by Gro Nystuen, Andreas Follesdal & Ola Mestad (eds.). Cambridge: Cambridge University Press, 2011. 277pp. Hardback $99.00. ISBN: 978-1-107-01285-1.

Reviewed by Michael C. Macchiarola, Distinguished Lecturer, City University of New York. Email: Macchiarola [at]


At the outset, I must confess that I have long been skeptical of the intellectual heft girding much of the “robust and growing phenomenon” (p.65) toward socially conscious investment. And, while it makes for an interesting read, Human Rights, Corporate Complicity and Disinvestment has done little to change my mind.

The book uses the policies of the Norwegian Government Pension Fund – Global (the “Fund”), the world’s second largest sovereign wealth fund, as the vehicle to explore the intersection of human rights violations and the moral and legal complicity of the corporation. The editors, all of whom are members of the Fund’s Council on Ethics, frame the issues the book confronts in the very first page of its introduction: “At the same time as companies’ activities have come in closer contact with people, increased use of market economy solutions through institutional investment has brought more citizens into closer contact with ownership of multinational companies” (p.1). The book concerns the efforts of private funds and government funds to establish reliable “policies and practices to handle issues of corporate involvement which they find unethical” (p.1).

The introduction is followed by nine individual essays addressing concepts of corporate complicity in human rights violations from various philosophical and legal perspectives. At times, the volume can seem uneven, as the essays range from interesting and thought-provoking to impractical, theoretical flights of fancy. Overall, however, the large majority of the contributions tend toward the former. Some of the more memorable parts are addressed below.

Gro Nystuen, Chair of the Council on Ethics for the Fund discusses, in detail, the Fund’s approach to excluding investments in companies that it deems “complicit” in unethical conduct. As Nystuen admits, the Fund’s attempts have struggled with precision in assigning complicity. And, while “complicity” has been favored over notions of “attribution” or “contribution,” inherent subjectivity and imprecision have clearly frustrated the development of reliable benchmarks. In addition, by favoring the complicity construction, the Fund has embraced the application of a forward-looking regime instead of a more retrospective norm. All in all, the approach seems displeasingly arbitrary. Perhaps that is why it remains “one of the very few existing systems which entail disinvestment based on a set of fixed criteria” and “rare within the sphere of corporate social responsibility” (p.42).

Simon Chesterman opens his chapter entitled “Laws, standards or voluntary guidelines?” with the observation that recent efforts to shape the dealings of [*345] multinational companies through various inducements and public pressure represent “an admission that traditional regulation through coercion for violations of specific rights is not working” (p.44). Chesterman acknowledges that the efforts to date have been uneven, however, conceding that the “virtue of law as a means of regulating behaviour is clarity” before yielding that exercising discretion of the kind that Norway applies through the Fund “might be seen as an arbitrary basis” (p.59).

Christopher Kutz’s “Responsibility beyond the law?” was both the book’s most interesting and frustrating offering. Kutz starts with an examination of the foundational building blocks of the corporation, and takes dead aim at the “illusion of morally costless investment” (p.65) that results from a system that separates ownership and management. As Andreas Follesdal frames the resulting coordination problem in a later chapter, “[i]t would seem that disinvestment by single actors is irrelevant, since it would take a powerful hegemonic global authority to establish reasonably effective screens on investments” (p.134). Kutz’s well-written chapter artfully compares the legal to the ethical and further examines the temporal limitations of a future-directed criteria like the one employed by the Fund. In the end, Kutz’s words seem in vain as he capitulates that problems of coordination are likely to stifle any widespread application of what he calls “business conducted in good faith and with respect for the rights of all those affected” (p.78).

Ola Mestad confronts the idea that “violations of human rights and other unethical conduct related to multinational companies normally take place at a level very distant from the listed parent company” (p.79). How then is a responsible investment fund to apply a consistent procedure to avoid condoning such distasteful activities? Mestad’s well-developed essay offers the “sphere of control” as a reliable guidepost. Not unrelated, authors Urs Gasser, Silke Muller and James Thurman propose the concept of “sphere of influence” as “among the drivers of a seismic shift from a state-oriented paradigm of human rights to a broader, holistic approach aimed at ensuring and fostering human rights (among private actors)” (p.131).

Andreas Follesdal’s essay is notable for its lucid discussion of the moral obligation of the investor class. Follesdal rejects, out of hand, the “amoral self-indulgence” of the view that sees unilateral disinvestment as allowing others to reap the profits “while harm to vital interests continues” (p.152). Follesdal’s assertion that (i) agency principles of law and (ii) the Kantian concept that “the subject matter of morality is not what we should bring about, but how we should relate to one another” are among the most interesting philosophies presented in the book. Further examination of these concepts would have been welcomed. Follesdal’s essay also does well to compare the moral grounding of today’s socially responsible investor with the principled opposition to slavery employed by the Quakers in Early America. With respect to the former, it appears that Follesdal hopes for a tipping point of sorts when “investors and states that refuse to participate in human rights violations today may thereby avoid moral complicity in evil, and at the same time contribute to its eradication” (p.155). [*346]

In the end, the book’s shortcoming is not a function of poor thought or unpersuasive or imprecise writing. And, it is certainly not lacking for noble intentions. Instead, despite their best efforts, the authors simply cannot overcome what Follesdal characterizes as “amoral self-indulgence.” They fail to convince at least this reader that the best contortions of various fund managers or pontificating ruminations of ethical councils can avoid the fact that investing is a market function. And, a market’s participants possess idiosyncratic tastes and individual ethical values. Absent large-scale coordination – which seems both impractical and uncomfortably threatening to liberty – an individual fund can affect “ethical purity” on its investment process only to its own economic disadvantage. In fact, as additional managers opt for such a regime, the spoils are left to those who bend to a more lenient ethical view.

The issues that the book confronts, however, are not likely to go away anytime soon. Globalization, the quest for return on investment and the competition for capital should continue to pit the varied ethical considerations of investors in competition for some time to come. And, by framing many of the ethical and legal issues that market participants are likely to confront, Human Rights, Corporate Complicity and Disinvestment has done a real service.

Copyright by the Author, Michael C. Macchiarola.