The governance gap - Bridging the divide between global corporations and national regulations

Beyond national boundaries 

“We live in a world where the majority of people live in countries where their own governments are not protecting them,” Posner explained. This reality fundamentally challenges the assumption that national governments will safeguard citizens’ rights. The international system, designed with the expectation that governments would protect their people, is increasingly disconnected from reality – particularly in developing economies where weak regulations enable businesses to operate with minimal oversight. 

This gap creates a responsibility vacuum that multinational companies must address. While businesses drive economic development and poverty reduction – what Posner called “the greatest achievement in human rights over the last 50 years” – they must simultaneously recognize their obligations to communities where they operate. 

From corporate compliance to corporate leadership 

Posner pointed to a significant evolution in corporate thinking. “Companies would routinely say ‘we follow local law,’” he noted. “Now, you don't hear that or if you hear it, you know the company hasn’t really begun to think about these issues.” This shift reflects growing recognition that operating in a globalized economy means companies can’t outsource ethical responsibility along with production. 

The challenge spans industries – from manufacturing and mining to technology – where complex global supply chains involve significant human rights risks. Companies must take concrete steps to assess these risks and implement protections, rather than hiding behind jurisdictional boundaries. 

The transatlantic divide on regulation 

European governments have taken the lead in addressing governance gaps through regulatory frameworks holding businesses accountable for human rights impacts. Meanwhile, the American approach has moved in the opposite direction. “The divide between the US and the EU is greater than it’s been for decades,” Posner observed, noting the current US administration is focused on “hollowing out” government oversight. 

This regulatory divergence creates practical challenges for global companies. As panel participant Anahita Thoms, head of Baker McKenzie’s International Trade practice group in Germany, noted businesses already navigate complex conflicts of law: “For example, there are sanctions by the United States against Cuba forever and there is an anti-boycott law in place in the European Union.” These contradictions require sophisticated legal navigation, particularly for German companies with significant US market exposure and complex international supply chains. 

Creating long-term business value  

Posner challenged the short-term profit paradigm that dominates many corporate decisions. “I can make the business case that in 10 years you’re going to be a more sustainable better company, but I can’t do it in three months,” he stated. This represents a direct challenge to what Posner called “the bane of my existence” – namely, Milton Friedman’s doctrine that maximizing shareholder returns should be any company’s sole focus. 

The current emphasis on quarterly earnings drives companies away from investments in human rights protections that yield long-term benefits. “Businesses can be profitable. They can be successful, but they have to recognize there’s a cost to doing the right thing,” Posner emphasized. This cost represents an investment in sustainable value creation rather than a drain on profitability. 

When political pressure threatens corporate values – as with diversity and inclusion initiatives – Posner advised maintaining core practices even if terminology changes: “If you need to change the words on your website, I don’t care about that. I care about what you’re instructing your human resources department to do, what your managers are doing.” Companies like Microsoft, Apple, and Costco have determined that diverse workforces and equitable opportunities align with their business interests and continue these practices despite political headwinds. 

Grounding new frameworks in industry standards 

The path toward addressing governance gaps begins with due diligence – understanding supply chains and business relationships. As Thoms noted, many global companies were unprepared for disruptions like COVID-19 or Panama Canal blockages because they didn’t fully understand their own supply networks. “We have clients with 60,000 suppliers...it is difficult to do the supply chain mapping.” 

However, due diligence is only the beginning. Posner envisions a more comprehensive approach: “You have to have rules, you have to have standards, you have to have metrics, you have to evaluate performance.” These frameworks must be industry-specific, acknowledging the different challenges in manufacturing, mining, technology, and other sectors. 

A collective response to democratic challenges 

Beyond operational issues, Posner highlighted businesses’ responsibility to defend democratic institutions during periods of political instability. He distinguished between companies speaking out on general social issues versus fundamental threats to democracy: “If there are actions taking place that fundamentally undermine democracy and democratic protections, then you have an obligation to do it.” 

Rather than individual corporate voices, Posner advocates collective action through industry associations: “One of the things I'm trying to counsel companies is get together, figure out what does this mean for business.” He emphasized that businesses benefit from independent courts, rule of law, and democratic systems that create predictability and stability – making their defense not just a moral but a commercial imperative. 

Building new rules for the global economy 

The governance gap demands a collaborative response from businesses, governments, and civil society. Rather than waiting for perfect solutions, companies must start by understanding their supply chains, developing industry-specific standards, and measuring progress against concrete metrics. 

As global regulatory divergence increases, companies face more complex compliance challenges. Yet this environment also creates opportunity for leadership. By taking a longer view of success and recognizing that human rights protections represent an investment rather than merely a cost, businesses can help establish what Posner called “the rules of the road for a globalized 21st century economy.” 

“We’re moving in the direction of saying whether you’re in manufacturing or mining or you’re in the tech sector...there are standards that apply to our industry, and we’re going to have to figure out with our competitors how do we abide by those standards,” Posner concluded. “We're going to be judged by our performance: have we made workers’ lives better by what we're doing?” 

The event took place on April 2, 2025, at ESMT Berlin as part of the inaugural session of the "ESMT Insight Hour" series. The discussion was moderated by Markus Löning, an internationally renowned human rights expert and the founder of Löning – Human Rights & Responsible Business, a consultancy firm advising global brands on responsible business strategies.