Beyond voluntary: state–firm bargaining over corporate social responsibilities in mining

ABSTRACT

This paper investigates how and why governments use both regulatory and extra-juridical pressures to influence what are normally considered to be the voluntary corporate social responsibility contributions of mining firms to local social and economic development that go beyond compliance with regulatory requirements. Based on a modified version of the obsolescing bargain model, the paper argues that governments opt to co-produce corporate social responsibility when they face pressures to reform the firm's relationship with society but are unable or unwilling to change the legal framework that governs it. In this regard, institutional stickiness can result in the displacement of bargaining from the formal rules and regulations that govern foreign direct investment, to the unregulated and informal practices associated with the social responsibilities of business. The argument is confirmed through a qualitative examination of state–firm relations in the mining sectors of Argentina and Peru.

KEYWORDS:

• State–firm bargaining
• corporate social responsibility (CSR)
• political corporate social responsibility
• obsolescing bargain
• mining
• mineral rents
• weak institutions
• Argentina
• Peru
• Latin America

Acknowledgments

The author would like to give special thanks to Florencia Vergara Rossi for her ongoing support for fieldwork conducted on this project, as well as to Flavia Berger Moya, Camila Andrea Le-Bert Del Campo and Paolo Sosa Villagarcia. The author has benefited from discussions on this paper with members of the Research Group MEGA (Mobilization, Extractivism and Government Action) based at the Centre for Inter-American Policy and Research (CIPR), Tulane University.

Disclosure statement

The author declares that he does not have a conflict of interest related to the content of this paper.

Notes

1. On the first relationship, researchers point to the consequences of globalization, which, it is argued, has led to a weakening of the regulatory authority of the nation-state, an increase in issue areas characterized by governance gaps, and a crisis of moral legitimacy for corporations (Scherer & Palazzo, 2011, pp. 902, 907, 2007, pp. 1108–1109). In this context, firms engage with political processes, and voluntarily assume ‘state-like’ roles and functions, including the governance of global problems, the provision of global public goods (Scherer & Palazzo, 2011, p. 900; also Crane, Matten, & Moon, 2004, p. 109).

2. Of course, institutions are by definition ‘sticky’, but here we refer to a kind of rigidity that prevents either purposeful thorough-going institutional reform, or which prevents the institution from effectively adapting to changes in the underlying balance of social power.

3. The outcome is affected by their relative bargaining power (the resources each controls that are desired by the other party and not available elsewhere), strategy (how the investment fits into the firm's and the country's economic strategy), and constraints (the existence of alternatives and pressure from domestic and international actors; Kobrin, 1987, p. 611).

4. Chubut (2003), Córdoba (2008), La Pampa (2007), La Rioja (2007, 2008), Mendoza (2007), Río Negro (2005, 2008), San Luis (2008, Tierra del Fuego (2012) and Tucuman (2007).

5. Although voluntary, the voluntary commitments made by the company are subsequently approved by the provincial legislature as a contract between the state and company.

6. The provincial government was debating the transformation of IPEEM into a state mining company with the right to explore and exploit resources, principally due to the opportunities to earn more rent from its associations with private companies (#30ARSJ12). This initiative floundered as mineral prices fell, and the province's bargaining power declined.

Additional information

Funding

This study was funded by the Social Sciences and Humanities Research Council (SSHRC) of Canada [grant number 410-2009-0950].

Notes on contributors

Paul Alexander Haslam

Paul Alexander Haslam's teaching and research interests span both international development and international political economy. Current research focuses on corporate social responsibility, social conflict between mining firms and nearby communities, state-firm relations (particularly Argentina, Chile and Peru), and the international regulation of foreign direct investment in Latin America.