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Oh, Behave!

Voluntary Codes Can Make Corporations Model Citizens

In 1851, Great Britain organized the first world's fair, which attracted some six million visitors to London. By comparing foreign and British products, the "Great Exhibition" celebrated British industrial prowess. It implicitly highlighted British democratic capitalism as a model for other nations to follow.

One hundred fifty years later, the British are again advancing a new vision of how democratic capitalism should evolve, this time by promoting global corporate citizenship. They seemed to understand early on that policymakers would need new tools and strategies to govern globalization. In 1990, Prince Charles formed the Prince of Wales Business Leaders Forum to promote responsible business practices in Britain and around the world. On March 7, 2000, Dr. Kim Howells became Britain's Minister for Corporate Social Responsibility. Dr. Howells is the first government minister in the world to have such a portfolio. He is working to convince business that corporate social responsibility "can create win-win situations for both business and communities."

However, policymakers, activists, and executives are finding it is not easy to create win-win situations for all the stakeholders in the global economy. Citizens have become more vocal in demanding that global business be held accountable for conduct that could undermine economic, social, or environmental progress. Yet there is no road map for how firms should operate around the world. Nor is there one set of norms for governing the global corporation.

Globalization puts governments in a bind. On the one hand, policymakers want to encourage further economic integration. All nations--rich and poor alike --need the investment, technology, employment, and cost efficiencies global firms bring to national economic growth. At the same time, most policymakers want to ensure that such corporations don't despoil the environment, produce defective products, or abuse workers. Yet while they must act to cushion citizens from the side effects of capitalism, such as environmental degradation, policymakers are less able to regulate at the national level because such regulation may make their nations less attractive to global investors. Thus, those activists and policymakers who want to promote global business citizenship must find a strategy that holds corporations accountable without thwarting the many benefits that such companies bring to their stakeholders. As a result, a growing number 6f policymakers have focused on promoting global corporate citizenship.

To many analysts, voluntary codes of conduct are an attractive alternative to direct regulation. They are formal statements of the values and business practices of a corporation. While they are non-binding, many companies expect their employees to be guided by such codes everywhere they operate. Some companies have had codes of conduct since the Nineteenth Century. But after the ITT scandal in Chile and the Nestle boycott (where activists boycotted the marketing of infant formula) in the 1970's, activists, executives, and policymakers began to develop codes as a tool to govern global economic interdependence.

The International Chamber of Commerce noted that as of May 2000 there were more than forty codes, existing or in preparation, designed to govern the activities of global corporations. As Chart 1 illustrates, some of these codes are sector specific; other codes were designed to apply to all companies operating across borders. The codes also differ as to authorship; some were developed by civil society activists; others by executives acting on their own initiative; and still others were devised by executives working in tandem with activists. With the prominent exception of the Global Reporting Initiative (which is a system of disclosure on environmental, social and economic aspects of corporate performance) and the SA 8000, which sets verifiable standards for certifying corporate performance in human and labor rights, most of these codes lack mechanisms for monitoring and accountability. Thus, many social and environmental activists will continue to insist on enforceable international agreements to govern the global commons and work conditions.
CHART 1 A Content Comparison of Various Initiatives, Codes of
Conduct, and Corporate Accountability

Name of Code Global Compact Global Sullivan
 Agreement Principles

Code United Nations Rev. Leon Sullivan,
Proponents major multinationals

Focus of Code Voluntary Aspirational
(Whom is it UN-sponsored global code for
addressing?) platform for companies of
 encouraging and all sizes,
 promoting good
 corporate practices.

CONTENT:
- Freedom of Respects right Respects voluntary
 Association to associate right to
 associate

- Right to Respects right Not addressed
 Bargain to bargain
 Collectively collectively

- Sustainable Not addressed Meets basic
 Living needs and
 Wage increases skills

- Human Rights ILO, UN Human Supports
 Rights Declara- Universal Human
 tions Rights
 Conventions

- Discrimination Non- Equal opportunity
 discrimination

- Health Safe & Safe & healthy
 & Safety healthy workplace
 in the workplace
 Workplace

- Vendor Not addressed Promotes
 Standards principles to all
 partners

- Child Labor Promotes No exploitation
 abolition of of children
 child labor;
 none under 15

- Environment Greater Promote
 environmental sustainable
 responsibility development
 and clean technology

- Corporate Not addressed Companies
 Governance/ will respect
 Ethics and obey
 local laws; promote
 fair competition,

ACCOUNTABILITY
Transparency: Not addressed Expected
Reporting
to -
Shareholders

Transparency: Yes. Must issue Expected
Reporting statement of
to - General support for GC.
Public

Transparency: Yes. Expected to Annual report to
Reporting post examples Rev. Sullivan
to - Code of improvements
Proponents made, engage
 in partnership
 with UN agencies,

Internal None N/A
Monitoring
System by
Corporation

External None N/A
Monitoring
By Auditors

Monitoring None None
by Code
Proponents

Name of Code OECD Guidelines for ILO Tripartite
 Multinational Declaration of
 Enterprises Principles Concerning
 Multinational
 Enterprises and
 Social Policy

Code OECD International Labor
Proponents Organization (ILO)

Focus of Code Recommendations Seeks the promotion
(Whom is it designed of social justice
addressing?) to establish and/ and internationally
 or clarify recognized human and
 shared expectations labor rights.
 for business
 conduct and
 sustainable
 development.

CONTENT:
- Freedom of Respects the right to Free association
 Association associate

- Right to Respects right Freedom to bargain
 Bargain to bargain collectively
 Collectively collectively

- Sustainable Not addressed Must provide
 Living for basic needs
 Wage

- Human Rights Respect for ILO Human Rights
 Human Rights at Work,
 UN Human rights
 Declarations

- Discrimination Non-discrimination Non-discrimination

- Health Adherence to local law Safe and healthy
 & Safety work place
 in the
 Workplace

- Vendor Encourage vendors' Not addressed
 Standards adherence to Guidelines

- Child Labor Contribute to Advocates the
 abolition of elimination of
 child labor child labor

- Environment Promote sustainable Not addressed
 development
 and responsible
 use of resources

- Corporate Supports anti-bribery/ Not addressed
 Governance/ corruption
 Ethics measures, free
 competition and trade,
 use of international
 dispute mechanisms, must
 obey local laws.

ACCOUNTABILITY
Transparency: Encouraged Individual companies
Reporting have no reporting
to - requirement.
Shareholders

Transparency: Reports should be made Yes. Country reports
Reporting available to the public. to ILO are publicly
to - General
Public

Transparency: No formal requirement Member countries
Reporting must submit an annual
to - Code report on measures
Proponents taken to satisfy
 ratified Conventions
 and Recommendations.

Internal Encouraged Encouraged
Monitoring
System by
Corporation

External None None
Monitoring
By Auditors

Monitoring None None
by Code
Proponents

Name of Code SA8000 Caux Principles

Code Social Accountability Caux Roundtable:
Proponents International (SAI) and Business Leaders-
 advisory group of COs, Europe, Japan & USA.
 NGOs and unions.

Focus of Code Establishes a uniform, Moral foundation for
(Whom is it auditable standard for business leaders,
addressing?) third party verification,
 Modeled on ISO 9000
 and ISO 14000.

CONTENT:
- Freedom of ILO standard Not addressed
 Association

- Right to ILO standard Not addressed
 Bargain
 Collectively

- Sustainable Basic needs, supports fair,
 Living discretionary income competitive
 Wage wage.

- Human Rights Respects ILO, Promote HR in countries
 UN Declarations of business

- Discrimination Non-discrimination Equal treatment
 guaranteed

- Health Safe & healthy Health & dignity
 & Safety work place respected
 in the
 Workplace

- Vendor Suppliers selected by Seeks suppliers who
 Standards adherence to standard respect dignity

- Child Labor None under 15; Not addressed
 provides school
 support

- Environment Not addressed Business Should protect
 /improve the
 environment

- Corporate Not addressed Promotes spirit of
 Governance/ trust, respect
 Ethics for rules/
 laws, free trade,
 avoidance
 of illicit
 operations, social
 justice,

ACCOUNTABILITY
Transparency: Yes Yes
Reporting
to -
Shareholders

Transparency: Yes No
Reporting
to - General
Public

Transparency: Reports tO SAI No established
Reporting mechanism
to - Code
Proponents

Internal Yes N/A
Monitoring
System by
Corporation

External Yes, by certified N/A
Monitoring auditors
By Auditors

Monitoring SAI accred organizations N/A
by Code which certify factories
Proponents

Name of Code "Benchmarks" Global Reporting
 Global Principles Initiative (GRI)

Code Religious CERES, UNEP, group of
Proponents shareholders: experts, COs, NGOs &
 ICCR, ECCR, TCCR(1) academics

Focus of Code Comprehensive Global guidelines
(Whom is it principles, criteria, for COs in issuing
addressing?) benchmarks to evaluate sustainability
 company performance. reports; primarily
 environmental.

CONTENT:
- Freedom of ILO Standard (GRI is not a
 Association code, but set
 of guidelines
 for reporting
 enviro'tal,
 social and economic
 sustainability)

- Right to ILO Standard N/A
 Bargain
 Collectively

- Sustainable Yes, and PPI studies N/A
 Living
 Wage

- Human Rights ILO, UN Human N/A
 Rights Declarations

- Discrimination Non-discrimination N/A

- Health Regular H & S N/A
 & Safety inspections
 in the
 Workplace

- Vendor Company responsible N/A
 Standards for supplier conditions
 & monitoring

- Child Labor Company, &/or N/A
 suppliers must not
 employ children

- Environment Implementation of Provide credible,
 environmentally consistent
 responsible policies information
 on environmental
 performance,
 Est. common
 metrics for
 measuring env.
 sustainability,

- Corporate Not directly addressed Not addressed
 Governance/
 Ethics

ACCOUNTABILITY
Transparency: Yes Yes
Reporting
to -
Shareholders

Transparency: Yes Yes
Reporting
to - General
Public

Transparency: Reports on company's Yes
Reporting compliance program
to - Code
Proponents

Internal Company compliance Encouraged
Monitoring process- training,
System by on-site inspections
Corporation

External Viewed as part of Encouraged
Monitoring company monitoring
By Auditors

Monitoring Principles used as Will establish
by Code accountability tools new institution
Proponents for GRI

Name of Code CERES Principles Worldwide Responsible
 Apparel Manufacturing
 (WRAP) Principles

Code Coalition for Environ- WRAP is an
Proponents mentally Responsible independent
 Economies (CERES) non-profit
 launched by the
 American Apparel
 Manufacturers
 Association.

Focus of Code Establish an ethic and Minimum standards
(Whom is it criteria by for production
addressing?) which investors facilities
 and others participating
 can assess in the Worldwide
 corporate Responsible
 environmental Apparel Production
 performance. Certification
 Program.

CONTENT:
- Freedom of Not addressed Respects the right
 Association to associate

- Right to Not addressed Not addressed
 Bargain
 Collectively

- Sustainable Not addressed Pays at least min.
 Living wage required
 Wage by law

- Human Rights Not addressed Not addressed

- Discrimination Not addressed Non-discrimination

- Health Not addressed Safe & healthy
 & Safety work place
 in the
 Workplace

- Vendor N/A Not addressed
 Standards

- Child Labor Not addressed None under 14

- Environment Commitment to Environmentally
 sustainable use of conscious
 resources, waste practices in all
 reduction, energy locations where
 conservation, product they operate.
 safety. and public disclosure.

- Corporate Board of Directors and Must comply
 Governance/ top management will be with local laws,
 Ethics fully informed and customs regulations,
 responsible for and will
 environmental policy, cooperate with
 local and international
 drug enforcement
 agencies.

ACCOUNTABILITY
Transparency: Yes Not addressed
Reporting
to -
Shareholders

Transparency: Yes: annual CERES Not addressed
Reporting report
to - General is public.
Public

Transparency: Endorsing companies will Reports to WRAP
Reporting complete an annual Certification
to - Code CERES reports. Board
Proponents

Internal Expected Factories perform
Monitoring self-assessment
System by
Corporation

External None By certified auditors
Monitoring
By Auditors

Monitoring None Certification
by Code Board certifies
Proponents factories for a
 negotiated term

Name of Code Fair Labor Charter US Business
 Agreement Principles
 for Human Rights of
 Workers in China

Code Fair Labor Association Global Exchange/
Proponents -- (FLA) government, Int'l Labor Rights
 companies, NGOs and Fund, Levi Strauss,
 universities Mattel, Reebok

Focus of Code Member COs and suppliers Promotes human
(Whom is it in the apparel rights &
addressing?) & footwear labor standards
 industry in China.
 monitored against
 code.

CONTENT:
- Freedom of Respects the right to "Undertakes
 Association associate to promote"

- Right to Respects right "Undertakes
 Bargain to bargain to promote"
 Collectively collectively

- Sustainable Pays legal Meets China's Wage
 Living minimum wage guidelines,
 Wage as a floor basic needs

- Human Rights Not directly Endorses
 addressed ILO Conventions & UN
 HR Covenants

- Discrimination Non-discrimination, no Nondiscrimination;
 sexual harassment prohibits
 sexual
 harrassment

- Health Safe & healthy work Safe production
 & Safety place methods
 in the
 Workplace

- Vendor Vendors must Not addressed
 Standards also comply

- Child Labor None under 15, Prohibited
 unless law under China's
 allows 14 labor laws

- Environment Not addressed Environmentally
 responsible
 methods
 of production

- Corporate Not addressed Transparency in labor
 Governance/ conditions,
 Ethics fair treatment
 of workers

ACCOUNTABILITY
Transparency: Not addressed Not addressed
Reporting
to -
Shareholders

Transparency: Yes Not addressed
Reporting
to - General
Public

Transparency: Annual report to FLA. Annual Report
Reporting Periodic report to HR for
to - Code to FLA by Workers Working Group
Proponents company's monitors

Internal Members required to Internal monitoring
Monitoring monitor suppliers expected of
System by companies
Corporation

External Auditing firms N/A
Monitoring certified by
By Auditors FLA

Monitoring FLA certifies Evaluate
by Code monitors and company reports
Proponents companies. and provide feedback

Name of Code Code of Labor Practices Ethical Trade
 Initiative Base Code

Code Clean Clothes Ethical Trade
Proponents Campaign, an Initiative (ETI),
 international network an alliance
 of trade unions, of companies,
 consumer organizations non-governmental
 and other organizations (NGOs),
 groups and trade union
 organizations

Focus of Code End labor abuses Fair labor practices
(Whom is it in the apparel
addressing?) industry; inform
 consumers on
 labor conditions.

CONTENT:
- Freedom of ILO standard Respects right of
 Association free association

- Right to ILO standard Respects right
 Bargain to bargain
 Collectively collectively

- Sustainable wage Supports
 Living living wage
 Wage

- Human Rights ILO standard UN/ILO standards

- Discrimination ILO standard Non-discrimination

- Health ILO standard Safe and healthy
 & Safety work place
 in the
 Workplace

- Vendor Vendors must comply Not addressed
 Standards with standards

- Child Labor ILO standard ILO standard

- Environment Not addressed Not addressed

- Corporate Not addressed Not addressed
 Governance/
 Ethics

ACCOUNTABILITY
Transparency: Not addressed Not addressed
Reporting
to -
Shareholders

Transparency: Yes. Informing Must publicly endorse
Reporting consumers is key the code and provide
to - General public information in
Public annual report

Transparency: Yes Not addressed
Reporting
to - Code
Proponents

Internal Expected Internal monitoring
Monitoring expected
System by of companies
Corporation

External Yes. Through a "forum" Yes. Annually.
Monitoring made up of members,
By Auditors NGOs, and trade unions.

Monitoring Yes. Also via Not addressed
by Code the "forum".
Proponents

Name of Code ICTI Code of Business Keidanren Charter
 Practices for Good
 Corporate Behavior

Code International Council of Keidanren (Japan
Proponents Toy Industries (ICTI) Federation
 of Economic
 Organizations

Focus of Code Fair labor practices Improved Corporate
(Whom is it in the citizenship
addressing?) toy industry

CONTENT:
- Freedom of Respects right of free Not addressed
 Association association

- Right to Not addressed Not addressed
 Bargain
 Collectively

- Sustainable Must be humane, comply High wages should
 Living with local law be a corporate
 Wage goal

- Human Rights Not addressed Respect for
 employee and human
 dignity

- Discrimination Non-discrimination Not addressed

- Health Safe and healthy work Safe and healthy
 & Safety place work place
 in the
 Workplace

- Vendor Contractors must comply Not addressed
 Standards with standards

- Child Labor Comply with local law; Not addressed
 otherwise none under 14

- Environment Not addressed Maintain
 environmental safety

- Corporate Not addressed Transparency,
 Governance/ communication,
 Ethics healthy
 and sound
 relations
 with government,
 respect for
 local law when
 operating abroad.
ACCOUNTABILITY
Transparency: Not addressed Yes
Reporting
to -
Shareholders

Transparency: Yes. Must publish Yes
Reporting annual
to - General report
Public

Transparency: Not specified Not required
Reporting
to - Code
Proponents

Internal Expected. Member Top management
Monitoring companies must also is expected
System by monitor their to ensure that
Corporation contractors, principles are
 met.

External None None
Monitoring
By Auditors

Monitoring Not specified None
by Code
Proponents

Name of Code ICC Charter Responsible Care[R]
 for Sustainable
 Development

Code International Chamber of American Chemistry
Proponents Commerce Council
 (ACC)

Focus of Code Provide global basis for Improve the
(Whom is it sounds environmental management of
addressing?) management. chemicals worldwide
 including
 production,
 distribution,
 pollution
 control, and
 disposal.

CONTENT:
- Freedom of Not addressed Not addressed
 Association

- Right to Not addressed Not addressed
 Bargain
 Collectively

- Sustainable Not addressed Not addressed
 Living
 Wage

- Human Rights Not addressed Not addressed

- Discrimination Net addressed Not addressed

- Health Not addressed Safe and
 & Safety healthy workplace
 in the
 Workplace

- Vendor Encourage adoption Work with
 Standards of principles contractors to
 among suppliers improve safety,
 reduce environmental
 impact

- Child Labor Not addressed Not addressed

- Environment Companies must recognize Continually improve
 environmental management health, safety,
 as a key concern; and environmental
 Promote performance;
 energy efficiency listen to public
 and sustainable concern about
 use of environmental
 resources in all and safety
 company functions; concerns; assist
 promote cleaner other members
 technologies, in achieving
 optimum environmental
 performance.

- Corporate Not addressed Not addressed
 Governance/
 Ethics

ACCOUNTABILITY
Transparency: Yes Yes
Reporting
to -
Shareholders

Transparency: Yes Yes
Reporting
to - General
Public

Transparency: No Yes. Annual report
Reporting to ACC. Note:
to - Code adherence to
Proponents Responsible Care is
 a membership
 obligation of ACC.

Internal Yes. Internal Yes
Monitoring periodic audits
System by
Corporation

External No No
Monitoring
By Auditors

Monitoring No No
by Code
Proponents

Name of Code Electronic Privacy
 Principles

Code Computer
Proponents Professionals for
 Social Responsibility

Focus of Code Guidelines to guarantee proper
(Whom is it respect for the privacy and
addressing?) dignity of employees,
 customers, and
 citizens.

CONTENT:
- Freedom of Responsibilities
 Association of employers:
 - must inform employees of
 company policy regarding
 privacy.
- Right to Resp. of service providers:
 Bargain - notify users of personal data
 Collectively collection
- Sustainable Resp. of mailing list and database
 Living operators:
 Wage - Only necessary info may be
- Human Rights collected
- Discrimination - User must be notified
- Health Resp. of software developers:
 & Safety - Network software should
 in the protect privacy
 Workplace Individuals:
- Vendor - Must take measures to protect
 Standards their privacy
- Child Labor Governments:
 - No restriction on encryption
 - Must not hinder privacy pro-
 tection via law enforcement

- Environment Not addressed

- Corporate Transparency in company and
 Governance/ service provider privacy policies.
 Ethics

ACCOUNTABILITY
Transparency: There are no reporting
Reporting requirements.
to -
Shareholders

Transparency:
Reporting
to - General
Public

Transparency:
Reporting
to - Code
Proponents

Internal None
Monitoring
System by
Corporation

External None
Monitoring
By Auditors

Monitoring None

by Code
Proponents

(1) ICCR - The Interfaith on Corporate Responsibility
(USA); ECCR - Ecumenical Council for Corporate Responsibility
(UK); TCCR - Taskforce on the Churches and Corporate
Responsibility (Canada)

Source: Global Accountability Program, ICCR, January 2000.
Expanded by Honeywell November 2000.


Many governments have tried to find a middle way, between directly regulating their multinationals and promoting voluntary adherence to codes of conduct. Some have designed their own codes; others have combined voluntary and governmental initiatives. For example, on December 21, 2000, the U.S. State Department and British Foreign Office in tandem with multinationals, unions, and human rights organizations announced yet another code, designed to prevent human rights abuses by governments in developing nations where these companies operate. Still others have tried to foster multinational cooperation. The Danish government established an international institution, the Copenhagen Center, to promote corporate social responsibility partnerships.

As Chart 2 shows, international organizations have taken the lead in promoting a middle way. In 1977, the International Labor Organization adopted a code of conduct for multinational enterprises, the Tripartite Declaration. This voluntary code addresses social justice, human and labor rights, but it does not address the environment, corporate governance or ethics issues. Consequently, many groups active in social reform believe its scope is too limited to serve as a universal code of conduct.
CHART 2 Voluntary Global Codes that Involve Government at the
National and/or International Level

Name UN Global Compact (est. 1999)

Scope Based on long accepted principles of
 international law that were signed by UN, ILO
 member nations. Covers labor rights, human
 rights, and the environment. The UN is
 the largest and most comprehensive international
 organization, and has a history of
 trying to promote both foreign investment
 and responsible corporate citizenship.

Who Signs Corporations

Who Corporations, but can partner with other
Implements groups with reporting or monitoring
 expertise.

Description of No formal role, UN tries to encourage.
Government's
Role

Mode of Ac- No formal mode of accountability, but can
countability be linked to SA 8000. However, at any
 point, people can go public alleging a viola-
 tion. Each year, corporations must report in
 writing to the UN on how they put one or
 several of the principles into action.

Corporate View Mixed. Sponsors include individual
 corporations and organizations such as
 Business for Social Responsibility, Confer-
 ence Board, International Chamber of
 Commerce, World Business Council on
 Sustainable Development.

Who dissemi- Corporations play the key role here.
nates to employ-
ees of corpora-
tion or citizens

NCO Supported by Amnesty Intl; WRI; World-
supporters Wide Fund for Nature; Human Rights
 Watch.

NCO view Less enthusiastic as no modes of account-
 ability.

Name ILO Guidelines on Multinational
 Enterprises and Social Policy (est. 1977)

Scope These Guidelines address labor rights,
 employment, and training. They are based
 on ILO Covenants, which are widely ac-
 cepted and have the force of international
 law. The Guidelines however, are recom-
 mendations.

Who Signs Governments sign. Governments promote
 to their corporations, as does ILO. ILO
 provides technical assistance, surveys
 governments regarding how firms imple-
 ment these guidelines.

Who Corporations in tandem with workers.
Implements

Description of At national level, government tries to en-
Government's courage. However, although the Declara-
Role tion is not legally enforceable, there are
 established procedures for interpretation
 of its provisions in cases of disputes aris-
 ing over its application. The ILO thus, may
 play a mediative role.

Mode of Ac- Governments and in certain circum-
countability stances employers or workers' organiza-
 tions may ask ILO for an interpretation of
 the provisions of the Declaration in the
 event of disputes over their operation.

Corporate View ?

Who dissemi- ?
nates to employ-
ees of corpora-
tion or citizens

NCO Supported by NGOs and unions.
supporters

NCO view ?

Name OECD Guidelines (est.1976)

Scope The most comprehensive--covers human
 rights, labor standards, environment, corrup-
 tion; and information disclosure. In its most
 recent revision, corporations were asked to try
 to hold their suppliers and subcontractors
 accountable.

Who Signs Governmental agreement--currently 33
 nations, including 4 non-OECD members:
 Slovakia, Argentina, Brazil, and Chile.

Who Governments are responsible for disseminating
Implements to all national businesses. Businesses
 implement, but as with UN Compact
 and Global Sullivan, no
 legal sanctions for violations are attached.

Description of Government disseminates material, and encour-
Government's ages compliance. No monitoring role. However,
Role if a violation is alleged, a national contact
 point has authority to investigate
 and if a violation is found, national
 contact point tries to mediate a
 settlement between the parties. Thus,
 government also plays a Mediative ROLE.

Mode of Ac- No formal mode of accountability. However, if
countability national contact point can not mediate a solu-
 tion, claimant can go public alleging
 violation of guidelines.

Corporate View Mixed, although corporations played a role in
 negotiating Guidelines. Many corporations think
 it will be difficult for business to take
 responsibility for the practices
 of their suppliers and subcontractors,
 given the comprehensive nature
 of the Guidelines.

Who dissemi- Governments have responsibility to disseminate
nates to employ- to all of its corporations; corporations have
ees of corpora- responsibility to implement.
tion or citizens

NCO Negotiations involved NGOs such as Amnesty
supporters International, Oxfam, and Friends of the Earth.
 Many were also impressed that the OECD
 posted negotiating drafts on the web.

NCO view Since latest revision, proof of utility
 lies in implementation by governments
 at the national level.

Susan Ariel Aaronson. Senior Fellow, NPA


The United Nations has also tried to play a constructive role in encouraging global corporate citizenship. In January 1999, United Nations Secretary General Kofi Annan challenged business leaders to enact the Global Compact--nine core principles on labor standards, human rights, and environmental protection. Many prominent companies responded, including Procter and Gamble and Daimler Chrysler. But the Compact has no mechanisms for accountability. Companies are simply asked to demonstrate their adherence by taking corporate action and to publicize this action through reports posted on the UN Website and in their annual reports. Governments at the national level play no role in promoting the Compact. Ironically, because of this lack of accountability, many social activists, as well as corporate officials denounce the Global Compact as "pretty words."

In 1976, the OECD--long considered a club and a think-tank for the industrialized nations of the world--developed the OECD Guidelines for Multinational Enterprises, which address the environment, labor standards, human rights, corruption, and competition policy. They are the only global strategy built on the recognition that foreign investment is a crucial tool for economic development in many countries.

The Guidelines have been revised several times since the 1970's. In the most recent revision, the OECD invited social activists to work with labor and business groups, as well as policymakers in the redrafting. In this way, the OECD hoped to build a broad constituency for the Guidelines. But while activist groups insist that the Guidelines must change corporate behavior, business groups insist that the Guidelines are voluntary.

However, in contrast with every other code, the Guidelines set up a governmental process to encourage positive business behavior. The thirty-three signatory governments, which include the United States, Mexico, Korea, and Europe as well as non-OECD members Argentina, Brazil, and Chile, have promised to put in place a governmental mechanism, called a National Contact Point, to investigate allegations of violations of the Guidelines. If the National Contact Point finds a complaint to be legitimate, it would then offer its good offices to try to resolve the issue. However, if the issue could not be mediated, the National Contact Point will make a public statement about the complaint. The negative publicity that such a statement might bring could press a corporation into changing its behavior.

Business groups are divided about the potential of these codes, whether they involve government or not. Some worry that by agreeing to adhere to such codes, business could be held liable in domestic courts. Executives also worry that under the OECD Guidelines, they will be held responsible for the actions of their suppliers or subcontractors.

There is no one code that can fit all sectors, all corporations, or all the issues that make globalization controversial. Yet the diversity of codes and their voluntary nature send misleading and confusing signals to market actors. Governments can help provide guidance to corporate officials on how to respond to the plethora of codes on the environment, labor standards, etc. In this way, governments may help promote a rationalization among the codes, many of which are redundant. Moreover, by promoting business adherence to such codes, governments can help ensure that responsible corporate actors are not disadvantaged in global markets.

To encourage adherence to codes, governments might provide incentives and, when necessary, disincentives. For example, the U.S. and British government both give widely publicized awards for responsible global business. Many policymakers recognize that they may also need to use disincentives to encourage compliance with voluntary codes. Some countries have proposed that the OECD Guidelines should be linked to government procurement. Only those companies that adhere to such voluntary Guidelines can bid on governmental contracts. This kind of action would be a strong incentive to adherence, should it be approved. But some executives are concerned that this strategy would compromise the voluntary nature of the Guidelines.

Nevertheless, a growing number of governments, such as Canada, Denmark, Australia, the Netherlands, and Great Britain are developing tools that combine voluntary adherence to codes with government incentives and disincentives for compliance. Governments, however, can only go so far short of regulation. Ultimately, it is corporate behavior that will decide whether globalization can be managed through self-policing or the heavy hand of government.

Susan Ariel Aaronson is Senior Fellow at the National Policy Association and the author of Taking Trade to the Streets: The Lost History of Public Efforts to Shape Globalization (University of Michigan Press, 2001). NPA has grants from the Ford and Boeckler foundations to examine how governments can encourage global corporate citizenship.

See www.multinationalguidelines.org/OECD.
COPYRIGHT 2001 International Economy Publications, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
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Title Annotation:voluntary corporate codes of conduct
Author:AARONSON, SUSAN ARIEL
Publication:The International Economy
Geographic Code:4EUUK
Date:Mar 1, 2001
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Better Boards: The Equity Answer.
Copps on Patrol. (Cleaning up TV).
Corporate self-governance remains an imperative.

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