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Ecological Economics 222 (2024) 108232
Available online 13 May 2024
0921-8009/© 2024 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-
nc-nd/4.0/).
Overhauling multinationals for the Anthropocene: How a rogue subsidiary
offers a blueprint for sustainable development
Alejandro Agafonow
a
,
*
, Marybel Perez
b
a
ESSCA School of Management, 55 quai Alphonse Le Gallo, 92513 Boulogne-Billancourt, Paris, France
b
ESSCA School of Management, 1 rue Joseph Lakanal - BP 40348, Angers 49003, France
ARTICLE INFO
Keywords:
Anthropocene
Ben & Jerry’s
Climate Change
Multinational Enterprise
Rent Appropriation
Theory of the Firm
ABSTRACT
This research addresses the question of how multinational enterprises (MNEs) can be overhauled to reckon with
the nite ecosystem services that characterize the Anthropocene epoch. A comparative mechanism-based
methodology is employed to seek an answer in the class of entities that MNEs are benchmarked against the
unorthodox organization of a recently dubbed Unilever’s “rogue subsidiary,” i.e., Ben & Jerry’s, which could
evolve into a turning point in sustainable development if replicated on a sufcient scale. The ndings are that
this subsidiary has put exceptional mechanisms to work, turning around functions that typically bolster the
capabilities of MNEs to cash in on natural resources and other non-equity stakeholders. In a nutshell, these
mechanisms 1) reduce the cost that stakeholders bear when engaging with MNEs across the value chain; 2) put
the wardens of the company mission in charge of the organizational drivers of environmental and social com-
mitments; 3) prevent the conict of interests inherent in making wardens accountable to shareholders; 4) appoint
key MNE executives in good faith consultation with wardens; and 5) secure wardens’ recourse to the courts in the
case of a breach of contract.
The transnational corporations are ambivalent […] Their positive
contribution to development cannot be disregarded. But their
ambivalence gives grounds for serious and lasting concern. For
everywhere, and especially in the centres, they carry a considerable
share of the responsibility for the deterioration of the environment
and the destruction of non-renewal natural resources. And where the
periphery is concerned, their immediate interests and the collective
interests are not necessarily the same. (Prebisch, 1977, p. 280).
1. Introduction
Policymakers’ xation with economic growth as measured by GDP
may not have been as menacing for humanity in the Holocene epoch,
before anthropogenic emissions became the driving force of climate
change. However, such a xation, which biases wealth for produced and
human capital and against natural capital (Arrow et al., 1995; Daly,
1990; Dasgupta, 2021a), may prove to be fatal in the Anthropocene
epoch, i.e., the unofcial designation of the most recent geological time
when the role of humans in the depletion of ecosystems has become
patent (Waters et al., 2016).
Because the Anthropocene has made plain that ecosystem services
are not limitless (Engel et al., 2008; Wunder, 2015) and because markets
are known for failing to put a price tag on ecosystem services to curb
their consumption accordingly (Dasgupta, 2021a; Hardin, 1968), it is
high time to enter natural capital into the equation of wealth. One
possible way to do so is to take on the feedback loops between in-
stitutions and natural capital (Dasgupta, 2008; Ostrom, 2009), over-
hauling institutions to deal with the market failures that have led to the
depletion of ecosystems.
Thus, if institutions are taken to be “…social infrastructure (e.g.,
laws, property rights, beliefs, and the extent of trust among people) for
guiding the allocation of resources, including the capital assets them-
selves” (Dasgupta, 2008, p. 5), a logical candidate to overhaul is the
bundle of property rights that a multinational enterprise (MNE here-
after) is (Coase, 1937, 1988). This is because the MNE, despite being but
one legal template bundling property rights, is noteworthy for its impact
on the depletion of ecosystems owing to its geographical outreach linked
to international trade (Lenzen et al., 2012) and its distinct capability to
deprive non-equity stakeholders, Nature included, of value to be
* Corresponding author.
E-mail addresses: alejandro.agafonow@essca.fr (A. Agafonow), marybel.perez@essca.fr (M. Perez).
Contents lists available at ScienceDirect
Ecological Economics
journal homepage: www.elsevier.com/locate/ecolecon
https://doi.org/10.1016/j.ecolecon.2024.108232
Received 29 November 2023; Received in revised form 1 April 2024; Accepted 4 May 2024
Ecological Economics 222 (2024) 108232
2
appropriated by shareholders in the form of prots.
This view of the impact of MNEs on ecosystems contrasts with a
sanguine account that deems MNEs to be the amiable agent of sustain-
able development, which emerging evidence on the negative environ-
mental impact of the Sustainable Development Goals (SDGs hereafter)
(Zeng et al., 2020) helps to further call into question. The sanguine ac-
count overlooks what the dawn of MNEs at the turn of the 20th century
meant to achieve (Chandler, 1999), which economics and organization
scholarship seized to shed light on the distinguishing attributes of these
kinds of rms leading to a rude awakening to their true role. This is in
agreement with the observations of policymakers in developing coun-
tries, as evidenced by this article’s opening quotation from Raúl Pre-
bisch (1977), former executive director of the United Nations Economic
Commission for Latin America and the Caribbean (ECLAC).
As it will be expounded, just as MNEs have outstripped other kinds of
rms in preventing managers from indulging in self-serving behavior
and employees from shirking, they have arguably excelled at cashing in
on natural resources and other non-equity stakeholders too. This is
because MNEs’ divisionalized structure is the most sophisticated orga-
nizational undertaking to replicate the high-powered incentives of
markets inside the organization, enabling MNEs to haggle and bargain
more aggressively over apportioning out razor-thin rents among stake-
holders (Baumol, 1967; Brickley et al., 2016; Chandler Jr., 1999; Jensen
and Meckling, 1998; Milgrom and Roberts, 1992; Mintzberg, 1979;
Roberts, 2004; Williamson, 1981, 1985). This situation is aggravated in
the case of Nature because it is a “mobile, invisible, or silent” stake-
holder (Dasgupta, 2021b, p. 18) which, by denition, lacks the negoti-
ation skills and the capability of unied action commonly attributed to
human stakeholders (Barney, 2018; Coff, 1999).
This bleak picture of MNEs painted, we insist, by mainstream econ-
omists and organization scholars, does not have to be met with shrugged
shoulders. Instead, the present article takes a proactive step in
answering the question: how can MNEs be overhauled to reckon with the
nite ecosystem services that mark the Anthropocene epoch? Sustain-
able development is taken herein to be “the qualitative capacity to
convert that constant level of physical resource use (throughput) into
improved services for satisfying human wants” (Daly, 1990, p. 33), and
property rights are regarded as a means—perhaps a kind of social
technology—to affect resource throughput in agreement with equality
(Agafonow and Perez, 2024a).
Thus, a possible answer is sought in the subsidiary of an MNE whose
unconventional organization has for the most part dropped beneath the
radar—except for Agafonow and Perez (2017). This is because reliable
sources of data about the instance-level parts that make up the inner
workings of rms can be difcult to come by (Coase, 1991), especially
when rms are not bound by disclosure standards.
The MNE in question is Unilever, which in 2000 added to its more
than four hundred fully owned subsidiaries the ice-cream maker Ben &
Jerry’s (B&J hereafter). Despite the little academic interest aroused by
the unorthodox organization of this subsidiary, certain oddities have
topped out as the tip of an iceberg hiding exceptional mechanisms that,
if replicated by other MNEs, could become a turning point in the role
played by these kinds of rms in sustainable development.
These oddities comprise, most notably, a complaint to the London
Stock Exchange motivated by what the petitioner claimed to be a “rouge
subsidiary” that “evade[s] normal corporate governance practices” (UK
Lawyers for Israel, 2021, p. online); a mission statement in the sub-
sidiary’s articles of incorporation where equity holders are missing with
potentially far-reaching legal implications, which reads: “We have a
progressive, nonpartisan, social mission that seeks to meet human needs
and eliminate injustices in our local, national and international com-
munities by integrating these concerns into our business activities. Our
focus is on children and families, and the environment” (SEC, 2000, p.
92); as well as discrepant decisions about where to do business coming
from two different Unilever’s ice-cream makers, i.e., whereas B&J
refused to do business in the Israeli settlements in Palestinian territory
(Kingsley, 2022), Wall’s has defended its decision to keep its Cornetto
ice-cream in war-ridden Russia (Thomas, 2023).
Anticipating what will be expounded in the methodology section,
this research extrapolates based on extant knowledge on the cogs a
wheels that are characteristic of MNEs as a class of entities, which a
comparative mechanism-based methodology makes possible (Craver
and Darden, 2013; Steel, 2008). It does not employ a case-study meth-
odology because: “[c]ase study is not a methodological choice but a
choice of what is to be studied. By whatever methods, we choose to
study the case” (Stake, 2003, p. 134), and a case alone has limited
extrapolation capabilities.
Thus, this research has found, in a nutshell, that B&J shows a plau-
sible way along which MNEs could be overhauled to reckon with the
Anthropocene consisting of:
1) The reduction of the marginal cost of engaging with one more
MNE borne by stakeholders across the value chain through the
appointment of dedicated wardens of the environmental and social
mission of a company (the wardens of the mission, for short), which B&J
achieved by appointing stakeholder representatives.
2) Dodging the conict of interests involved in making the wardens
of the mission accountable to shareholders, which B&J accomplished by
shielding wardens with a self-perpetuating status, i.e., stakeholder rep-
resentatives designate like-minded individuals to ll the vacant posi-
tions of representation.
3) Putting the wardens of the mission in charge of the organizational
drivers of the company’s environmental and social commitments, as
well as granting them the capacity to prevent MNE executives from
acting on these drivers, which B&J attained by granting wardens power
over “product introduction,” “the changing of product standards and
specications,” and "the licensing or other use of the trademark" (SEC,
2000, p. 81), through which they can credibly have an impact on
stakeholders across the value chain.
4) Involving the wardens of the mission with the appointment of key
MNE executives, which B&J realized instituting that the CEO be
appointed in good faith consultation with wardens.
5) Last but not least, safeguarding all of the above by giving the
wardens of the mission recourse to the courts, which B&J implemented
with an injunction that can redress breach of contract.
Most recently, Unilever has announced that it is studying ways to
part with the portfolio of divisions where B&J is situated (Speed et al.,
2024). It is difcult to assert whether this has been motivated by the
disagreement about doing business in Israeli settlements (Kingsley,
2022). But the fact is that the drivers with the power to alter the envi-
ronmental and social commitments of B&J are off-limits to Unilever
which—as it will be expounded herein—reduces the MNE’s capability to
exact value from B&J’s stakeholders, making it a candidate for a
divestment that would upend a twenty-four-year-old groundbreaking
acquisition.
2. What MNEs Were Created For
Today’s existential battle for intellectual property and industrial
espionage (Editorial board., 2022) speaks of a reality marked by the
adversarial nature of markets, where the appropriation of rents pivots on
the control of coveted resources. This is in stark contrast with the view of
the free private enterprise as the amiable agent of sustainable develop-
ment, popularly known as trickle-down economics, or as posited by a
champion of unregulated markets: “Even the poorest today owe their
relative material well-being to the results of past inequality” (Hayek,
2011, p. 98).
The weakness of this sanguine view of the role of the private enter-
prise, and MNEs in particular, in sustainable development is that, on the
one hand, it overlooks the threat that the kinds of oligarchic capitalism
(Baumol et al., 2007) or crony capitalism (Haber, 2002) in many devel-
oping countries pose to their own population, whose wellbeing is
jeopardized by institutions stacked against inclusive economies
A. Agafonow and M. Perez
Ecological Economics 222 (2024) 108232
3
(Agafonow and Donaldson, 2015). On the other hand, this view ignores
what MNEs were created for in the rst place, and what their role in a
real-world adversarial market economy is.
The making of MNEs is far from aiming at deepening sustainable
development, although there are positive side effects to be sure. Eco-
nomics and organization scholarship are clear about the reasons for the
replacement of functional organizational units with the divisional units
that gave rise to MNEs, namely, it is a way to offset the shift of rents
away from net prots toward self-serving subgoals which, however
disallowed by top management, were pursued by the heads of outsized
functional departments (Baumol, 1967; Milgrom and Roberts, 1992;
Roberts, 2004; Williamson, 1981, 1985).
MNEs owe their inception to the increasingly complex choices of
capital expenditures that top management faced at the turn of the 20th
century, when functionally departmentalized rms had vertically inte-
grated, growing too large whenever the nature of production allowed
standardization without giving up on quality, e.g., the production of
cigarettes as opposed to cigars where avors and aromas matched the
complexity of wines (Chandler Jr., 1999).
The appropriation of rents by equity holders, who were self-made
tycoons (Chandler Jr., 1999), lessened when capital expenditures were
not justied by their added value to the bottom line, which the top
management was unable to assess in the absence of markets inside these
kinds of rms (Williamson, 1981, 1985). Thus, the dawn of modern
MNEs hinged on methods to overcome both the difculties top man-
agement faced when judging the opportunity costs of the demands of
capital expenditures made by the heads of outsized functional de-
partments, and the cognitive overload of top managers who were
increasingly overwhelmed by the mix of strategic and operating
decision-making in these large organizations (Chandler Jr., 1999; Wil-
liamson, 1981, 1985).
The inception of MNEs hinged on the formation of divisional units,
which lies in moving production into subsidiaries that will now operate
as quasi-autonomous entities, relinquishing the kinds of administrative
coordination with top management that functional units require. The
autonomy side of the equation means that subsidiaries are entrusted with
authority over the quantity of output to be produced, the product mix (e.
g., low- vs. high-end products) to be emphasized, and marketing activ-
ities, thus competing on their own in the market (Brickley et al., 2016;
Jensen and Meckling, 1998; Mintzberg, 1979). The quasi side of the
equation means that subsidiaries fall short of the autonomy that an in-
dependent rm enjoys because prots are transferred to headquarters
which, in turn, will authorize or refuse capital expenditures based on
how protable subsidiaries are instead of poking around in the dark
without market signals, as it is the case with large functionally organized
rms (Milgrom and Roberts, 1992; Mintzberg, 1979; Williamson, 1985).
This has given way to a body of knowledge, too large to acknowledge
here, on how to make these markets internal to MNEs better emulate real
markets in the allocation of resources according to opportunity costs,
known as transfer prices. Another way paved by this research on MNEs is
how to raise the power of incentives to heighten prot making. Just as
powerful heads of outsized functional departments can erode prot
margins by self-serving decisions that claim a larger part of the rent
cake, so to speak, staff can do the same when their compensation is not
contingent on measurable tasks or outputs (Lazear, 1986). Thus, this
strand of the literature has sought to craft organizational structures
inlaid with high-powered incentives over and above divisional bound-
aries (Baker, 2000; Brown, 1990; Hoskisson et al., 2018; Lazear, 2018;
Pencavel, 2012; Zenger and Hesterly, 1997).
2.1. MNE rent appropriation: critical interfaces in the nexus of contracts
To put in a stylized digest what has just been expounded, what makes
MNEs an efcacious tool in appropriating rent hinges on two critical
interfaces linking the nodes of the board of directors up in the head-
quarters, with the subsidiaries and their internal executive authority
down the organizational hierarchy.
The rst interface of interest corresponds to β* (see Fig. 1 and
Table 1), through which the board of directors discharges its function of
rating the performance of subsidiaries, which is illustrated with the
known icon of the divisionalized organizational form proposed by Min-
tzberg (1979, 1981). One thing that should strike the reader is the row of
white inverted Ts representing subsidiaries which in today’s Unilever,
for instance, are more than four hundred. To rate performance means to
evaluate “after the fact, in specic quantitative terms, in the case of
business corporations by measures of prot, sales growth, and return on
investment” (Mintzberg, 1979, p. 383) thus making capital expenditures
based on objective basis instead of on the clout of subsidiary executives.
The second interface corresponds to
η
* (see Fig. 1 and Table 1), via
which the board of directors discharges its function of designating
compliant subsidiary executives, illustrated with the icon of a CEO’s
ofce door. This grip on subsidiary executives should not come as a
surprise for it is a standard practice in the corporate world, as well as a
trump card commonly played by public authorities in the name of na-
tional interest like, for instance, the recent power to appoint Pirelli’s
CEO that the Italian government has accorded a trusted minority
shareholder to countervail the higher stake held by the Chinese com-
pany Sinochem (Kazmin and Sciorilli Borrelli, 2023).
Thus, rating and designation are key functions that parsimoniously
illustrate the key parts of the mechanisms that MNEs employ to offset the
shift of rents away from net prots to enhance the capture of value by
shareholders, more about which will be said under the ndings heading.
If there is any hope to rethink MNEs for the ongoing Anthropocene
epoch, when ecological thresholds are being overstretched by human
activities (Muradian, 2001; Uehara, 2013), the strain that MNEs place
on stakeholders and their ecosystems can only be tackled by overhauling
this mechanism, which today gives shareholders the means to hold ex-
ecutives accountable as per the market value of equity (Milgrom and
Roberts, 1992; Williamson, 1993), and at the expense of the integrity of
ecosystems and the claims of non-equity stakeholders (Agafonow and
Perez, 2024a).
2.2. The trickle-down bias of International Business scholarship: A
critique
One could hardly be blamed for believing that International Business
(IB hereafter) is a eld called to seize the true role of MNEs in sustainable
development. Yet, according to recent accounts of its exponents, IB
scholarship has built a rm-centered lens that has crowded out societal
concerns (Buckley et al., 2017; Rygh, 2019; Van Assche, 2018). This
makes it particularly vulnerable to the lapses of the trickle-down
interpretation of sustainable development.
This rm-centered lens has made at least a part of IB scholarship
aloof from the environmental issues that stem from heightening prot-
making by apportioning out razor-thin rents among non-equity stake-
holders which, as mainstream economists and organization scholars
have remarked, is what MNEs are intended for. Thus, when environ-
mental and social issues have been considered, a part of the IB schol-
arship appears to have been led astray by the trickle-down bias that
overlooks the adversarial nature of markets.
By way of example, Oetzel and Doh (2009) posit that greater
collaboration between MNEs and NGOs can harness rm-specic ad-
vantages on the grounds that:
MNEs are under pressure to continuously increase shareholder return
[…] As large MNEs saturate their home markets and those of the
other developed countries, developing countries are necessary for
continued growth. To succeed in these markets, however, rms must
understand how to compete, particularly in the face of institutional
and economic underdevelopment. MNE-NGO collaborations may
provide market access to geographic and demographic groups that
A. Agafonow and M. Perez
Ecological Economics 222 (2024) 108232
4
would otherwise be out of their reach. (Oetzel and Doh, 2009, p.
115).
It is public knowledge, however, that owing to the conguration of
MNEs’ bundle of property rights the balance between value capture—in
the form of prots—and value creation—in the form of a positive
environmental impact—is likely to be tilted in favor of shareholders.
This is also sidelined by Kolk and Pinkse (2008) when positing that
MNEs’ green rm-specic advantages can help tackle climate change,
which in hindsight is unwarranted in the light of new evidence on how
SDGs disguise environmental destruction (Zeng et al., 2020).
A cross-sectional and self-administered survey conducted by van
Zanten and van Tulder (2018), tapped executives with responsibilities
for the sustainability policies of 350 MNEs headquartered in Europe and
North America. It found that these “…MNEs have adopted an important
but fairly narrow/passive role in contributing to SDGs” (van Zanten and
van Tulder, 2018, p. unpaginated). On the contrary, given the conr-
mation bias that is expected to surface when the opinions of interested
parties are tapped, these ndings speak volumes for the plausible lack of
compliance with SDGs.
A different self-administered survey—this time longitudinal and in a
single country—seems to show that environmental innovation at foreign
subsidiaries is higher when both MNEs are headquartered in countries
with strong pro-environmental institutions and the subsidiaries in
question are the product of greeneld investments (i.e., subsidiaries
created from scratch instead of acquired). Thus, to benet from envi-
ronmental innovation Konara et al. (2021) recommend that host coun-
tries channel foreign investment to greeneld subsidiaries instead of the
acquisition of domestic ones. They, however, overlook the negative
societal impact of turning capital away from indigenous subsidiaries, as
well as the mixed evidence about positive spillover effects from foreign
investments (Gorg and Greenaway, 2004).
Acknowledging that their research does not shed light on the
mechanisms of environmental innovation, Konara et al. (2021) submit
that: “[f]uture research could examine these mechanisms at a more
micro level, probably through a qualitative approach or a questionnaire
survey” (p. 12). The mechanisms of MNEs are at the very heart of the
present article and, as will be expounded next, researching mechanisms
is indeed a qualitative endeavor, except that it goes beyond what
questionnaires can achieve.
IB’s reliance on rm heterogeneity to conjecture differences in rm
performance (Van Assche, 2018) has brought one rm too many for the
proper treatment of mechanisms. This is because studying the
Fig. 1. The mechanism of the archetypical multinational enterprise: 1) Shareholders >
α
* >board of directors; 2) Board of directors >β* >subsidiaries; 3) Board of
directors >
η
* >CEOs of subsidiaries; 4) CEOs of subsidiaries >κ* >subsidiaries’ nancial performance; 5) Shareholders >λ* >stock exchange; 6) Shareholders >
μ
* >law court; 7) Rule or legal doctrine >
ν
* >law court; 8) Law court >ξ* >duciary duty; 9) Fiduciary duty >ο* >board of directors (Adapted from Agafonow
and Perez, 2024a and based on Brickley et al., 2016; Chandler, 1999; Easterbrook and Fischel, 1996; Jensen and Meckling, 1998; Milgrom and Roberts, 1992;
Mintzberg, 1979; Roberts, 2004; Schanzenbach and Sitkoff, 2020; Williamson, 1981, 1985 and Creative Commons icons. By Alena, Alessandro Suraci, Alzam,
barurezeki, Adrien Coquet, Gregor Cresnar, DC Icons, Eliricon, b farias, Endang rmansyah, Hironicons, Gan Khoon Lay, Magicon, Murat Mustafa, RROOK, Sri,
Creative, Stall, Amethyst Studio, and Viktorijareut, licensed under CC-BY-3.0.).
A. Agafonow and M. Perez
Ecological Economics 222 (2024) 108232
5
microanalytic features of rms involves “a breadth (more observations)
for depth (greater detail) tradeoff” (Williamson, 1985, p. 105). Thus,
IB’s reliance on large micro-datasets in place of instance-level parts
pieced together in the workable whole that an MNC is, has exposed it to
the limits of the statistical t between prediction and response variables.
These limits stem from the many functions that can account for the
relationship between variables, saying nothing about real mechanisms
at work, or as posited by Murphy (1978): “using some function for no
better reason than that it gives an optimal t, may tell us nothing at all
scientically […] It is obvious, then, that in practice, excellence of t of
some function does not guarantee insight” (p. 08).
More colorful but also telling is the argument of Ioannidis (2003),
who reminds us that recording 100 astrological parameters for 1000
subjects with diabetes mellitus and 1000 control-group subjects (i.e.,
without diabetes), ve astrological parameters will be found to be
signicantly correlated with diabetes. Needless to say, no self-respecting
physician would credit diabetes to the inuence of astrology, despite
such parameters being able to account for heterogeneity and the cor-
relation being signicant.
Instead, studying the inner workings of MNEs entails something that
the exponents of IB have just begun to recognize, namely, that there are
several levels of analysis involved and that inner workings are located at
the level of the rm (Andersson et al., 2014; Buckley et al., 2017). Still,
this is something that the goodness of t of a statistical model has limits
to cope with (Ioannidis, 2003; Murphy, 1978) and which the exponents
of IB have not acknowledged yet. Only when this is brought home it is
possible to leverage “thick nomological descriptions” to spell out the
details of how things work (Cartwright, 2004, p. 815), which is at the
heart of the comparative mechanism-based methodology employed
herein.
It will take, however, a paradigm shift in IB scholarship to move in
the right direction which, notwithstanding the intention of fostering
research with societal impact (Doh et al., 2023), is likely to be slowed
down by the view of academic publishing as a means to boost the
monetary reward of IB academics (e.g., Li et al., 2023). Because the
wrong incentives make the whitewashing of research take precedence
over genuine knowledge breakthroughs (Agafonow and Perez, 2023a,
2024b), it is reasonable to expect IB journals positioned in the highest
tiers of rankings to be ooded with counterfeit social-impact research.
We will thus be forgiven for being skeptical about the “renaissance” of IB
scholarship (cf. Buckley et al., 2017).
3. Comparative mechanism-based methodology
That short-term value maximization destroys value has acquired the
status of an axiom, yet it is lacking in how-tos. This is because the
changes in the inner workings of rms that would arguably lead them
away from short-term value maximization have rarely been ascertained
in terms of mechanisms, which otherwise could harness the design un-
dertaking that overhauling MNEs for the Anthropocene demands.
Thus, employing a benchmark-comparison method (Hsiung and
Gunning, 2002) this research builds on contrastive explanation (Lipton,
2004) to set off by contrast what the differences between the mecha-
nisms of a point of reference, i.e., an archetypical MNE, and its foil, i.e.,
Unilever’s B&J, are. It is thus possible to weigh the implications of the
differences between B&J and the archetypical MNE on how rents are
apportioned out among stakeholders, including Nature.
Benchmarking Unilever’s B&J against an archetypical MNE would
be insufcient for a design undertaking without a mechanism-based
system, which lays down how the inner workings in question are
congured. Thus, starting from the denition of mechanisms as “…en-
tities and activities organized to produce a phenomenon” (Darden et al.,
2018, p. 2), this research sets forth how entities display functions to
discharge powers or capacities that bring about changes in other entities
(Chibucos et al., 2014; Smith et al., 2005; Steel, 2008).
Mechanisms are in a stronger position to make extrapolations than
the correlation of cross-sectional data, which is arguably the dominant
methodology in empirical social sciences. While the latter aims to
extrapolate based on reducing sampling errors to increase the proba-
bility that a phenomenon is recurrent in large samples (Altman and
Krzywinski, 2017; Babbie, 2021), mechanisms extrapolate based on the
cogs a wheels that have been determined to be characteristic of entire
classes of entities (Craver and Darden, 2013; Steel, 2008)—like the
MNEs studied herein. Thus, mechanisms are on rmer grounds to
generalize ndings for they can sort the causal from the random,
whereas purely random patterns that exhibit statistical correlations at
signicant levels are obstacles for extrapolating with correlations
(Popper, 1971; Schick Jr. and Vaughn, 2014).
Mechanisms would be of little help, however, should a common
framework to deal with the units of observation be absent (Ostrom,
2009). Such a framework is thus mobilized through two complementary
steps. On the one hand, the units of observation employed in this
research count on a high degree of reliability by coming from lawful
agreements and stock exchange lings, whose breach opens the door to
costly litigation. This counteracts the adaptive goal-oriented behavior of
agents (Simon, 1996) turning the words therein into deeds, which lends
data a higher degree of reliability compared to subjective eld research
where it is difcult to tell reliable data apart from impressionistic data
(Blaikie, 2010), and where the events observed may be lost in a distant
past without the possibility to revisit them in the hope of replication.
On the other hand, the Basic Formal Ontology described in Arp et al.
(2015)—which also counts on the ISO/IEC 21838–1 standard—is
employed to classify the units of observation. Data coding is thus man-
ifest, instead of latent (Babbie, 2021), laying bare the instance-level parts
Table 1
Description of the causal parts of the nexus of contracts of the archetypical MNE.
(Authors’ own based on Brickley et al., 2016; Chandler Jr., 1999; Easterbrook
and Fischel, 1996; Jensen and Meckling, 1998; Milgrom and Roberts, 1992;
Mintzberg, 1979; Roberts, 2004; Schanzenbach and Sitkoff, 2020; Williamson,
1981, 1985)
Link Pair of nodes Causal-role
Function
Comments
α
*
(Alpha)
Shareholders and
board of directors
Vote Shareholders hold in check
the board of directors of the
MNE through voting
β*
(Beta)
Board of directors
and subsidiaries
Rate The board of directors rate
the performance of the
MNE’s subsidiaries through
protability measures
η
*
(Theta)
Board of directors
and the CEOs of
subsidiaries
Designate The board of directors
designates the CEOs of
subsidiaries
κ*
(Lambda)
CEOs and
subsidiaries’
nancial
performance
Oversee CEOs oversee the nancial
performance of subsidiaries
λ*
(Nu)
Shareholders and
stock exchange
Exit Stock exchanges offer a
low-cost exit option for
shareholders
μ
*
(Xi)
Shareholders and
law court
Appeal Shareholders have legal
standing to appeal to a law
court to redress the breach
of duciary duty
ν
*
(Omicron)
Rule or legal
doctrine and law
court
Guide The adjudication by law
courts is guided by the best
interest legal doctrine
ξ*
(Rho)
Law court and
duciary duty
Adjudicate In the event of a lawsuit, the
law court adjudicates on
the conict based on the
duciary duty owed to
shareholders
ο*
(Sigma)
Fiduciary duty and
board of directors
Deterrence The decision-making of the
board of directors is
constrained by deterrence
inherent to penalties for the
breach of duciary duty
A. Agafonow and M. Perez
Ecological Economics 222 (2024) 108232
6
or individual denizens of reality (Arp et al., 2015) which, for illustration
purposes, are gathered in the Porphyrian Tree of Fig. 2 and Tables 1 and
2.
This formal ontology is a stepping stone to building a much-needed
common framework (Ostrom, 2009) because it paves the way for the
interoperability of data across studies (Arp et al., 2015), as it has been
successfully shown in biomedicine (Arp et al., 2015; Smith, 2008), as
well as making plain the building blocks of the mechanisms expounded
herein. It only remains to bring the instance-level parts of this Por-
phyrian Tree together in an intelligible schema, showing how entities
react as a result of the capacities discharged through relevant functions,
which is the object of what remains of this article.
4. Findings
The London Stock Exchange received in 2021 a complaint that reads:
“…it appears that Unilever has a rouge division in the United States
known as Ben & Jerry’s Homemade (‘Ben & Jerry’s’) which has been
structured so as to evade normal corporate governance practices” (UK
Lawyers for Israel, 2021, p. online). The complaint sought to downgrade
Unilever’s premium listing, pointing out that the relationship between
Unilever and B&J is dysfunctional because:
[…] what is taking place is a failure of corporate governance which is
inherent in the structure of Unilever. As noted above, it appears that
Unilever has delegated important high risk decisions to an unelected
board which is accountable to nobody. (UK Lawyers for Israel, 2021,
p. online).
In effect, and as posited by Coff (1999): “Shareholders’ bargaining
power is only as strong as their ability to monitor or provide incenti-
ves—in other words governance structures” (p. 126). Thus, for share-
holders to successfully claim as much net prots as possible, suitable
organizational arrangements must be in place. Key functions to see to it
that only enough rent is apportioned out among stakeholders—so that,
as seen earlier, subsidiary executives do not indulge in self-serving
behavior and employees do not shirk—are rating and designation illus-
trated with the interfaces β* and
η
* respectively (see Fig. 1 and Table 1).
Unilever’s structure falters precisely in these key functions with ripple
effects across the nexus of contracts that favor non-equity stakeholders.
To mention a few of these effects, some of which were ahead of their
time, B&J’s non-equity stakeholders are upheld when: A) a substantial
part of the incentive-based compensation of board members is calcu-
lated taking into consideration social performance (SEC, 2000); B) full-
and part-time employees in the company’s manufacturing plants and
scoop shops are paid an annually adjustable livable wage (Agafonow
and Perez, 2017; Ben and Jerry’s Homemade Inc, 2015); C) the company
strikes long term agreements with family farms to employ best practices
in the production of organic dairy (Agafonow and Perez, 2017; Ben and
Jerry’s Homemade Inc, 2015); D) it sources key ingredients from fair-
trade producers and invests in helping these producers increase pro-
duction capacity (Agafonow and Perez, 2017; Ben and Jerry’s Home-
made Inc, 2015); E) it partners with non-prots to help people that face
employment barriers acquire skills (Agafonow and Perez, 2017; Ben and
Jerry’s Homemade Inc, 2015); F) it commits 7.5% of the company’s
annual pre-tax prots to be spent in community projects and to support
progressive public campaigns, like opposing the administration of Re-
combinant Bovine Growth Hormone to dairy cows, promoting children’s
basic needs in the US national agenda (Ben and Jerry’s Homemade Inc.,
n.d.); G) as well as withdrawing the sales of ice-creams in support of
human rights (Kingsley, 2022).
Importantly, these are not simply the product of the goodwill of
managers, whose behavior, however commendable, may fall prey to the
agency and adaptive goal-oriented behavior motivated by pressing cir-
cumstances (Agafonow and Perez, 2023b, 2024a; Simon, 1996). On the
contrary, they are the product of a nexus of contracts whose nodes hold
by-relations that make the goal of apportioning out rent among non-
equity stakeholders operational ex ante (March and Simon, 1993),
which was engineered during the negotiations that paved the way to the
acquisition of B&J by Unilever (SEC, 2000).
It is the unconventional ex-ante conguration of this nexus of con-
tracts—hinted at in the complaint to the London Stock Exchange—-
which arguably prevents Unilever from turning the screw on B&J to the
point where its non-equity stakeholders would get just enough rent to
keep them in place or prevent them from leaving (Coff, 1999; Peteraf,
1993) thus amassing substantial rent surplus to be appropriated by
shareholders, as it is only to be expected in the archetypical MNE.
Fig. 2. Porphyrian Tree of Ben & Jerry’s and the archetypical MNE in keeping with a Basic Formal Ontology (Authors’ own based on Arp et al., 2015 and Creative
Commons icons. By Alena, Alessandro Suraci, Alzam, barurezeki, Adrien Coquet, Gregor Cresnar, DC Icons, Eliricon, b farias, Endang rmansyah, Didzis Gruznovs,
Dan Hetteix, Hironicons, David Khai, Gan Khoon Lay, Tommy Lau, Magicon, Murat Mustafa, RROOK, Fery Saputra, Sri, Creative, Stall, Amethyst Studio, Marc
Torrada, Numeralia Vita Zein, and Viktorijareut, licensed under CC-BY-3.0.).
A. Agafonow and M. Perez
Ecological Economics 222 (2024) 108232
7
4.1. The mechanism of Ben & Jerry’s
Unlike the appointment of the archetypical subsidiary’s CEO, B&J’s
CEO is not unilaterally designated by the corporate board of Unilever,
which is tributary to the large shareholder base that holds Unilever
accountable through majority vote via the link
α
(see Fig. 3 and Table 2).
On the contrary, B&J’s CEO is designated via the link
ι
(see Fig. 3 and
Table 2) by an appointment committee consisting of the Class U direc-
tor—which is the representative of Unilever—as well as two Class I
directors—which are part of the wardens of the company’s environ-
mental and social mission—with whom Unilever is expected to consult
in good faith (SEC, 2000, p. 81).
Interestingly enough, Class I directors were initially seven members
from among B&J’s earlier board—referred to as the surviving corporation
board, including the very founders of the company Ben Cohen and Jerry
Greeneld—whose appointment falls outside Unilever’s remit as illus-
trated in the link γ where the function of designation is circle-backslash.
As expressed in the merger agreement:
Directors shall be elected for one year terms (subject to earlier
removal, death or resignation), and a majority of directors then in
ofce in each Class shall designate the candidates for election to the
Company Board in such Class each year, and Conopco shall cause the
election of such candidates […] Vacancies on the Company Board
shall be lled in a like manner. Conopco, as sole shareholder of the
Surviving Corporation, shall remove any director of any Class at the
written request of at least a majority of the directors of such Class
then in ofce and shall not otherwise remove any member of the
Company Board after the Effective Time, other than a Class U Di-
rector or the CEO following termination of his or her employment.
(SEC, 2000, p. 39).
It is noteworthy that Class I directors are, as expressed in the
complaint to the London Stock Exchange, “unelected” and “accountable
to nobody” (UK Lawyers for Israel, 2021, p. online). These kinds of di-
rectors are called self-perpetuating and they are typical of non-prot or-
ganizations (Hansmann, 2000), where there are no shareholders
because residual rent surplus is not meant to be distributed as dividends
but to be reinvested into the organization for the sake of beneciaries,
perhaps better summed up by the notion of value devolution (Agafonow,
2015; Agafonow and Donaldson, 2015).
As Unilever’s fully owned subsidiary, however, B&J is meant to
transfer prots up to headquarters, only that such prots are a discounted
surplus after rent has been apportioned out over and above what it would
take to keep non-equity stakeholders in place (Coff, 1999; Peteraf,
1993). This is because key drivers with the power to alter the environ-
mental and social commitments of B&J are off-limits to Unilever,
allowing Class I directors to keep in check how the business is conducted
via the link
ε
(see Fig. 3 and Table 2), thus having the capacity to prevent
the CEO from acting in several areas. More specically, and as expressed
Table 2
Description of the causal parts of the nexus of contracts of Unilever’s Ben &
Jerry’s.
(Authors’ own based on Agafonow and Perez, 2017; Brickley et al., 2016;
Chandler Jr., 1999; Easterbrook and Fischel, 1996; Jensen and Meckling, 1998;
Milgrom and Roberts, 1992; Mintzberg, 1979; Roberts, 2004; Schanzenbach and
Sitkoff, 2020; SEC, 2000; Williamson, 1981, 1985)
Link Pair of nodes Causal-role
Function
Comments
α
(Alpha)
Unilever’s shareholders
and board of directors
Vote Unilever’s shareholders
hold in check the board
of directors through
voting
β
(Beta)
Unilever’s board of
directors and
subsidiaries
Rate Unilever’s board of
directors rate the
performance of the
MNE’s subsidiaries
through protability
measures
γ
(Gamma)
Unilever’s board of
directors and B&J’s
Class I directors
Does not
designate
Unilever’s board of
directors does not
designate B&J’s Class I
directors
δ
(Delta)
Self-perpetuation and
B&J’s Class I directors
Designate B&J’s Class I directors
designate themselves in
a self-perpetuating
fashion
ε
(Epsilon)
B&J’s Class I directors
and the company’s
environmental and
social performance
Oversee The Class I directors of
B&J oversee the
environmental and
social performance of
the company
ζ
(Zeta)
B&J’s Class I directors
and appointment
committee
Partake B&J’s Class I directors
partake in the
appointment committee
charged with appointing
B&J’s CEO
η
(Eta)
Unilever’s board of
directors and B&J’s
Class U director
Designate Unilever’s board of
directors designates
B&J’s Class U director
θ
(Theta)
B&J’s Class U director
and appointment
committee
Partake B&J’s Class U director
partakes in the
appointment committee
charged with appointing
B&J’s CEO
ι
(Iota)
Appointment
committee and B&J’s
CEO
Designate B&J’s appointment
committee, composed of
Class U and Class I
directors, appoints
B&J’s CEO
κ
(Kappa)
B&J’s CEO and the
company’s nancial
performance
Oversee The CEO of B&J
oversees the nancial
performance of the
company
λ
(Lambda)
Unilever’s shareholders
and stock exchange
Exit Stock exchanges offer a
low-cost exit option for
Unilever’s shareholders
μ
(Mu)
Unilever’s shareholders
and law court
Appeal Unilever’s shareholders
have legal standing to
appeal to a law court to
redress the breach of
duciary duty
ν
(Nu)
Rule or legal doctrine
and law court
Guide The adjudication by law
courts is guided by the
best interest legal
doctrine
ξ
(Xi)
Law court and duciary
duty
Adjudicate In the event of a lawsuit,
the law court
adjudicates on the
conict based on the
duciary duty owed to
Unilever’s shareholders
(subject to the merger
agreement in force)
ο
(Omicron)
Fiduciary duty and
Unilever’s board of
directors
Deterrence The decision-making of
Unilever’s board of
directors is constrained
Table 2 (continued )
Link Pair of nodes Causal-role
Function
Comments
by deterrence inherent
to penalties for the
breach of duciary duty
π
(pi)
Injunction and law
court
Guide An injunction guides the
adjudication by law
courts subject to the
merger agreement in
force
ρ
(Rho)
B&J’s Class I directors
and injunction
Appeal B&J’s Class I directors
have recourse to an
injunction meant to
force Unilever to comply
with the merger
agreement in force
A. Agafonow and M. Perez
Ecological Economics 222 (2024) 108232
8
in the merger agreement:
The Company Board shall be the custodians of the Ben & Jerry’s
brand image and shall have primary responsibility for safeguarding
the integrity of the essential elements of the Ben & Jerry’s brand-
name (the “ESSENTIAL INTEGRITY OF THE BRAND”). The Com-
pany Board shall work together with the CEO to provide that the
business of the Surviving Corporation is conducted in a manner that
preserves and enhances the Essential Integrity of the Brand. As part
of this responsibility, the Company Board may prevent any action by
the CEO in the areas of new product introduction, the changing of
product standards and specications, the approval of the content of
marketing materials and the licensing or other use of the Ben &
Jerry’s trademark that, in each case, a majority of the Company
Board reasonably determines to be inconsistent with the Essential
Integrity of the Brand. (SEC, 2000, p. 81).
Note that Class I directors hold sway over B&J’s commitments via the
root cause of such commitments, notably “product introduction” and
“the changing of product standards and specications,” thanks to which
the company can credibly claim to link prosperity for all its stakeholders
“from seed to freezer” (Ben and Jerry’s Homemade Inc, 2018, p. Online).
For instance, they were able to challenge the decision of former CEO
Walt Freese to debase B&J’s iconic ice-cream Cherry Garcia adding “new
kinds of cherries into it that were smaller and tasted like rubber”
(Edmondson, 2014, p. 203). This is far from being a trivial decision for it
is by altering product standards and specications, e.g., removing
organic milk or fair-trade nuts and berries from the ice-cream mix, that
the company could relinquish its environmental and social impact across
the value chain. Likewise, the inuence of Class I directors on “the
licensing or other use of the trademark,” has allowed them to stand for
human rights by refusing to license the commercialization of its ice-
creams in certain regions (Kingsley, 2022).
Thus, to prevent Unilever from interfering with Class I directors’
sway over the company’s environmental and social commitments, the
mechanism under consideration has been reinforced with an injunction,
i.e., recourse to a judicial order meant to force Unilever to comply with
Fig. 3. The mechanism of Unilever’s Ben & Jerry’s: 1) Unilever’s shareholders >
α
>Unilever’s board of directors; 2) Unilever’s board of directors >β >sub-
sidiaries; 3) Unilever’s board of directors >γ >B&J’s Class I directors; 4) Self-perpetuation >δ >B&J’s Class I directors; 5) B&J’s Class I directors >
ε
>envi-
ronmental and social performance; 6) B&J’s Class I directors >ζ >appointment committee; 7) Unilever’s board of directors >
η
>B&J’s Class U director; 8) B&J’s
Class U director >θ >appointment committee; 9) Appointment committee >
ι
>B&J’s CEO; 10) B&J’s CEO >κ >nancial performance; 11) Unilever’s share-
holders >λ >stock exchange; 12) Unilever’s shareholders >
μ
>law court; 13) Rule or legal doctrine >
ν
>law court; 14) Law court >ξ >duciary duty; 15)
Fiduciary duty >ο >Unilever’s board of directors; 16) Injunction >
π
>law court; 17) B&J’s Class I directors >
ρ
>injunction (Authors’ own based on Agafonow
and Perez, 2017; Brickley et al., 2016; Chandler, 1999; Easterbrook and Fischel, 1996; Jensen and Meckling, 1998; Milgrom and Roberts, 1992; Mintzberg, 1979;
Roberts, 2004; Schanzenbach and Sitkoff, 2020; SEC, 2000; Williamson, 1981, 1985 and Creative Commons icons. By Alena, Alessandro Suraci, Alzam, barurezeki,
Adrien Coquet, Gregor Cresnar, DC Icons, Eliricon, b farias, Endang rmansyah, Didzis Gruznovs, Dan Hetteix, Hironicons, David Khai, Gan Khoon Lay, Tommy Lau,
Magicon, Murat Mustafa, RROOK, Fery Saputra, Sri, Creative, Stall, Amethyst Studio, Marc Torrada, Numeralia Vita Zein, and Viktorijareut, licensed under CC-
BY-3.0.).
A. Agafonow and M. Perez
Ecological Economics 222 (2024) 108232
9
the terms of the agreement, illustrated in Fig. 3 with an umbrella. Acting
via the links
ρ
and
π
, Class I directors can request court adjudication to
force Unilever to comply with the mechanism explained heretofore.
Without this injunction, Unilever could plausibly break with the terms of
the merger agreement to get back to business as usual in the manage-
ment of B&J. This is because the best interest doctrine—which in the case
of the US where B&J is incorporated guides court adjudication via the
links
ν
and ξ—gives priority to shareholders when there are conicts of
interest (Schanzenbach and Sitkoff, 2020), which is illustrated with a
shackle representing the duciary duty that ties the board of directors in
with shareholders subject to the so-called business judgment rule
(Easterbrook and Fischel, 1996).
The injunction was put to a test rst in the 2000s when, under the
leadership of CEOs Yves Couette and Walt Freese, Unilever tried to back
down from B&J’s commitments and interfered with the job of Class I
directors (Agafonow and Perez, 2017), as well as in 2021 when the
company announced that the licensing agreement with an Israeli com-
pany would be stopped in support of human rights in the Israeli settle-
ments in Palestinian territory (Kingsley, 2022). This latter chapter
opened a conict with Unilever headquarters that despite its bitter-
ness—with retaliations from Israeli interest groups, divesting actions
from US public pension funds, and activism by Unilever minority in-
vestors (Evans, 2022b)—has settled for the middle ground of selling the
Israeli business to its licensee who will now use a different branding for
its ice-creams (Kingsley, 2022).
5. Discussion: Overhauling MNEs for the Anthropocene
Overhauling MNEs for the Anthropocene entails diminishing these
rms’ capabilities to capture the rents that non-equity stakeholders
would receive if a short-term, prot-maximizing strategy were aban-
doned. Key to it is the control of the organizational drivers of the
company’s environmental and social commitments, on account of which
MNEs successfully prevent the displacement of a prot-maximizing goal
(Mintzberg, 1983) which is instrumental in serving shareholders.
The green dashed ovals in Fig. 4 seek to highlight what makes B&J
distinct from an archetypical MNE, setting off by contrast (Hsiung and
Gunning, 2002) what the mechanisms to apportion out rents among
stakeholders consist of, either genuinely fostering an environmental and
social mission like in B&J, or expropriating value from non-equity
stakeholders like in a MNE. Thus, subsidiaries in the archetypical MNE
are organized to put key internal organizational drivers off limits for
non-equity stakeholders, instead placing these drivers under the tight
control of the nexus node of subsidiary executives or, for illustration
purposes, a CEO’s ofce door inside the green dashed oval on the right
side of Fig. 4.
Putting non-equity stakeholders behind the wheel, so to speak, is
confronted, however, with the challenge that stakeholders across the
value chain are contingent or tangential (Rounds & Rounds, 2020), i.e.,
there are too many different beneciaries. Therefore, the non-equity
stakes held by these many beneciaries are dispersed enough to make
the marginal cost of engaging with one more MNE, i.e., to press it to
uphold environmental and social commitments, high enough to invite
inaction. It is thus possible to concentrate such stakes by appointing
Fig. 4. The mechanisms of Unilever’s Ben & Jerry’s and the archetypical multinational enterprise compared (Authors’ own based on Agafonow and Perez, 2017;
Brickley et al., 2016; Chandler, 1999; Easterbrook and Fischel, 1996; Jensen and Meckling, 1998; Milgrom and Roberts, 1992; Mintzberg, 1979; Roberts, 2004;
Schanzenbach and Sitkoff, 2020; SEC, 2000; Williamson, 1981, 1985 and Creative Commons icons. By Alena, Alessandro Suraci, Alzam, barurezeki, Adrien Coquet,
Gregor Cresnar, DC Icons, Eliricon, b farias, Endang rmansyah, Didzis Gruznovs, Dan Hetteix, Hironicons, David Khai, Gan Khoon Lay, Tommy Lau, Magicon, Murat
Mustafa, RROOK, Fery Saputra, Sri, Creative, Stall, Amethyst Studio, Marc Torrada, Numeralia Vita Zein, and Viktorijareut, licensed under CC-BY-3.0.).
A. Agafonow and M. Perez
Ecological Economics 222 (2024) 108232
10
dedicated wardens of a company mission, which in B&J are the so-called
Class I directors as set off by the large green dashed oval on the left side
of Fig. 4.
The wardens of the mission risk, however, being mere window
dressing to woo customers or avoid scrutiny. For instance, in the wake of
the Black Lives Matter movement in the US, rms rushed to create
management positions responsible for diversity, equity, and inclusion
(DEI) matters. These DEI ofcers have been downsized since they
reached a maximum in 2021 while experiencing a high turnover with
only 1.8 years of service on average (Rogers and Temple-West, 2023).
This brings to the fore that the credibility of environmental and social
commitments lessens when they depend on the will of executives caught
in the grip of shareholder-centric governance (Agafonow and Perez,
2023b, 2024a).
The crux of the matter is that, to strengthen the credibility of envi-
ronmental and social commitments the wardens of the mission cannot be
accountable to shareholders despite not being accountable to contingent
or tangential non-equity stakeholders either (Rounds & Rounds, 2020).
There are thus two known ways out of this predicament: 1) either the so-
called replacement mechanism which allows a settlor to designate trust-
worthy successors to keep checking on duciaries, normally used in
Charitable and Purpose Trusts (Rounds Jr. and Rounds, 2020; Sitkoff,
2004), or self-perpetuating board membership where board members
designate like-minded individuals to ll vacant positions, commonly
found in nonprots (Hansmann, 2000). While the former has recently
been employed in the outdoor clothing company Patagonia, Inc. (Aga-
fonow and Perez, 2024a), the latter characterizes B&J, which is illus-
trated with the link γ in the elongated and right-leaning green dashed
oval on the left side of Fig. 4, where the designation of Class I directors is
off limits to Unilever.
Notwithstanding the reduction of the marginal cost of pressing one
more MNE fullled by dedicated wardens of the mission, they would
have difculties displacing the prot-maximizing goal that lies at the
root of the expropriation of rent from stakeholders unless they are in
control of the organizational drivers of environmental and social com-
mitments. For instance, benet corporations that in most US jurisdic-
tions are meant to combine prot with social or environmental goals,
designate one director who on paper oversees the latter goals (MacLeod
Heminway, 2017). Yet this director is given neither precedence over nor
has authority to prevent other executives from meddling with the drivers
of these goals, making her role ineffectual in practice (Agafonow and
Perez, 2017).
There are two known ways for the wardens of the mission to exert
such control: 1) either the so-called fractionation of trusteeship which
seeks to counteract the inuence of a single, powerful duciary in the
management of assets by means of splitting this role, so that the du-
ciary’s actions are overseen by a co-trustee (Langbein, 1996; Sitkoff,
2004), or 2) neutralizing the inuence of the agents of rival interests
like, for instance, dedicated directors appointed by minority share-
holders so that these agents have an upper hand in the control of specic
areas under their authority. The former has recently been implemented
in Patagonia, Inc. (Agafonow and Perez, 2024a), and the latter is found
in B&J whose Class I directors can block the actions of the CEO in spe-
cic areas as discussed earlier. This is illustrated with two separate
chains of links running in parallel to each other within the large green
dashed oval on the left side of Fig. 4.
In keeping with the archetypical MNE, the CEOs in charge of sub-
sidiaries are designated by the board of directors, or a dedicated com-
mittee within it, back in the headquarters (illustrated with the link
η
* on
the right side of Fig. 4). In contrast, the CEO of B&J is designated by an
appointment committee whose steering is shared between the repre-
sentatives of both Unilever and non-equity stakeholders, as described
earlier and illustrated with the link
ι
inside the large green dashed oval
on the left side of Fig. 4.
Lastly, non-equity stakeholders hardly count on standing to launch
legal proceedings against the decisions of MNE executives, if anything
because under the best interest doctrine (Schanzenbach and Sitkoff,
2020)—see the link
ν
* on the right side of Fig. 4—the business judgment
rule keeps the cost of endless judicial reviews under control by assuming
that executives manage MNE in good faith unless conicts of interest
exist (Easterbrook and Fischel, 1996). This rule has carried over into
benet corporations in the US, where the non-equity stakeholders that
benet from the social or environmental mission of these companies
paradoxically lack legal standing to sue executives for breach of purpose
(MacLeod Heminway, 2017). B&J has solved this problem granting the
wardens of the mission recourse to an injunction which, if invoked,
would seek the intervention of courts to redress a breach of the merger
agreement (SEC, 2000), where all of the above mechanisms have been
agreed upon. This is illustrated with the links
ρ
and
π
inside the elon-
gated and left-leaning green dashed oval on the left side of Fig. 4.
5.1. Environmental governance in Institutional Ecological Economics
That B&J has escaped the attention of the contenders for the expla-
nation of value creation attests to how primitive the theory of the rms
is, at least in certain scholarly traditions. For instance, whereas main-
stream economists acknowledge that they have construed the rm as a
ction that intendedly deviates from “its real-world namesake” (Dem-
setz, 1983, p. 377), conventional stakeholder theorists admit that the
boundaries of the rm remain fuzzy in their scholarship where “there is
no ‘inside’ that distinguishes the rm from the market” (Phillips et al.,
2019, p. 3).
Progress toward a more realistic account of the rm started, how-
ever, long ago with Coase (1937, p. 388), who bought into the rm as a
space for the wielding of “conscious power,” paving the way for a richer
understanding of the market economy where in-house production serves
to reduce the cost of transactions up to the point where inputs can be
secured more cheaply by outsourcing their production to the market.
The view of Coase (1937), however, simplies the market economy
to a dichotomy between market and hierarchy (i.e., bureaucracy). It was
not until decades later that further types were added to these two
discrete structures, including international institutions (Dietz et al.,
2003; Stern, 2011), hybrids (Hennart, 1993; M´
enard, 1996; Williamson,
1985, 1991), self-organized local communities (Ostrom, 1990), non-
prot organizations (Valentinov, 2008, 2012), public bureaus (Wil-
liamson, 1999), and clans (Ouchi, 1980; Ouchi and Price, 1978).
Except for Ostrom (1990) and the literature she has inspired on the
governance of common pool resources (CPR), we agree with Paavola
and Adger (2005) that the environment has not featured prominently in
this scholarship. The last two decades have witnessed, however, a
gradual awakening of scholars that have seen in this scholarship the
bases for the design of new governance structures that could plausibly
serve environmental or social goals (e.g., Agafonow, 2020; Agafonow
and Perez, 2023b, 2024a; Bradley, 2021; Ferguson-Cradler, 2024;
Greenwood and Holt, 2008; Gui et al., 2017; Mauerhofer, 2019b,
Mauerhofer, 2019a; M´
enard, 2011; Nygaard, 2022; Paavola and Adger,
2005; Polski, 2005; Pr´
evost and Rivaud, 2018; Rametsteiner, 2002;
Roggero, 2015; Schlüter, 2007; Slavíkov´
a et al., 2010; S¨
oderbaum,
1992; Solomon, 1999; Stern, 2011; Thees and Olschewski, 2017; Val-
entinov, 2008, 2012, 2013; van der Burg, 2000; van Griethuysen, 2012).
Unfortunately, the empirical study of novel structures remains wanting
because, with a few exceptions, this scholarship has been diverted by the
exegesis of economic thought.
Even so, a few general governance structures have been proposed
making possible a preliminary comparison with the overhauled MNE
that B&J kindles. These structures are positioned along the dashed en-
velope curve of Fig. 5, meaning that every point of the envelope rep-
resents transactions made possible by the corresponding governance
structure housing them. Therefore, transactions are sorted into different
structures that, however costly they may be, are the most cost-effective
mechanisms to safeguard the viability of these transactions. For
instance, should the transactions that the orange-dashed section of the
A. Agafonow and M. Perez
Ecological Economics 222 (2024) 108232
11
envelope houses be governed by the market, the latter would incur
substantially higher governance costs as the solid section of the red
curve illustrates, leading to the failure of these transactions. The market
is thus far from being an all-purpose structure for the governance of real-
world economies.
Thus, franchises and joint ventures are but two exemplars of hybrids,
which are network structures positioned between markets and hierar-
chies. M´
enard (2011) has suggested that Ostrom (1990), self-organized
local communities could be construed as other kinds of hybrids that
internalize the sustainable exploitation of CPRs. Similarly, Nygaard
(2022) proposes that a circular economy hinges on organizations acting
as networks that reach out beyond their bureaucratic boundaries to
pursue low-carbon objectives across the supply chain preventing eco-
opportunism.
These kinds of hybrids can be illustrated by the orange cost curve of
Fig. 5, which means that they take on environmental objectives whose
achievement has traditionally failed when pursued by the bureaus of the
government. There may thus be room for the government to outsource
some corporate social responsibility (CSR) to these hybrids because they
can more cost-effectively govern a certain array of transactions.
Valentinov (2013), on the other hand, submits that hierarchies
pursuing CSR are “a functional equivalent of vertical integration […] It
involves the internalization of the societal environment in order to
forestall the hazards that would result from it otherwise” (p. 321). This
points to another array of transactions whose governance may be
handed out to for-prot enterprises, bringing about net gains in the
reduction of governance costs, which the blue cost curve of Fig. 5 il-
lustrates. We must emphasize, however, that the feasibility of
outsourcing CSR to either for-prot hybrids or for-prot hierarchies
depends on whether the risk of eco-opportunism, like greenwashing, can
be mitigated through credible commitments (Agafonow and Perez,
2023b, 2024a).
In contrast, we see the overhauling of MNEs along the lines of B&J as
a discrete structure on its own merits. To the extent that every complex
organization like a MNE is subject to the separation of ownership and
control (Fama and Jensen, 1983), property rights are attenuated because
no single private individual can centralize all the rights of control
(Grossman and Hart, 1986; Schlager and Ostrom, 1992). This attenua-
tion is higher, however, in B&J because it has innovated rearranging its
bundle of property rights by putting the drivers that alter the environ-
mental and social commitments off-limits to equity holders. If the aca-
demic community accepts that partitioning the rights of control in the
way shown herein is novel—let alone feasible for B&J actually exists—it
would merit a dedicated place in Fig. 5 as illustrated by the thick green
cost curve.
5.2. Limitations
Because the mechanism of B&J may not be foolproof, a reection on
the circumstances under which it could fail can help further the design of
organizations that better adapt to the constraints that the Anthropocene
imposes, thus preventing Nature and other relevant stakeholders from
being shortchanged ex post, during the contract execution stage.
One of the weaknesses of B&J’s mechanism paradoxically lies in the
self-perpetuating status of Class I directors (i.e., the wardens of the
mission) which, by being accountable to no one but themselves, akin to
the trustees of ownerless non-prots, shields their role of mission war-
dens from the interference of Unilever. Despite such a shield serving to
protect the subsidiary’s environmental and social commitments, it
drives the issue of accountability one level deeper raising the familiar
question: “Who monitors the monitor?” (Milgrom and Roberts, 1992, p.
497).
To be sure, board self-perpetuation paves the way for likeminded
people to ll vacant positions which, in the best-case scenario, will keep
alive the values of B&J’s founders, and the track records of many suc-
ceeding Class I directors show that they have been engaged in social or
environmental advocacy before joining the company (Agafonow and
Perez, 2017). Yet we can imagine a scenario where oversights in the
screening of candidates lead to the admission of directors whose values
align more with Unilever’s shareholders than with B&J’s stakeholders.
There is perhaps a way to go one level deeper in safeguarding stake-
holder accountability, which consists in fractionating trusteeship (Lang-
bein, 1996; Sitkoff, 2004) so that the role of mission wardens is split
between Class I directors and a credible co-trustee. This is an arrange-
ment that Patagonia, Inc. has recently put into practice (Agafonow and
Perez, 2024a) and whose details fall outside the scope of this article.
Another weakness of B&J’s mechanism may be its liability to Uni-
lever’s tactics to put pressure on Class I directors. For instance, in the
wake of B&J’s decision to halt its licensing agreement with an Israeli
company (Kingsley, 2022), Unilever withheld the payment of Class I
directors:
Member of the board claimed […] that the freeze was a ‘pressure
tactic prior to a mediation that took place last week.’ Anuradha
Mittal, chair of the Ben & Jerry’s board, said: ‘Despite them freezing
our salaries, we are continuing to do our work because our delity is
to Ben & Jerry’s.’ (Evans, 2022a, p. online).
However, because the merger agreement attributes authority to B&J
and its board over “[t]otal compensation (including Bonuses) of any
employees at or above the level of Ofcer” (SEC, 2000, p. 94), this
conict may pave the way for the injunction (illustrated in Fig. 4 with an
umbrella) to be put to a test once again, as it happened back in the 2000s
(Agafonow and Perez, 2017).
6. Conclusion
If MNEs are to credibly meet the challenge of sustainability, it is high
time that they are overhauled to reckon with the nite ecosystem ser-
vices that mark the Anthropocene (Engel et al., 2008; Waters et al.,
2016; Wunder, 2015). This is a design undertaking that pivots on a
Fig. 5. Governance costs as a function of the attenuation of property rights:
Cost-effective transactions are positioned along the dashed envelope curve and
housed in the governance structures that make them possible. The attenuation
of property rights is higher the more real-world structures depart from the
hypothetical centralization of the rights of control by a single private individual
(Authors’ own based on Agafonow, 2020, p. 189; Williamson, 1991).
A. Agafonow and M. Perez
Ecological Economics 222 (2024) 108232
12
mechanism-based methodology which, despite thriving in other sciences
(Chibucos et al., 2014; Darden et al., 2018; Smith et al., 2005; Steel,
2008), remains underexploited in the social sciences (Hedstr¨
om and
Swedberg, 2005; Pajunen, 2008, 2010).
Rewriting corporate charters to include an environmental or social
mission, as recent articles have it (e.g., Segrestin et al., 2021; Serres
et al., 2022), would not do because non-equity stakeholders normally
nd it too costly to litigate against MNEs. Thus, the design challenge is to
spell out how the rights of control (Grossman and Hart, 1986) can be
partitioned to reduce the marginal cost that these stakeholders bear
when pressing one more MNE to uphold environmental and social
commitments. This is because these kinds of stakeholders are contingent
and tangential (Rounds & Rounds, 2020), hence lacking bargaining
power to make MNEs comply should the conguration of property rights
remain unchanged.
The focus on MNEs above other kinds of rms is not arbitrary for
MNEs combine two important characteristics that make their impact on
ecosystems more acute, namely, a geographical outreach that intensies
the impact of international trade on ecosystems (Lenzen et al., 2012) and
the capability to cash in on natural resources and other stakeholders by
haggling and bargaining more aggressively, thus maximizing rent sur-
plus for shareholders (Baumol, 1967; Brickley et al., 2016; Chandler Jr.,
1999; Jensen and Meckling, 1998; Milgrom and Roberts, 1992; Min-
tzberg, 1979; Roberts, 2004; Williamson, 1981, 1985).
Comparing the mechanisms of Unilever’s B&J with an archetypical
MNE, this research has set off by contrast how B&J deviates from
business as usual to accommodate the constraints imposed by the
Anthropocene. B&J has thus built a governance structure that tackles
several obstacles that burden today’s MNEs, including the high marginal
cost that stakeholders bear when engaging with one more MNE across
the value chain; the conict of interests of making the wardens of the
mission accountable to shareholders; the meddling of MNE executives
with the organizational drivers of environmental and social commit-
ments; the appointment of key MNE executives behind stakeholders’
back; and a limited recourse to the courts for stakeholders. B&J’s answer
to these obstacles perhaps blaze a trail that can galvanize humanity into
overhauling MNEs to cope with the Anthropocene.
CRediT authorship contribution statement
Alejandro Agafonow: Writing – review & editing, Writing – original
draft, Visualization, Validation, Supervision, Software, Resources,
Project administration, Methodology, Investigation, Funding acquisi-
tion, Formal analysis, Data curation, Conceptualization. Marybel Perez:
Writing – review & editing, Writing – original draft, Visualization,
Validation, Supervision, Software, Resources, Project administration,
Methodology, Investigation, Funding acquisition, Formal analysis, Data
curation, Conceptualization.
Declaration of competing interest
This research does not include data collected from human subjects,
and it relies on evidence based on publicly available archival data.
Therefore, we believe there is no conict of interest to report, nor does it
require informed consent from the ethical review board of the authors’
institution.
Data availability
Data is archival and publicly available
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