Corporate power
Corporate power
Companies were originally invented at the end of the sixteenth century in order to manage colonial trade. Companies were chartered by a number of European governments to foster and protect the interests of the state. In the following centuries their legal form slowly changed, and they were granted more freedom to pursue economic activities of their own choosing (Bendell 4). In Russia, on the other hand, the development of companies, the laws that regulate them and the role of firms in society have their own special characteristics due to Russia’s long socialist past. In the Soviet Union, enterprises were legal persons, but in practice they were part of the state bureaucracy. Enterprises were governed in an administrative manner and, in fact, the whole economy worked like a huge hierarchy. Problems of agency were considerable, since the state as owner could not effectively control and monitor the enterprises and the activities of company managers (Nystén-Haarala ).
The collapse of the Soviet Union led to a profound change in the role of firms in society. The transition to a market economy created pressure on Russian firms to modernise and restructure. Firms that had previously been mainly administrative units of the state were supposed to become, as soon as possible, economic actors focused on making profits for their owners. A great deal of company legislation was developed during this rather chaotic period. For instance, the first part of the Civil Code, which regulates different forms of companies, was passed on November 4, and the Law on Joint Stock Companies was passed on December . In the course of the privatization period, joint stock companies were the main instrument used to privatise and restructure state-owned enterprises (Nystén-Haarala ). Holding companies, in particular, were seen as an appropriate instrument The collapse of the Soviet Union led to a profound change in the role of firms in society. The transition to a market economy created pressure on Russian firms to modernise and restructure. Firms that had previously been mainly administrative units of the state were supposed to become, as soon as possible, economic actors focused on making profits for their owners. A great deal of company legislation was developed during this rather chaotic period. For instance, the first part of the Civil Code, which regulates different forms of companies, was passed on November 4, and the Law on Joint Stock Companies was passed on December . In the course of the privatization period, joint stock companies were the main instrument used to privatise and restructure state-owned enterprises (Nystén-Haarala ). Holding companies, in particular, were seen as an appropriate instrument
Legal personality and limited liability are, as a rule, considered to be typical features of companies. For instance, in the Russian Law on Joint Stock Companies, legal personality and limited liability are mentioned as features of joint stock companies. Generally speaking, legal personality implies that a firm is a separate entity from its founders and shareholders. It owns its own property, and it can sue and be sued in its own name. Limited liability, on the other hand, means that the shareholders and founders are not personally responsible for the debts of the company and vice versa. Legal personality and limited liability are routinely considered as the basis of corporate power (Bendell and Bendell ; Bendell 4; Villiers ). Nowadays, it is widely acknowledged that firms are economic, environmental and cultural forces, and corporate power is a significant aspect of contemporary societies (Bendell and Bendell ). The dependence of forest industry companies on natural resources binds them closely to the localities in which they operate. Since forest companies exploit natural resources, their activities may have a considerable impact on the environment. Furthermore, the issue of social sustainability is important. In the countryside and remote districts, a forest company is often the only significant employer in the area. In recent years, for instance, in Finland, the closure of some large pulp and paper production units and massive lay-offs have generated a lively debate and concern about the power of large companies. In , for instance, the closure of the Stora Enso pulp and paper mill in Kemijärvi in Finnish Lapland and the resultant lay-offs gained a great deal of publicity. The closure of the mill generated a popular movement which, through the mass media, sharply criticised the activities of the company Stora Enso and its CSR practices. In addition, the state and its ownership policy were criticised, since the state owns shares in Stora Enso. The state was expected to take action against the social and economic difficulties caused by job loss (Helsingin Sanomat a, b, c, ).
According to recent Russian press reports, the economic and raw material problems of the enterprises that are part of the holding company Investlesprom According to recent Russian press reports, the economic and raw material problems of the enterprises that are part of the holding company Investlesprom
Today many Northwest Russian forest companies are part of holding companies. Large holding companies are naturally more capable of exercising power than separate small and medium-sized companies. Big production plants have traditionally been significant employers. Furthermore, Russia’s socialistic past and the weak social and economic conditions in several localities increased the importance of the forest industry companies in the Russian part of the Barents Region (Nystén-Haarala ; Matilainen ; Välkky et al. ). During Soviet times, the provision of many social services, such as schools, health care, culture and sports, just to mention a few, and the whole infrastructure of towns and villages were based on local enterprises (Kuliasova ; Kortelainen and Nystén-Haarala, ; Tulaeva ). Nowadays, the Soviet traditions have not completely disappeared, although they have been undermined (Kuliasova ; Kuliasova ). At the beginning of the free market era, municipalities were expected to take more responsibility for social services and infrastructure, and firms, in turn, were supposed to focus on making profits for their owners. However, despite efforts to develop the municipalities, they are still rather backward and lacking in financial resources. They turn to local companies for financial help, and, consequently, particularly in the countryside, the municipalities and the local companies are still closely connected (for more details Nystén-Haarala ). The town of Kondopoga in the Republic of Karelia, Northwest Russia, is an extreme example of a symbiotic relationship between the local forest company and the town. In Kondopoga the local pulp and paper mill continues to provide a wide range of social services from health care to culture and sports facilities. Naturally, costly social responsibilities impair the competitiveness of forest companies. Therefore, nowadays, many forest companies in Northwest Russia are seeking to improve Today many Northwest Russian forest companies are part of holding companies. Large holding companies are naturally more capable of exercising power than separate small and medium-sized companies. Big production plants have traditionally been significant employers. Furthermore, Russia’s socialistic past and the weak social and economic conditions in several localities increased the importance of the forest industry companies in the Russian part of the Barents Region (Nystén-Haarala ; Matilainen ; Välkky et al. ). During Soviet times, the provision of many social services, such as schools, health care, culture and sports, just to mention a few, and the whole infrastructure of towns and villages were based on local enterprises (Kuliasova ; Kortelainen and Nystén-Haarala, ; Tulaeva ). Nowadays, the Soviet traditions have not completely disappeared, although they have been undermined (Kuliasova ; Kuliasova ). At the beginning of the free market era, municipalities were expected to take more responsibility for social services and infrastructure, and firms, in turn, were supposed to focus on making profits for their owners. However, despite efforts to develop the municipalities, they are still rather backward and lacking in financial resources. They turn to local companies for financial help, and, consequently, particularly in the countryside, the municipalities and the local companies are still closely connected (for more details Nystén-Haarala ). The town of Kondopoga in the Republic of Karelia, Northwest Russia, is an extreme example of a symbiotic relationship between the local forest company and the town. In Kondopoga the local pulp and paper mill continues to provide a wide range of social services from health care to culture and sports facilities. Naturally, costly social responsibilities impair the competitiveness of forest companies. Therefore, nowadays, many forest companies in Northwest Russia are seeking to improve
Legal pluralism and the Northwest Russian forest sector will be discussed later in this chapter. The regulatory environment in the Russian forest sector nowadays is clearly complex, and, in addition to state laws, various private actors regulate and constrain the behavior of the forest companies. The increase in private regulation has led to the simultaneous existence of several regulatory regimes. Legal pluralism highlights the influence and power of forest companies, whose rule-creating activities can be regarded as an expression of corporate power. In the Northwest Russian forest sector, large forest companies, together with NGOs, play a crucial role in introducing private regulation.
Corporate power and the behaviour of multinational firms, in particular, are often discussed when these multinational firms conduct business in developing nations whose national governments often have comparatively few economic resources and little power. The economic power of multinational firms gives them political power, enabling them to influence social and environmental policies and regulation. Globalisation has accelerated the debate over corporate power on the one hand and the limited possibilities of traditional nation state- based forms of regulation to govern global corporate activities on the other hand. Therefore, civil society organisations have started advising companies on best practices, and endorsing and promoting such practices. In the West a turn towards companies by civil society groups can be identified as beginning in the early s. Codes of conduct and certification schemes such as the FSC (Forest Stewardship Council) grew significantly during the s. The FSC was
a pioneering multi-stakeholder initiative, the objective of which was – and still is – to provide a credible guarantee to consumers that wood products come from well-managed forests (Bendell and Bendell ; Bendell 4). FSC forest certification in Russia will be discussed in the following section. Jennifer Zerk ( ) has noted that concerns about the power of multinational corporations have developed and changed over time. According to Zerk, historically, the implications of corporate power for national sovereignty and culture were the main concerns. In recent years, there has been a shift in emphasis away from these “state-centred” concerns toward more “people-centred” concerns such as the environment and human rights. In this development the CSR movement has played a significant role (Zerk ).