The Sound of Awkward Silence: Contract Social Responsibility (Part 6)

I wanted to start this, my final post, by thanking the keepers of CoOp for allowing me to blog here this month, as I try to sort out my thoughts about contract social responsibility (KSR), the idea that contracts might seek a form of social justice, e.g., eliminating slavery through supply chain agreements or racial discrimination through “inclusion riders” in movie production contracts.

My prior post suggested that KSR differs from the private, pre-political and bilateral contracts that dominate the contractualist imagination because it would use private ordering to achieve public and political goals.  I want to talk today about two analytic approaches that might supplement contractualism, institutionalism and relationalism.

Say what?!?

I also want to talk about the awkward silence that may follow asking hard questions about KSR at home.

But start with “institutionalism,” a broad and fancy term.  I mean by it the study of social organizations at a high level of generality, superstructures in which law is a constitutive but not necessarily defining element.  For my purposes, the variant that seems most tractable sometimes travels under the name “experimentalist new governance” (ENG), a literature often associated with Sabel and Simon.

As they and others have observed, states no longer use command-and-control mechanisms to achieve many public policy goals. Instead, social problems are often solved by public-private partnerships, quasi-autonomous standard-setting organizations, voluntary alliances, monitoring, and experimentation.  Examples include food certification, sustainable forestry, and environmental protection.

In a recent paper, Abbott and Snidal explain that ENG:

(1) incorporates a decentralized range of actors and institutions, both public and private, into the regulatory system, as by negotiating standards with firms, encouraging and supervising self-regulation, or sponsoring voluntary management systems;

(2) relies on this range of actors for regulatory expertise;

(3) modifies its regulatory responsibilities to emphasize orchestration of public and private actors and institutions rather than direct promulgation and enforcement of rules; and

(4) utilizes ‘soft law’ to complement or substitute for mandatory ‘hard law.”’

KSR fits well within this framework.

  1. The standards that firms negotiate in the decentralized model will often be set by a range of actors, public (the state), quasi-public (e.g., the ILO) and private (corporations).  KSR implements these standards at the firm level with the specificity, familiarity, and continuity that contract provides.
  2. The “regulatory expertise” implemented by KSR will derive both from the standard-setting organizations noted in 1, and from the market-based insights of the parties.  KSR can transmit normative standards which may not be native to the parties’ business models but which, for whatever reasons, have become important enough to embed in their contract.
  3. As individually-tailored contracts, KSR presents a fairly fine-grained “orchestration” of public and private actors.  Rather than one-size-fits-all commands, KSR promotes customization, specification and, ultimately, assent.
  4. KSR may seem appealing because contract language looks “harder” than the vague statements of corporate social responsibility.  But, contract doctrine is often hortatory, expressive and aspirational—that is, “soft.”  Add the difficulties of enforcing KSR terms I noted in a prior post, and you have to wonder whether KSR is really such “hard” law?

While ENG may describe KSR’s institutional framework, it tells us little about how to address hard cases.  It does not, for example, tell us whether or how courts should enforce KSR terms; what courts should do with normatively problematic KSR terms (e.g., what if Mel Gibson wants an “exclusion rider” to keep Jews off the movie set?); or, what should happen if the underlying valence of political commitments changes?

ENG helps to identify a key risk of KSR, which is that it may be illusory.  It may lull parties into believing that the feel-good standards of their contracts satisfy underlying public commitments, when that may not be the case.  KSR may be an example of cooptation against which Lobel has warned.  It may induce the very moral complacency that has permitted so many social problems to develop and persist in the first place.

If institutionalism can identify some of the peril in KSR, relational contract principles might help to recognize some of the promise.  Relationalism is motivated by the insight that it is difficult to understand a contract apart from the relationships of the parties to it.  Stewart Macaulay and Lisa Bernstein have perhaps most astutely observed that commercial contractual relationships are likely to reflect a complex mix of preferences for formal and informal mechanisms, and that that blend may change over time, as conditions of trust and reciprocity change.

The first thing a relationalist would notice is that social justice goals may flip the typical formal-to-informal ratio.  In conventional contracting, we tend to think parties want greater flexibility and informality in performance.  The paper deal may not matter.  Only in serious breach do we recruit more formal mechanisms (e.g., strict interpretations, elaborate damage-calculation formulas).

As previously suggested, however, those who want to use contract to achieve social responsibility will usually want little deviation from the formal terms of the contract in performance. Yet,  KSR’s real remedial power may be largely off-contract.  It will trade on the parties’ long-term commitments to one another.  The most plausible sanctions for breach may be “lumping it”–walking away from the relationship–or exclusion from other voluntary associations (e.g., standard-setting organizations), or shaming.

A second point of interest for a relationalist might involve lawyers. In order to have KSR terms, they will probably have to be negotiated by the parties and reviewed and approved by the lawyers.  Lawyers would then become an instrument in crafting and conveying the normative message.

There is a large body of literature about lawyers as “norm entrepreneurs,” but it usually focuses on “cause” lawyers.  In a world of Michael Cohens and Eric Schneidermans, it is hard to think of lawyers as agents for moral good.  But perhaps that is why KSR has the potential to motivate business lawyers:  it presents a moment of normative power in work where that may be rare.

Which brings me to awkward silence.

I started this series of posts by recounting a meeting of an ABA task force developing model terms on human rights in supply chain contracts.  I noted that the discussion was pretty exciting, as meetings about model contract terms go.

I did not, however, mention how I endeared myself to at least one former ABA President involved in the project.  When discussing who would use these terms, I blithely asked whether the ABA does?  After all, I pointed out, the ABA is a large purchaser of hospitality services, which is an industry that may have labor trafficking problems (we were at a large conference hotel in Orlando, Florida. . . .).

To ask that question—what do we do about human rights in our own contracts?—was to invite a long, awkward silence.  No one knew whether the ABA required its contractors to represent that they followed articulated standards on human trafficking.  But it did not seem likely.

Therein lies the ultimate challenge and opportunity of KSR. It is easy for those of us in the professoriate to demand high moral performance from others.  But what do we demand of ourselves and our institutions?

Most readers of this blog work at an institution of higher learning.  Those institutions, like the ABA or General Motors, have market purchasing power that they express through contract.  They can, as discussed this month here, contract for social responsibility, or at least try to do so.

I have no idea how contractors with my home institution (Temple University) treat their employees.  Maybe they pay a living wage.  Maybe they don’t. If our contractors don’t treat their employees decently (defined how?), it may be worth asking how serious we, as academics, really are about the issues we claim to care about.

This, then, seems to be the bottom line about KSR.  Maybe the most it can do is make it a bit more plausible for individuals in large organizations to act more deliberately on matters of social concern.  It would be a way for lawyers and other involved in the contracting process to act on intuitions that are typically isolated from their daily grind.  It would not necessarily provide a moral solution, but it might induce us to ask (awkward?) moral questions.

Whoever thought contract could do that?

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1 Response

  1. Naomi Cahn says:

    Note the various professional responsibility issues involved – fun stuff. Thanks for posting!