Explain the global governance gap in relation to multinational companies including its causes as discussed by Scherer/Palazzo

The global governance gap in relation to multinational companies, as discussed by Scherer and Palazzo, refers to the lack of an effective global system to regulate the activities of multinational corporations. This gap exists due to several reasons:

1. Jurisdictional Limitations: National governments have jurisdiction only within their territorial boundaries. This means they can regulate the activities of multinational corporations only to a limited extent.

2. Inadequate International Laws: International laws and regulations are not sufficient to govern the complex operations of multinational corporations. These laws are often weak and lack enforcement mechanisms.

3. Power Imbalance: Multinational corporations have significant economic power, often exceeding that of the countries in which they operate. This power imbalance makes it difficult for countries to enforce regulations.

4. Globalization: The process of globalization has led to an increase in cross-border activities of corporations. This has further complicated the regulation of their activities.

5. Lack of Transparency: Multinational corporations often lack transparency in their operations. This makes it difficult for regulators to monitor their activities and enforce regulations.

Scherer and Palazzo argue that this governance gap has led to a legitimacy crisis for multinational corporations. They suggest that corporations should take on a greater role in filling this gap, by adopting more socially responsible practices and engaging in global governance initiatives.