Why do Multinational Companies Sign Transnational Company Agreements?
Hadwiger, F. (2014). The economics of the Internationalization of the Law
Transnational company agreements (TCAs) are negotiated between the management of a company
and employees’ representatives. TCAs specify the responsibility of multinational companies to follow
particular standards in more than one country or even worldwide with regard to:
- Fundamental social rights
- Working conditions
- Restructuring practices
- Health & Safety conditions
- Training
- Environmental protection provisions
Increasingly interrelated world individual states only have a limited capacity to regulate cross
border activities there is a permissive environment for wrongful acts without adequate
sanctioning race to the bottom the body of international law is growing rapidly in recent years.
In contrast to the traditional regime of labor regulations it is soft law providing incentives and
information and it addresses new responsibilities primarily to firms and not to governments. The
emergence of the private ordering (there is already a myriad of international labor standards)
illustrates that some multinational companies perceive it to be in their interest to have certain labor
and environmental standards. TCAs are an example of an emerging new global labor governance
regime that involves private bargaining partners and global rule-making through private agreements.
Self-regulation is characterized as “relying substantially on the goodwill and co-operation of
individual firms for their compliance”. Compared to traditional regulation by state authorities, self-
regulation is:
- More speedy
- More cost-effective
- More sensitive to market circumstances
- Producing higher levels of voluntary compliance
- Unable to significantly realign companies’ incentives & interests credibility gap
- Only successful when parties decide that it is in their best interest to work along the
standards
Authors argue that TCAs are able to alleviate the criticized shortcomings of codes of conduct. TCAs
can be divided into:
1. International Framework Agreements (IFAs)
IFAs are TCAs that are global in their scope, involve global union federations (GUFs), and
contain the ILO core labor standards at a minimum. These agreements focus on respecting
labor standards, mostly outside Europe.
2. European Framework Agreements (EFA)
European Works Councils (EWCs) (alone or in cooperation with national, European, or global
Unions) have signed a considerable number of EFAs. Research showed that most EFAs focus
Hadwiger, F. (2014). The economics of the Internationalization of the Law
Transnational company agreements (TCAs) are negotiated between the management of a company
and employees’ representatives. TCAs specify the responsibility of multinational companies to follow
particular standards in more than one country or even worldwide with regard to:
- Fundamental social rights
- Working conditions
- Restructuring practices
- Health & Safety conditions
- Training
- Environmental protection provisions
Increasingly interrelated world individual states only have a limited capacity to regulate cross
border activities there is a permissive environment for wrongful acts without adequate
sanctioning race to the bottom the body of international law is growing rapidly in recent years.
In contrast to the traditional regime of labor regulations it is soft law providing incentives and
information and it addresses new responsibilities primarily to firms and not to governments. The
emergence of the private ordering (there is already a myriad of international labor standards)
illustrates that some multinational companies perceive it to be in their interest to have certain labor
and environmental standards. TCAs are an example of an emerging new global labor governance
regime that involves private bargaining partners and global rule-making through private agreements.
Self-regulation is characterized as “relying substantially on the goodwill and co-operation of
individual firms for their compliance”. Compared to traditional regulation by state authorities, self-
regulation is:
- More speedy
- More cost-effective
- More sensitive to market circumstances
- Producing higher levels of voluntary compliance
- Unable to significantly realign companies’ incentives & interests credibility gap
- Only successful when parties decide that it is in their best interest to work along the
standards
Authors argue that TCAs are able to alleviate the criticized shortcomings of codes of conduct. TCAs
can be divided into:
1. International Framework Agreements (IFAs)
IFAs are TCAs that are global in their scope, involve global union federations (GUFs), and
contain the ILO core labor standards at a minimum. These agreements focus on respecting
labor standards, mostly outside Europe.
2. European Framework Agreements (EFA)
European Works Councils (EWCs) (alone or in cooperation with national, European, or global
Unions) have signed a considerable number of EFAs. Research showed that most EFAs focus
