there is no guarantee of peace unless people have the resources and economies to stay and thrive in their ancestral lands. (359) Therefore, globalization must mean more than just opening new markets for MNCs.

MNCs have gained from the freer movement Of people and goods across national borders, and they have both the power and the responsibility to do business in ways that materially enhance human well-being by preserving the natural environment that sustains life on Earth. Ecology cannot be separated from domestic and international politics; the new century requires that the United States consider and prioritize environmental threats to more traditional notions about national security. (360) The rules of the game--to borrow Friedman's phrase--are not only shaped by voting citizens and politicians, but by increasingly powerful corporations that have claimed a voice in public affairs and in the legislative arena. (361) In promoting or opposing national and international "rules of the game," corporations should seek to institute the kinds of structural efficiencies that promote sustainable economies. (362) This ethical duty is also eminently practical.

In dealing with the law, many corporations, their lawyers, and their government relations staffs may feel like they are playing defense, litigating opportunistic product liability claims, and heading off disastrous, wrong-headed regulations. They also have an ethical duty, however, to support meaningful market reform at national and international institutions. Business people, like vacationers, are very risk averse. The best collective risk reduction strategy for business in the twenty-first century is to take seriously the cumulative effects of economic activity on the natural environment and the fabric of local communities, and to support national and international legal reforms that restore functioning ecosystems and vibrant communities.

(1.) See, e.g., A Survey of Global Equity Markets, ECONOMIST, May 5, 2001, at 30 (referencing the "vast economic literature" on "the difficulty of ensuring that company managers will act in the interests of the shareholder owners for whom they are, in theory, supposed to be mere agents"); see also Daniel P. Hann, Emerging Issues in U.S. Corporate Governance: Are the Recent Reforms Working?, 68 DEF. COUNS. J. 191 (2001) (discussing different origins and conceptions of "corporate governance," including the need to improve performance by publicly owned companies, increased government regulation and rulemaking to force disclosure of executive compensation, improved information flows to shareholders, and the intervention of large institutional shareholders such as TIAA-CREF or CalPERS into corporate managers' performance); Matthew Boyle, The Dirty Half-Dozen: America's Worst Boards, FORTUNE, May 14, 2001, at 249-52 (referring to corporate governance in terms of tracking "bad corporate governance").

(2.) B. Joseph White, Remarks at the Conference on Corporate Governance, Stakeholder Accountability, and Sustainable Peace, The University of Michigan Business School (Nov. 2, 2001).

(3.) See THOMAS DONALDSON & THOMAS W. DUNFEE, TIES THAT BIND: A SOCIAL CONTRACTS APPROACH TO BUSINESS ETHICS 135 (1999) [hereinafter TIES THAT BIND]. Donaldson and Dunfee note that "[t]he historical business insensitivity to environmental concerns ... is characterized by faith in technology and the presumption that an irresolvable conflict exists between ecology and economic growth." Id. (citing Paul Steidlmeier's concept of "public policy ecology" rather than "pre-ecological economism"). Donaldson and Dunfee go on to say that:

   Pre-ecological economism presumes what the hypernorm formally
   rejects--namely, that efficiency is to be measured only by the height of
   the gross domestic product. The efficiency hypernorm implies, rather, that
   until we factor into the broad economic equation the value of scarce
   natural resources, we have an inadequate measure of social efficiency.

Id. Readers familiar with Donaldson and Dunfee's work on integrative social contracts theory will recognize that their proposed efficiency hypernorm is meant to transcend particular economies, laws, and customs.

(4.) Preserving environmental values through economic efficiencies may have seemed contradictory some years ago, but a substantial body of research and thinking does not view "free market environmentalism" as an oxymoron. See generally TERRY L. ANDERSON & DONALD R. LEAL, FREE MARKET ENVIRONMENTALISM (2001); PAUL HAWKEN, AMORY LOVINS, & L. HUNTER LOVINS, NATURAL CAPITALISM: CREATING THE NEXT INDUSTRIAL REVOLUTION (2000) [hereinafter NATURAL CAPITALISM] (emphasizing the waste in resources associated with neo-classical economic theory, where infinite resources and sinks are erroneously assumed, and the radically benign effects of full-cost pricing and positive subsidies).

(5.) See, e.g., Jonathan Rowe, Reinventing the Corporation, WASH. MONTHLY, Apr. 1996, at 16. Rowe recounts the history of state-authorized incorporations in the United States, and finds that while early incorporations had to serve a public purpose, New Jersey and Delaware led the way in granting corporate charters to for-profit corporations pursuing any legal purpose. Id. Corporate governance has thus come to mean accountability to shareholders rather than accountability to the public. Id.

(6.) Robert Reich has pointed out that, even as late as the mid-twentieth century, for-profit corporations were often identified with the economies and well-being of particular nations, and that the interests of major U.S. corporations were believed to be entirely consistent with the interests of the United States as host country. ROBERT B. REICH, THE WORK OF NATIONS: PREPARING OURSELVES FOR 21ST-CENTURY CAPITALISM (1991). Reich wrote that historically,

   [b]ecause of their size and central role in the economy, America's core
   corporations came to identify themselves, and be identified by Americans
   and others around the world, with the American economy as a whole. They
   were the champions of the national economy; their successes were its
   successes. They were the American economy.

Id. at 47.

(7.) Jeffrey Nesteruk's Article in this volume refers to the "nexus of contracts" theory as a dominant form of discourse among corporate governance scholars, citing--among others--Daniel Fischel's view, which rejects the notion that corporations are capable of having social or moral obligations. Jeffrey Nesteruk, Conceptions of the Corporation and the Prospects of Sustainable Peace, 35 VAND. J. TRANSNAT'L L. 437 (2002). See also JOHN DOBSON, THE ART OF MANAGEMENT AND THE AESTHETIC MANAGER: THE COMING WAY OF BUSINESS 113 (1999).

   The prevailing descriptive view of the firm in finance is that supplied by
   agency theory: The firm is a complex web of principal-agent relations. Any
   prescriptive statement that implies some unified firm objective is clearly
   inconsistent with this view. It is the individual agents who have
   objectives, and even those individuals may have more than one conflicting
   objective. Indeed, the whole essence of agency theory is that the firm is a
   cauldron of aspirational conflict, not a unified decision node.

Id.

(8.) Milton Friedman, The Social Responsibility of Business Is to Increase Its Profits, N.Y. TIMES, Sept. 13, 1970, [section] 6 (Magazine), at 32.

(9.) See, e.g., Reinier H. Kraakman, Corporate Liability Strategies and the Costs of Legal Controls, 93 YALE L.J. 857 (1984).

(10.) Norman Bowie, Morality, Money, and Motor Cars, in BUSINESS, ETHICS, AND THE ENVIRONMENT 89, 89-98 (W. M. Hoffman et al. eds., 1990).

(11.) RALPH ESTES, TYRANNY OF THE BOTTOM LINE: WHY CORPORATIONS MAKE GOOD PEOPLE DO BAD THINGS 28-30 (1996).

(12.) See Herman E. Daly, Steady-State Economics, in ECOLOGY: KEY CONCEPTS IN CRITICAL THEORY, 96, 96-106 (Carolyn Merchant ed., 1994).

(13.) The phrase "war on terrorism" is generally understood to be the U.S. military response to the September 11 attacks, and clearly includes diplomatic and military isolation of the Taliban in Afghanistan with the goal of finding Osama bin Laden and his chief aides "dead or alive"--to use President Bush's words. But the "war on terrorism" also extends to the freezing of U.S.-based financial assets that may assist bin Laden's network, and may eventually extend to other regimes that support deliberate violent action against non-military targets.

On terrorism generally, see JESSICA STERN, THE ULTIMATE TERRORISTS (1999) (detailing the history of terrorism and the recent emergence of terrorists who have the capacity to use weapons of mass destruction). Stern's definition of terrorism is "an act or threat of violence against noncombatants with the objective of exacting revenge, intimidating, or otherwise influencing an audience." Id. at 11. She also notes that nation-states--including the United States--have sometimes used terrorism as an instrument of national policy. Id. at 14.

(14.) Parts I and II argue that U.S.-based automobile and oil companies have in the past been part of the problem by not supporting structural efficiencies in the domestic and global economies. More specifically, they have generally opposed energy diversification and conservation. As short-term strategies, such opposition may have been warranted in the name of profit maximization; as a matter for standard views on corporate governance, such opposition may appear unimpeachable. But in terms of corporate citizenship there is much to improve on. See infra Part II.

(15.) See generally WILLIAM GREIDER, WHO WILL TELL THE PEOPLE: THE BETRAYAL OF DEMOCRACY (1992) (detailing the extent to which corporate lobbying and influence have made both major political parties in the United States more and more responsive to the desires of business interests).

(16.) Benjamin Barber has written tellingly of the conflict between modern, global capitalism--with mass production and consumption driven by the aggregate preferences of consumers worldwide--and the countervailing energies of religious sects, tribal groups, and extreme nationalists. The confrontation between global commerce and parochial ethnicity will not, in his view, produce a new and global citizenship, or engender the kinds of equality and justice that will nurture democracy and peace. BENJAMIN R. BARBER, JIHAD VS. MCWORLD 6-8 (1995). Barber speaks of a "wild capitalism" that promotes free markets without promoting democracy. Id. at 236-46.

   Truly free economies in this century have always been mixed economies in
   which democratic governments have balanced the interests of economic
   utility and social justice.... Only the new transitional democracies have
   been talked by foreign advisors or bullied by international banks into
   thinking that a laissez-faire capitalist economics is a self-sufficient
   social system. Predictably, the results have been catastrophic.... In
   America, the confidence in the omnipotence of markets has been transformed
   into a foreign policy that assumes internationalizing markets is tantamount
   to democratizing them....

Id. at 238-39. Walter Lippmann, writing much earlier in the twentieth century, spoke of "naive capitalism." WALTER LIPPMANN, A PREFACE TO MORALS 242-44 (1929). The book was first published in May of 1929. Lippmann's litany of naive capitalism's ills is eerily familiar, and describes essential tensions between business gains and social well-being that remain today.

   It was discovered that if each banker was permitted to do what seemed to
   him immediately most profitable, the result was a succession of disastrous
   inflations and deflations of credit; that if natural resources in oil,
   coal, lumber, and the like were subjected to the competitive principle, the
   result was a shocking waste of irreplaceable wealth; that if the hiring and
   firing of labor were carried on under absolute freedom of contract, a whole
   chain of social evils in the form of child labor, unsuitable labor for
   women, sweating, unemployment, and the importation of cheap and
   unassimilable labor resulted; that if business men were left to their own
   devices the consumer of necessary goods was helpless when he was confronted
   with industries in which there was an element of monopoly.

Id. at 243-44 (emphasis added).

(17.) See LESTER R. BROWN, ECO-ECONOMY 13-14 (2001).

(18.) Joan Warner, Peter Engardio, Thane Peterson, The Atlantic Century?, BUS. WEEK, Feb. 8, 1999, at 64-67.

(19.) Lee A. Tavis, Corporate Governance and the Global Social Void, 35 VAND. J. TRANSNAT'L L. 487, 516 (2002) (citing Human Development Report, U.N. Development Programme, at 154 (1999)). See also David Dollar & Aart Kraay, Spreading the Wealth, FOREIGN AFF., Jan.-Feb. 2002, at 120, 120-33. "So far, the current wave of globalization, which started around 1980, has actually promoted economic quality and reduced poverty." Id. at 120.

More dyspeptic views about progress in the developing nations can easily be found. See, e.g., TOM ATHANASIOU, DIVIDED PLANET: THE ECOLOGY OF RICH AND POOR (1996) (supporting the claim that nations in the "South"--transitional economies--are at a major disadvantage in the international trade and finance system). Id. at 163-226.

   A great deal of money has flowed from South to North, and despite all
   rhetoric, it continues to do so. It flows as neverending debt service
   (Third World debt is still rising), as low commodity prices, as royalties
   and fees, as foreign-exchange losses, as wealth bled off by a thousand
   obscure mechanisms. It is a very old story, and in the face of its
   interminable repetition, we should feign no surprise if money and not, say,
   democracy or sustainable development continues to define the North-South
   political agenda.

Id. at 214.

(20.) ATHANASIOU, supra note 19, at 194. In referring to MNCs as transnational corporations, or TNCs, Athanasiou writes:

   TNC activities involve a third of the world's private-sector assets, 70
   percent of the products in world trade, the bulk of international financial
   transactions, and the major share of advanced technology.... The role of
   TNCs in global environmental destruction is just as staggering. TNC
   activities account for half of all oil, gas, and coal extraction, refining,
   and marketing. TNCs are responsible for over half the greenhouse gases
   emitted by industry. They produce almost all ozone-destroying compounds and
   dominate key minerals industries.... TNCs control 80 percent of the land
   that, globally, is given over to export agriculture, land often taken from
   local food production. Twenty TNCs account for over 90 percent of all
   pesticide sales and ... have come to control a huge fraction of the world's
   seed stocks.

Id. at 194.

(21.) See, e.g., BILL MCKIBBEN, THE END OF NATURE (1989) (imagining a more barren future in which humanity is alone on Earth, with only a few plants and animals that we have chosen to save); see also PAUL HAWKEN, THE ECOLOGY OF COMMERCE (1993).

   Given current corporate practices, not one wildlife reserve, wilderness, or
   indigenous culture will survive the global market economy. We know that
   every natural system on the planet is disintegrating. The land, water, air,
   and sea have been functionally transformed from life-supporting systems
   into repositories for waste. There is no polite way to say that business is
   destroying the world.... [A]s I prepared to write this book, I reviewed
   much of the new literature in the field and discovered that the more I
   researched the issues, the more disquieting I found the information. The
   rate and extent of environmental degradation is far in excess of anything I
   had previously imagined.

Id. at 3-4.

(22.) The national protectionism exemplified by the Smoot-Hawley tariffs in the United States was widely believed to have propelled a global economic slowdown into a worldwide depression, with dire consequences for world peace. Gerald Segal writes that during the 1930s, the international banking system "collapsed because banks and government lent far more money than they had and, when some debtors defaulted, the banks went bust. International investment then dried up, leading to unemployment and protectionism." GERALD SEGAL, THE WORLD AFFAIRS COMPANION 27 (rev. ed. 1996). The IMF was established to break this cycle by providing rapid financial aid and advice to governments short on hard currency reserves. Id.

(23.) For example, the Reagan and Bush administrations worked to broaden GATT's mandate to areas of investment and trade in financial services, and the Clinton administration followed suit. During the Uruguay Round of GATT negotiations, corporations sat on various trade-advisory panels and were "in constant touch with government negotiators." RICHARD J. BARNET & JOHN CAVANAGH, GLOBAL DREAMS: IMPERIAL CORPORATIONS AND THE NEW WORLD ORDER 352 (1994) (reporting that Public Citizen, an NGO organized by Ralph Nader, found that "of the 111 members of three key trade-advisory committees, 108 represented corporations or industry trade associations, and noted that among the corporate members were twenty-four of the fifty largest spewers of toxic pollutants in the United States"). Id. See also Tom Hilliard, Trade Advisory Committee: Privileged Access for Polluters, PUB. CITIZEN, Dec. 1991, at 12.

(24.) Criticism of the World Bank includes both social and environmental aspects. See, e.g., CHERYL PAYER, THE WORLD BANK: A CRITICAL ANALYSIS (1982). As practiced by the World Bank, Payer sees global economic development as making "people poor by depriving them of their share of the world's natural resources and of access to political power." Id. at 11. Payer claims