The explosion of foreign direct investment by multinational corporations (MNCs) in the 1990s has elevated the social and environmental performance of U.S. industrial corporations operating overseas to the center of the public spotlight. In many developing countries where U.S. firms manufacture goods, extract resources, or develop land, governments simply lack the regulatory capacity to assure corporate adherence to international standards of performance, leaving corporations without clear management practice guidelines, and in many cases virtual carte blanche to maximize their bottom lines. As a result, in both home and host countries, MNCs have increasingly become the target of intense scrutiny-and criticism-by community and advocacy groups concerned with a wide array of negative social, economic, and environmental impacts of corporate activity. In response, many MNCs have developed voluntary "codes of conduct" in order to demonstrate their "social responsibility" to the skeptical public. However, because they are confined to narrow issue sets and lack monitoring, public disclosure, and enforcement mechanisms, these codes have little credibility in the eyes of activists and interested advocacy groups.

This Project will use both research and advocacy to enhance the international social and environmental performance of U.S. MNCs by moving the debate away from corporate voluntarism and toward innovations in corporate governance that are inherently transparent, both internally within firms and externally via government regulation. Specifically, we will identify and promote structural changes in the governance of corporate operations overseas through advancing policy, legal or corporate institutional reforms, that: 1) encourage the integration of a wide range of social, economic and environmental issues; and 2) increase incentives for corporate compliance with self-promulgated codes of conduct, through various measures such as quantitative measurement of social and environmental impacts, mandatory public disclosure, and independent third party monitoring and verification.

The Project will focus on the overseas practices of U.S. Multinationals, beginning with firms in the oil and high tech-sectors headquartered in California, where voluntary codes of conduct have been most widely adopted, and where corporations represent the best and worst practices. The Project has the following three components: