Business and Human Rights in a Time of Change (Christopher L. Avery, Nov. 1999)
2. Society calls on business to act
2.1 Silence and inaction: No longer tenable options
Royal Dutch/Shell has come under fire for its environmental and human rights record in Nigeria over the years, both for what it has done and for what it has failed to do.[99] Shell's worldwide reputation is still paying the price. Shell sought to distance itself from events in Nigeria when Ken Saro-Wiwa and his Ogoni colleagues (who had campaigned against environmental damage by oil companies and for increased autonomy for the Ogoni ethnic group) were arrested in 1994, detained illegally for at least eight months, held incommunicado in military custody under harsh conditions, tried in 1995 (before a special court established by the military government) under procedures that clearly violated international fair trial standards, convicted of murder, and executed.[100] Shell says of the case: "We did not seek to influence his trial, but after the verdict the Chairman of the Group's Committee of Managing Directors sent a letter to the Nigerian head of state urging him to grant clemency for all those sentenced."[101]
One of Shell's general managers reportedly made the following statement after the execution:
I am afraid I cannot comment on the issue of the Ogoni 9, the tribunal and the hanging. This country has certain rules and regulations on how trials can take place. Those are the rules of Nigeria. Nigeria makes its rules and it is not for private companies like us [Shell] to comment on such processes in the country.[102]
That statement ignores the most basic concepts of human rights: governments are prohibited from violating internationally-recognised fundamental human rights, and human rights violations are a matter of international concern because human rights transcend national boundaries. While the statement came from Shell, the philosophy of "human rights is not a matter for business to get involved with" has been shared by too many companies. Indeed most other multinational companies operating in Nigeria also remained silent about human rights violations.
Sir Geoffrey Chandler says the days when companies could remain silent about human rights issues are over: "Silence or inaction will be seen to provide comfort to oppression and may be adjudged complicity….Silence is not neutrality. To do nothing is not an option."[103]
John Elkington agrees:
The worst blind-spot today's business leaders suffer from in this area is the belief that if they can just manage to keep their heads down, they can avoid the sorts of challenges that have buffeted companies like Shell and Texaco. Instead, the evidence increasingly suggests that even companies that normally operate well outside the spotlight - and therefore often have little or no experience of dealing with the new stakeholders and their complex, interlocking agendas - will find themselves inexorably drawn into the wrenching controversies….[104]
Louisa Wah, writing in the American Management Association International's Management Review in 1998, advised companies that when it comes to human rights issues, "simply avoiding bad press or side-stepping the issue is not enough…."[105]
The Economist noted in December 1998:
Today multinationals are under pressure as never before to justify their dealings with abusive regimes and their treatment of employees in developing countries. Firms used to brush off criticism, saying that they had no control over third-world suppliers, and that politics was none of their business anyway. This is no longer good enough.[106]
2.2 A more sceptical and demanding public
Companies are realising that their credibility with the public has been strained in recent years, and that in a dispute with a human rights organisation or an environmental organisation they cannot depend on public opinion to give them the benefit of the doubt…in fact, just the reverse.
Robert Reich, former U.S. Secretary of Labor, recently identified some of the reasons that companies are so concerned about their public image:
Most companies are concerned about their public images because they sell their products directly or indirectly to the public; indeed, companies spend billions of dollars each year burnishing their public images. Anything that tarnishes that image may result in lost sales, and also may make it more difficult for the company to receive permits, subsidies, or other discretionary benefits from government.[107]
In the aftermath of the Brent Spar affair (the 1995 controversy surrounding Shell's proposed deep-sea disposal of an oil installation), a MORI-conducted poll reflecting public opinion in seven West European countries showed the following levels of confidence in statements about the environment: 27% confidence in statements by the oil industry (in Spain and Germany the level was closer to 10%), 29% confidence in government statements, 63% confidence in statements by environmental groups, and 65% confidence in statements by academics.[108]
Royal Dutch/Shell, in its 1998 social report, noted:
Multinationals have been criticised as being overly concerned with profit and failing to take their broader responsibilities seriously: to defend human rights, to protect the environment, to be good corporate citizens. [This debate] is taking place in a fast-changing world, characterised by global communications and diminishing respect for established authority….[P]eople are withdrawing their trust in traditional institutions unless it can be demonstrated that such faith is warranted -- what has been called a move from a "trust me" to a "show me" world.[109]
Some segments of the public are extremely sceptical about the entire notion of the business community getting serious about human rights. They see companies as part of the human rights problem internationally, rather than part of the solution. Some of these sceptics have first-hand knowledge of human rights abuses in which a company was directly or indirectly involved, and they have great difficulty trusting the intentions of that company or the private sector in general.
Many others see business capable of both harm and good in the human rights sphere. Twenty years ago most of these people probably would have given business the benefit of the doubt in a human rights controversy. But that is no longer the case. In the past two decades they have been disappointed too many times by disclosures about the human rights record of particular companies. While they welcome news that a company has adopted a human rights policy, they now withhold judgement to see whether the company follows through with action, and whether the results have been verified by an organisation truly independent of the company and without any motive to sugar-coat the findings. Too often they have seen companies only address human rights issues when forced to do so by public exposure. They have seen too many companies respond with approaches that are superficial, minimalist, and short-term, looking more like a slick public relations exercise than a genuine commitment to improving the human rights situation. They have heard too many companies say they believe in constructive engagement and "quiet diplomacy" on human rights issues, in situations where there is little or no evidence that such engagement or diplomacy is actually taking place. They have heard too many companies say they cannot act alone to promote human rights because that might disadvantage them vis-a-vis their competitors. These companies often suggest that action on human rights be taken collectively through an industry association or chamber of commerce, but such organisations too often adopt a lowest-common-denominator approach to human rights issues, doing as much in the human rights sphere as their least courageous members (i.e., they often do nothing at all).
Peter Sutherland, former Director-General of the World Trade Organization, says: "Business must re-establish trust with society. That will be done by example, not just talking…..It is right that business is scrutinised and that good business is rewarded with praise while bad business is punished with exposure."[110]
Many companies have underestimated the ability of the public to see through company initiatives that are less than thorough in addressing human rights issues. The public and media no longer accept assurances from business about environmental and social issues -- they want factual answers and verifiable commitments.
2.3 The informed consumer
In a 1993 survey of over 1500 households in the U.S., 76.8% of respondents said that a company's community relations activities make a difference in whether or not they do business with it. 74% of respondents said they deliberately chose not to buy products from companies they thought had failed to act in the best interests of the community.[111]
In a 1995 survey in the U.S., 78% of respondents said they would prefer to shop at retail stores that had committed themselves to ending apparel worker abuse; 84% said they would pay an extra $1 on a $20 item to ensure that the garment had been made in a worker-friendly environment.[112]
A garment industry consultant writing in the Wall Street Journal acknowledged that consumers are increasingly taking human rights issues into account:
What's changed is that for the first time human rights concerns could become a major marketing issue and tool for manufacturers. In an era when companies must work harder than ever to sell their products, anything that turns the consumer off has to be avoided at all costs….I am not speaking as a do-gooder….I am a garment industry consultant who has spent 30 years in Asia showing companies how to produce and buy better garments for less money. And I know for a fact that no social adjustments take place in the world of business unless the cost-accountants prove that change is necessary. But I am here to tell you that the tapping noise you hear on your door is your CPA [certified public accountant] coming to announce that something is indeed happening out there, and that if you want to survive, now would be a good time to develop a social conscience….
[T]ake Burma, where orders for exported garments produced by Burmese factories have fallen by two-thirds over the past year. Companies like Eddie Bauer, Liz Claiborne and Federated Department Stores, which in the past found some of their best bargains in Burma, are now discovering that in today's socially conscious marketplace these products are less competitive. You may ask, "What does Aung San Suu Kyi have to do with fashion?" The latest answer is, "A lot."[113]
In the U.S., recent grassroots consumer campaigns targeting companies doing business in Burma have been cited as important factors in some of those companies withdrawing from Burma. PepsiCo announced its complete withdrawal from Burma after Harvard University turned down Pepsi for a $1 million contract and Stanford University decided not to allow Taco Bell (a PepsiCo restaurant) on campus after 2000 students petitioned the university to sever ties with all companies doing business in Burma.[114]
A 1995 survey of 30,000 people in the U.K. by the Gallup Organization and Co-operative Bank showed that 60% were more worried about shopping ethics than they were five years before. 60% said they would pay up to 7% more for goods meeting ethical standards.[115] In the early 1990s the Co-operative Bank launched an advertising campaign in the U.K. drawing attention to its policy of not investing in countries with a very poor human rights record. This campaign reportedly was instrumental in bringing in tens of thousands of customers who opened more than 1000 accounts per week.[116]
A 1995 study carried out on behalf of a Canadian labour union indicated that over 92% of Canadians would choose to buy products made ethically if given a choice between an "ethical" and a "regular" product. 89% said they would pay more for clothing produced under ethical conditions and over two-thirds would be more likely to shop in a store selling ethical products.[117]
2.4 Intergovernmental organisations
International human rights instruments make clear that while human rights accountability is focused on governments, individuals and social institutions (including companies) have responsibilities to promote respect for human rights. The Universal Declaration of Human Rights, adopted by the U.N. General Assembly in 1948, states in its preamble that "every individual and every organ of society, keeping this Declaration constantly in mind, shall strive by teaching and education to promote respect for these rights and freedoms and by progressive measures, national and international, to secure their universal and effective recognition and observance…."[118] The International Covenant on Civil and Political Rights, and the International Covenant on Economic, Social and Cultural Rights, adopted by the U.N. General Assembly in 1966, both include the following statement in their preambles: "[T]he individual…is under a responsibility to strive for the promotion and observance of the rights recognized in the present Covenant."[119]
U.N. Secretary-General Kofi Annan, speaking at the Davos World Economic Forum in January 1999, called on multinational companies to promote universal values in their dealings, and to "uphold human rights and decent labour and environmental standards directly, by your own conduct of your own business."[120] He has proposed a "Global Compact," challenging business leaders to abide by nine principles derived from internationally-recognised standards:
Human rights
1. Business should support and respect the protection of internationally proclaimed human rights within their sphere of influence; and
2. make sure they are not complicit in human rights abuses.
Labour
3. Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;
4. the elimination of all forms of forced and compulsory labour;
5. the effective abolition of child labour; and
6. eliminate discrimination in respect of employment and occupation.
Environment
7. Businesses should support a precautionary approach to environmental challenges;
8. undertake initiatives to promote greater environmental responsibility; and
9. encourage the development and diffusion of environmentally friendly technologies.[121]
The U.N. fact sheet explaining the Global Compact with business notes: "Although governments have primary responsibility for implementing internationally accepted values, corporations acting on their own can do a great deal to actualize these principles within their spheres of influence."[122] The U.N. says that supporting the nine principles of the Global Compact is the right thing to do and is also good for business: "A clear demonstration that basic and broadly popular social values are being advanced as part and parcel of the globalization process will help ensure that markets remain open, and will truly bring the people of the world closer together."[123] On 5 July 1999 U.N. Secretary-General Annan and the President of the International Chamber of Commerce (and other business leaders representing the ICC) issued a joint statement stating that "business leaders welcomed the United Nations Secretary-General's call for a Global Compact between the United Nations and the private sector to promote human rights, improve labour conditions and protect the environment."[124]
Mary Robinson, U.N. High Commissioner for Human Rights, in June 1999 delivered a speech on the subject of business and human rights in which she noted that "civil society is scrutinizing corporate conduct much as it has watched the behavior of Governments in the past." She welcomed the fact that a number of business people were recognising "that the long term viability of their corporate activities and the future protection of shareholder value will be enhanced if the countries they are involved with respect human rights." She added: "The rights in the Universal Declaration [of Human Rights] contribute, both directly and indirectly, to the social and political conditions conducive to business." She encouraged companies to integrate human rights concerns into every aspect of their business in a meaningful way: "Human rights are not an 'add on', they should be central to companies' approach to investment and doing business." Finally, the High Commissioner said that her office and other U.N. agencies would be happy "to assist the private sector in incorporating the agreed values and principles into mission statements and corporate practices."[125]
When the U.N. General Assembly adopted the Declaration on the Right to Development in 1986, it made clear that the responsibility to promote development does not apply only to governments:
All human beings have a responsibility for development, individually and collectively, taking into account the need for full respect for their human rights and fundamental freedoms as well as their duties to the community, which alone can ensure the free and complete fulfilment of the human being, and they should therefore promote and protect an appropriate political, social and economic order for development.[126]
The U.N. Declaration on the Right to Development says that development should promote "a new international economic order based on sovereign equality, interdependence, mutual interest and cooperation among all States as well as to encourage the observance and realization of human rights."[127]
In 1999 the U.N. Commission on Human Rights (Commission) requested the U.N. Sub-Commission on Prevention of Discrimination and Protection of Minorities (Sub-Commission) to undertake a study on the issue of globalisation and its impact on the full enjoyment of human rights.[128] The Sub-Commission has appointed one of its members to prepare this study, which will be presented to the Commission at its meeting in 2001.[129]
In 1998 the Sub-Commission decided to form a working group for a three-year period to examine the activities of transnational corporations from a human rights perspective.[130] At that working group's first session in August 1999, individual Sub-Commission members volunteered to draft:
i) a code of conduct for transnational corporations based on human rights standards;
ii) a proposal for a mechanism for the implementation of a code of conduct;
iii) a compilation and analysis of relevant human rights standards; and
iv) a paper on the identification and examination of the effects of the activities of transnational corporations on the enjoyment of human rights.[131]
The Sub-Commission plans to hold during its year 2000 session a three-day "Forum on Economic, Social and Cultural Rights," to analyse violations of economic, social and cultural rights and their relation to globalisation.[132]
At the Sub-Commission's 1999 session it adopted a resolution requesting "all Governments and economic policy forums to take international human rights obligations and principles fully into account in international policy formulation."[133]
At the 1995 U.N. World Summit for Social Development (Copenhagen), governments reached consensus on the principle that respect for human rights is necessary for sustainable development.[134] The World Summit agreed that the private sector should be one of the actors involved in taking steps to address social development issues,[135] and stated:
Making economic growth and the interaction of market forces more conducive to social development requires the following actions: …Encouraging transnational and national corporations to operate in a framework of respect for the environment while complying with national laws and legislation, and in accordance with international agreements and conventions, and with proper consideration for the social and cultural impact of their activities….[136]
The 1977 International Labour Organization (ILO) "Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy" states in its introduction that multinational corporations can "make an important contribution to the promotion of economic and social welfare" and "to the enjoyment of basic human rights."[137] But it notes that they can also abuse their power by operating in a way that conflicts with the workers' and country's best interests.[138] It says the aim of the Tripartite Declaration is "to encourage the positive contribution which multinational enterprises can make to economic and social progress and to minimize and resolve the difficulties to which their various operations may give rise."[139] It also says all the parties concerned by the declaration (governments, employers and workers) "should respect the Universal Declaration of Human Rights and the corresponding International Covenants adopted by the General Assembly of the United Nations as well as the Constitution of the International Labour Organization and its principles according to which freedom of expression and association are essential to sustained progress."[140]
The ILO, through its 1998 "ILO Declaration on fundamental principles and rights at work" and its public statements, has been emphasising to governments and the private sector that "in a situation of growing economic interdependence" it is important to promote worldwide respect for fundamental principles such as freedom of association, the right to collective bargaining, the elimination of forced labour, the abolition of child labour, and the elimination of discrimination in employment.[141]
The "OECD Guidelines for Multinational Enterprises" were adopted in 1976 and last revised in 1991 when a section on environmental protection was added; the entire set of guidelines is currently under review. The introduction to the OECD Guidelines states: "The common aim of Member countries is to encourage the positive contributions which multinational enterprises can make to economic and social progress and to minimise and resolve the difficulties to which their various operations may give rise….with a view to improving the welfare and living standards of all people."[142] The Guidelines include a section on "Employment and industrial relations," and say that multinational enterprises should, inter alia:
[G]ive due consideration to those countries' [the countries in which they operate] aims and priorities with regard to economic and social progress, including industrial and regional development, the protection of the environment and consumer interests, the creation of employment opportunities, the promotion of innovation and the transfer of technology;…
Favour close co-operation with the local community and business interests;…[143]
A May 1995 OECD Development Assistance Committee policy statement ("Development Partnerships in the New Global Context") says that a key element to the success of sustainable development is: "Good governance and public management, democratic accountability, the protection of human rights and the rule of law."[144] The statement also says: "Development and greater interdependence require high levels of domestic effort, high standards of accountability, and a strong civil society….More widespread and sustainable progress now depends on building strong capacities to achieve good governance, reduce poverty, and protect the environment."[145]
A May 1996 statement by the OECD Development Assistance Committee ("Shaping the 21st Century: The Contribution of Development Co-operation") says that governments have a responsibility to "open up wide scope for effective development contributions from throughout civil society."[146] The statement notes:
Partnerships are becoming more complex. Earlier aid efforts involved working almost always with central governments. Today, we are working with many more partners to meet demands for greater efficiency, respond to more pluralistic and decentralised political systems, and recognise the importance of a dynamic private sector, local ownership and participation by civil society. Our understanding of development and development co-operation has undergone fundamental change….We now see a much broader range of aims for a more people-centred, participatory and sustainable development process.[147]
The European Parliament in January 1999 passed a resolution, "Code of conduct for European enterprises operating in developing countries," that, inter alia:
i) encourages company codes of conduct "with effective and independent monitoring and verification, and stakeholder participation in the development, implementation and monitoring of these codes";
ii) recommends that a model Code of Conduct for European businesses should be adopted, guaranteeing minimum internationally-recognised standards on the environment, health and safety conditions in the workplace, and respect for basic human rights; and
iii) requests the European Commission to establish an independent body of experts to monitor and verify implementation of the Code of Conduct, identify best practices, and receive complaints about corporate conduct from interested parties.[148]
Richard Howitt, the MEP (Member of European Parliament) from the U.K. who introduced the resolution, said:
What I want to emphasise is that our proposal is not to draw up a different set of standards just for Europe. Our purpose is to adopt a series of minimum applicable international standards which have been agreed already within bodies such as the United Nations and the International Labour Organisation, and to use the European Union to promote their implementation and to monitor those standards….[M]any people from developing countries, as well as trade unionists, have said that when new codes of business practice are drawn up, they often involve dilution of standards which have been negotiated over many years within international institutions. This proposal is intended to avoid such dilution.[149]
2.5 Governments
In the U.K., both the Foreign & Commonwealth Office (FCO) and the Department for International Development (DFID) have established units to promote and support socially responsible business. Alastair Newton, Head of the FCO's new Global Citizenship Unit, commented: "Corporate Social Responsibility is now evolving into what promises to be one of the big issues of the next decade."[150] The FCO says that through its network of embassies it can help British companies uphold high standards of corporate citizenship. DFID set up a Business Partnership Unit in 1997 to coordinate its approach of working in partnership with the private sector. DFID considers that companies can play an important role in poverty eradication, and it tries to promote the developmental aspects of business in developing countries. DFID routinely consults the private sector about development issues and when it develops its Country Strategy Papers.[151] DFID's recently-published Partnerships with Business says:
The "triple-bottom line" acknowledges that sustainable competitive advantage now requires companies to be economically viable, environmentally sound and socially responsible. This makes strong business sense: for example, decent and equitable employment conditions make a more committed and productive workforce; social investment in host communities widens a business's understanding of the local situation and market conditions and, in the information age, customers are demanding it.[152]
The Government of the Netherlands recently emphasised (in an explanatory memorandum to the 1998 budget of the Netherlands Ministry of Foreign Affairs) that it is important for multinational corporations to remain alert to the human rights situation in countries where they operate and to ensure that their activities do not contribute to a continuation of human rights violations. The memorandum also says corporations should contribute to the creation of an enabling environment for the realisation of human rights.[153]
In the U.S., the White House announced in May 1995 the "Model Business Principles," a one-page voluntary code of human rights principles for U.S. companies operating abroad.[154] This document refers to principles including "provision of a safe and healthy workplace," "fair employment practices, including avoidance of child and forced labour and avoidance of discrimination," "responsible environmental protection," and freedom of expression. Companies were encouraged to include these principles in their voluntary codes of conduct. The "Model Business Principles" have been criticised by human rights advocates for being too vague, incomplete in terms of the substantive rights included, and lacking a framework for effective implementation.[155] It was reported in 1997 that relatively little had been done since 1995 by the U.S. Government to promote these principles.[156]
In 1996 President Clinton appointed the Apparel Industry Partnership (see section 3.4 of this report).
The Canadian Government convened a meeting in May 1999 of Canadian retailers, manufacturers and NGOs to discuss how to ensure that consumer products sold in Canada are made under humane working conditions. The participants agreed to form a joint working group to develop a Canadian basic code of labour practice.[157]
South African President Nelson Mandela has called on the business community to contribute to social development:
There are many ways in which the special skills and know-how of the business community can help the government achieve its development objectives;[158]
Development can no longer be regarded as the responsibility of government alone. It requires a partnership of government with its social partners: private sector, labour and non-governmental organisations.[159]
2.6 Non-governmental organisations (NGOs)
Amnesty International's Human Rights Principles for Companies (and accompanying Introductory Checklist)[160] contain standards on the following subjects:
i) Personnel practices and policies;
ii) Security arrangements;
iii) Responsibility for promoting and upholding human rights standards;
iv) Implementation and monitoring;
v) Company policy on human rights;
vi) Community engagement;
vii) Prohibition of forced labour, bonded child labour, coerced prison labour;
viii) Health and safety;
ix) Freedom of association and the right to collective bargaining; and
x) Fair working conditions.
Amnesty International, in spite of having a more limited mandate than most other human rights organisations, is increasingly addressing business issues in its country reports. It has always addressed human rights violations directed against workers and trade unionists in its reports, and continues to do so. There is increasing attention to identifying links between companies and human rights concerns. For example, in late 1996 Amnesty International published a report on Nigeria that includes a section entitled "Transnational companies."[161]
Amnesty International is also increasingly integrating a business component into its human rights promotion initiatives: challenging the business community to play a more active and constructive role in addressing human rights issues. For example, during the organisation's 1996 campaign on China it issued a special set of papers for business people, entitled "Human rights are everybody's business."[162] The papers included an explanation of Amnesty International's concerns in China, recommended steps for companies operating in China to promote human rights, and articles written by business people about the importance of the private sector's support for human rights.
Sir Geoffrey Chandler, Chairperson of Amnesty International's U.K. Section Business Group, emphasises that the Universal Declaration of Human Rights "not only legitimises a company's right to speak out on such matters; it imposes an obligation to do so."[163] He recently commented, in a Time magazine guest editorial distributed to participants in the 1999 Davos World Economic Forum, that corporations must change their perception "about the frontiers of their responsibility." They must recognise that "they bear responsibility for the total impact of their operations - for the manner in which they treat their employees, for their security arrangements, for their effect on the social, physical and political environment in which they operate."[164]
Human Rights Watch, in its "Working Guidelines on Business and Human Rights,"[165] explains that its research and advocacy is focused on three issues where companies have been complicit in human rights abuses or have gained advantage from human rights abuses:
i) Direct corporate complicity;
ii) Corporate advantage from the failure of government enforcement; and
iii) Inappropriate corporate presence.
The Human Rights Watch guidelines include a section on "Proactive Measures," that says:
Human Rights Watch urges corporations to be a force for improving respect for human rights through a broad range of actions, including:
* emphasizing commitment to the rule of law which underlies respect of human rights;
* protesting restrictions on civil and political rights, for example freedom of expression, association or assembly;
* using influence with governments to raise concerns about human rights violations;
* respecting and protecting the basic human rights, including labor rights, of their employees.
The Human Rights Watch guidelines conclude with the following statement:
In countries characterized by severe human rights violations, corporations often justify their presence by arguing that their operations will enhance respect for rights but then adopt no substantive measures to achieve that end. Corporations doing business in these states take on a special obligation to implement proactive steps to promote respect for rights and to ensure that they do not become complicit in rights violations. Where a corporation uses "constructive engagement" to justify its presence in such a country, we will examine whether it has taken any of the acts listed above.
Human Rights Watch has also been giving more attention to the human rights-related record of corporations in its country reports. In 1996 it published Mexico - No Guarantees: Sex Discrimination in Mexico's Maquiladora Sector, which examined discrimination against and mistreatment of women workers in export-processing factories owned by multinationals.[166] That report was updated in a 1998 report: Mexico - A Job or Your Rights: Continued Sex Discrimination in Mexico's Maquiladora Sector.[167] In 1998 Human Rights Watch published Colombia: Human rights concerns raised by the security arrangements of transnational oil companies.[168] That report includes recommendations to oil companies aimed at preventing further human rights violations by military forces protecting company interests in Colombia, and letters from Human Rights Watch to BP and to Occidental Petroleum.
In January 1999 Human Rights Watch published two books that examine in great detail the human rights-related record of corporations:
i) The Enron Corporation: Corporate Complicity in Human Rights Violations[169] focuses on the Dabhol Power Corporation (DPC), an Indian subsidiary of Houston-based Enron Corporation. The Dabhol Power project in the State of Maharashtra constitutes the largest single foreign investment in India. The Human Rights Watch report examines the complex history of this project from its inception in 1992, particularly the local opposition that arose from environmental activists and villagers' organisations, and human rights violations including suppression of freedom of expression and peaceful assembly, arbitrary detention, and excessive use of force by the police. The report states that DPC was complicit in these violations because it:
- paid the police security forces located adjacent to the project site;
- did not adequately investigate complaints that DPC contractors committed abuses; and
- did not speak out about human rights violations.
The report identifies the interconnected responsibility of all the actors in this project for the human rights violations that occurred: the Government of India, the State Government of Maharashtra, the Enron Corporation, the U.S. Government ("the U.S. government bears special responsibility because…it extended hundreds of millions of dollars in public funds for the project while seemingly indifferent [to] human rights-related conditionalities that apply to such transactions"),[170] and public and private financial institutions that financed the project.
ii) The Price of Oil: Corporate Responsibility and Human Rights Violations in Nigeria's Oil Producing Communities[171] examines in considerable detail the connection between international oil companies and human rights violations in the oil-producing region of Nigeria. It includes recommendations to the Nigerian Government, the international oil companies operating in Nigeria, and the international community.
In May 1999 Global Exchange and the International Labor Rights Fund (ILRF) launched a set of "US Business Principles for Human Rights of Workers in China," a 10-point code of conduct based on internationally-recognised human rights of workers. Since then a number of human rights organisations have endorsed the principles, and three companies (Levi Strauss & Co., Mattel and Reebok) reportedly have announced that they will sign the principles.[172]
At the 1993 U.N. World Conference on Human Rights (Vienna), more than 1000 NGOs from all regions of the world participated in an NGO Forum that adopted in its "NGO Forum Final Report" recommendations including the following:
Urgent and effective steps must be taken to ensure that multinational corporations and other non-State violators of human rights are subjected to the standards and obligations of international human rights law.
The Working Group proposes…Accountability of major institutions of society, in terms of their obligations nationally and internationally, ie States, multinational corporations, global financial and other institutions, religious bodies, big national and international non-governmental organizations, in terms of the principle that parallel to the universality of rights lies the universality of accountability of all institutions.[173]
The Interfaith Center on Corporate Responsibility (U.S.), The Ecumenical Council for Corporate Responsibility (U.K./Ireland) and The Taskforce on the Churches and Corporate Responsibility (Canada) together developed Principles for Global Corporate Responsibility: Bench Marks for Measuring Business Performance.[174] These principles, adopted in 1995 and revised in 1998, say that a responsible company has the following characteristics:
The company is fully committed to respecting internationally recognized human rights standards, including the Universal Declaration of Human Rights….
In instances where legislation or the actual practices of any public institution violate fundamental human rights, the company does everything in its power to maintain respect for those fundamental rights in its own operations. The company also seeks to exercise its corporate influence to contribute to the establishment of such fundamental rights.
The company has a policy that it will withdraw from a country in instances where there are gross and systematic violations of human rights and when there is a recognized movement from within the country calling for withdrawal.
An active human rights committee has been established by and reports to the Board of Directors.
A senior executive in each operation is responsible for all matters of human rights.[175]
New York-based Council on Economic Priorities (CEP) in 1997 launched SA8000, a social accountability code providing global standards on workers' rights including trade union rights, child labour, forced labour, compensation, and health and safety (see section 3.4 for further details).[176] CEP's research team tracks hundreds of corporations internationally, rating their performance on issues including the environment, women's advancement, minority advancement, charitable giving, community outreach, family benefits, workplace issues, disclosure of information, military contracts, and animal testing. CEP uses this information in its SCREEN and GLOBAL SCREEN services for investors, in its Shopping for a Better World guide for consumers, and in other publications such as its 1998 book The Corporate Report Card: Rating 250 of America's Corporations for the Socially Responsible Investor.[177] The CEP's annual Corporate Conscience Awards have included an award for the category "International Human Rights."[178]
World Monitors, a New York-based firm providing consulting services to multinational corporations seeking to develop and implement socially responsible business policies, publishes a regular on-line newsletter to keep subscribers informed of developments concerning business and human rights.[179]
In 1995 Robert MacGregor, President of the Minnesota Center for Corporate Responsibility (which initiated the "The Caux Round Table Principles for Business," described in section 3.1 of this report), made the following comment at an International Anti-Corruption Conference in Beijing where Chinese President Jiang Zemin was the principal speaker: "In business, 80 per cent of success has to do with financial matters, but 20 per cent has to do with values. If the 20 per cent is out of whack, the whole system will end up going down, and stable business relationships and a sustainable world community will be impossible."[180]
The California Global Corporate Accountability Project, launched in January 1999, aims "to enhance the standards of U.S. multinationals in terms of both environmental protection and promotion of human rights."[181] The two-year project will monitor the overseas performance of multinationals headquartered in California in three industry sectors: oil, technology and finance. It will focus on whether or not corporations are abiding by environmental standards, human rights standards, and their own codes of conduct. The project will consider what mechanisms could enhance the monitoring and regulation of corporate conduct. It will also encourage a network of environmental and human rights NGOs to work together on these issues, and will operate an on-line corporate accountability documentation center.[182]
The International Centre for Human Rights and Democratic Development (ICHRDD) in Canada has given much attention to the subject of business and human rights in its publications and conferences. Ed Broadbent, when he was the organisation's president in 1996, identified three practical steps that companies can take to address human rights:
i) adopt codes of conduct aimed at ensuring that business operations respect international human rights principles;
ii) integrate information about human rights as part of strategic research prior to business trips and use whatever opportunities are available to inquire about such matters with local authorities; and
iii) establish a charitable fund for human rights groups with a percentage of corporate profits.[183]
Warren Allmand, ICHRDD's president in 1997, said:
[B]usinesses have an important role to play, not only in actively promoting human rights, but in ensuring that business as usual does not contribute to human rights abuses. Businesses must be particularly wary that their presence does not induce regimes that abuse human rights to increase their repressive activity or insulate such regimes from democratization.[184]
The Ethical Trading Initiative in the U.K. is "an alliance of companies, non-governmental organisations (NGOs) and trade union organisations committed to working together to identify and promote good practice in the implementation of codes of labour practice, including the monitoring and independent verification of the observance of code provisions."[185]
Development organisations such as Oxfam, Christian Aid, Save the Children and ActionAid during the 1990s have given increasing attention to the links between civil/political rights and economic/social/cultural rights. Oxfam emphasised at the 1993 U.N. World Conference on Human Rights "the view, based on experience of working with poor people throughout the developing world, that poverty tends to be characterized not only by material insufficiency but also by denial of rights….Political participation and economic empowerment, it believes, can be shown to be essential elements in all successful development programmes."[186]
The 1998 Quito Declaration (on the enforcement and realization of economic, social and cultural rights in Latin America and the Caribbean), adopted by more than 50 development and human rights NGOs, says:
States have the primary obligation of respecting, protecting, and promoting ESCR [economic, social and cultural rights] before the international community and their citizens. Nevertheless, other actors such as multinational corporations and multilateral organizations also have the duty to respect these rights and are accountable to them. Because of this, civil society as much as the international community and the States, when confronted with violations by deed or omission committed by actors such as multinational corporations and/or multilateral agencies, should adopt, individually or by means of international cooperation, effective measures to prevent and sanction violations of these rights.[187]
The Quito Declaration also includes the following appeals "to multinational and national companies":
That they adopt social ethics guidelines and codes of conduct that ensure the harmonization of their activities with their duty to respect all human rights.
That they scrupulously respect the standards of the ILO regarding the promotion and protection of the fundamental rights of workers.
That they take responsibility, including legal responsibility, for their actions and the impacts of these actions, relating to the ESCR [economic, social and cultural rights] of their workers, the users and consumers of their products or services, and/or the populations generally affected by their productive or commercial practices.
That they allow independent oversight and/or regular monitoring by civil society over those actions of an economic, social and/or cultural nature.[188]
Chris Jochnick, The Advocacy Director for the Center for Economic and Social Rights (an NGO established in 1993 to encourage respect for those rights[189]), wrote in 1999 that the "regulation of TNCs [transnational corporations] is perhaps the most pressing task for the promotion of ESCR [economic, social and cultural rights]….TNCs exercise an inordinate influence over local laws and policies. Their impact on human rights ranges from a direct role in violations, such as abuses of employees or the environment, to indirect support of governments guilty of widespread repression."[190]
Development agencies are giving increasing attention to encouraging business to contribute positively to sustainable development and human rights. They urge companies:
i) to avoid harm to the well-being of local communities;
ii) to use their influence with governmental authorities to press for funds (for example, fees paid by the company for joint ventures or exploration rights) to be used in ways that promote sustainable development for local communities and for others in need;
iii) to work in partnership with local communities and NGOs to contribute positively to sustainable development, poverty alleviation, education, health care, and other social needs.
For example, ActionAid works with companies on development projects aimed at eradicating poverty. In India ActionAid supports Partners in Change, an organisation that builds "meaningful and sustainable partnership between socially responsible companies and disadvantaged communities, both directly and through effective NGOs."[191] Partners in Change helps companies (multinationals operating in India and Indian companies) develop a social development policy, identify NGO partners, sensitise and train company staff on social development issues, and monitor the progress of social development programmes.[192]
Accountable Aid,[193] an Oxfam study of major development programmes in Brazil, India and Uganda, sets forth six principles for accountable development derived from internationally-recognised human rights standards that Oxfam says should be respected by companies as well as governments, international financial institutions and NGOs:
i) Due diligence: "Donors or private agents have an obligation to exercise due care before undertaking a project or investment operation. This means, among other things, examining and taking into account the political, social and environmental context; consulting widely with representatives of civil society…; and ensuring that donors are aware of the most recent human rights reports on the public record."
ii) Non-discrimination: "Donors have an obligation to ensure that development initiatives do not increase divisions in a recipient country, for example between ethnic groups, or otherwise contribute to perpetuating discriminatory practices…."
iii) Advisability: "Multilateral agencies, donors, or other private agents should respect the provision of the International Covenant on Economic, Social and Cultural Rights, which emphasises the need to ensure that development co-operation activities enhance the ability of recipient governments to promote economic and social rights, including the rights to an adequate standard of living, and to access to education, and the best possible level of health care…."
iv) Participation: "International human-rights standards have long recognised the right of individuals and communities to be involved in the formulation and implementation of policies, programmes, budgets, legislation, and other activities….It is recognised that effective participation requires access to information about development and environmental initiatives held by public authorities or donors or even private companies."
v) Accountability: "Donors, private companies, and governments have a duty to accept responsibility for their actions. This requires them to be transparent in their undertakings and honest in the presentation of operations to civil society and stakeholders. It means that they must take particular care to consult with local communities and to keep them informed during implementation of specific projects and programmes. It also requires them to be prepared to submit their operations to independent scrutiny and oversight. Where changes have to be made to programmes or operations, they should be based, as far as possible, on consensus. However, additional measures may have to be taken to protect the rights and interests of vulnerable groups. If problems arise, it is unacceptable for donors and private companies to simply withdraw from engagement."
vi) Redress: "…Most of the multilateral agencies have followed the World Bank's example and set up complaints mechanisms, but obtaining effective and timely remedial action when development initiatives cause harm to local people is still a protracted and thankless process. With the privatisation of development, it is even more urgent for private companies to ensure that credible dispute-settlement mechanisms are put in place at the outset of their operations. Donors and companies need to ensure that there is a fair process for adjudicating legitimate claims, given the difficulties - political, financial and cultural - that confront poor communities when they try to gain access to the courts."[194]
2.7 Non-governmental organisations and companies begin engaging
Human rights organisations are increasingly engaging directly with business people (and vice versa) about the human rights responsibilities of business. Sir Geoffrey Chandler, who previously worked for Royal Dutch/Shell and now works for Amnesty International, recently noted that there needs to be "an understanding by both companies and NGOs that neither can fulfil their objectives without the other":[195]
Companies need the expertise of NGOs in tackling problems of which they have inadequate knowledge. NGOs need the huge and growing influence of companies if they are to maximise their impact. Protest may win battles, and is indeed a weapon that cannot be surrendered, but it will not win the war or the argument. For this, dialogue is required. And over the past two years there has been the beginnings of a sea-change as the mutual suspicions, hostility and ignorance of the two sides have given way to tentative engagement on problems in the solution of which both have an interest.[196]
The Fund for Peace, a non-governmental organisation based in Washington, D.C., launched a Foreign Policy Roundtable in January 1998 that brings together on a regular basis corporate and human rights representatives to discuss issues of mutual concern.[197]
In 1998 Amnesty International's Asia-Pacific Program Director was invited to address the Keidanren (Japan Federation of Economic Organisations), the body that brings together the country's senior business and industrial leaders. Referring to the Asian economic crisis and recent political developments in the region, he said to the Keidanren:
One lesson is clear. The…factors which protect human rights - the rule of law; open, transparent and accountable government; the independence of the judiciary; uncorrupted institutions; freedom of information - are the same factors which underpin sustainable development and a stable business environment. In this way, agendas for the protection of human rights and business interests come together….
I have talked a lot today about the self interest business has in engaging with the human rights agenda. But it goes further than this. Business has a responsibility - moral and legal - to use its influence to promote respect for human rights. The Universal Declaration of Human Rights calls on "every individual and every organ of society" to join in the task of promoting and protecting the rights enshrined in it. In this globalised world, businesses are among the most powerful organs of society - they share a responsibility for the promotion and protection of human rights with the governments and citizens of the world.[198]
Amnesty International's Secretary General, Pierre Sané, was invited to speak to a 1998 international conference of oil company executives and government ministers responsible for oil and energy. He said in his speech:
It is a company's responsibility to anticipate and provide for human rights problems at any point in its operations in the same way that it has learnt to anticipate environmental problems. Policies need to be explicit and open. Mistakes may still be made, but secretiveness leads to the suspicion that these are at the best carelessness, at worst collusion.[199]
Since 1996 the Dutch Section of Amnesty International has been holding regular "Round Table" meetings with around ten Netherlands-based multinational corporations, to discuss how business is addressing and should be addressing human rights issues.[200]
When BP launched its first social report[201] in 1998 it sent copies to a large number of human rights and development organisations and invited them to its London headquarters for a half-day meeting to discuss the report with BP managers. At the outset BP announced that the meeting's purpose was for BP managers to listen rather than talk, and it invited all the representatives of organisations to speak about what they saw as the strengths and weaknesses of the social report, and to give suggestions on how BP could do better in future. BP has also increased its level of engagement with NGOs in the various countries of its operations.
Shell's 1999 social report says: "We work with human rights organisations to help guide our actions. We see this as a continuous process of understanding and improvement…. We are continuing our efforts to engage in more dialogue with communities wherever we operate."[202]
Indeed it is important that multinational companies do not only focus their efforts on discussions with international human rights/development organisations. Companies need to ensure that there are also ongoing discussions between their national/local operations and national/local human rights and development organisations.
2.8 Selective purchasing laws
A number of selective purchasing laws have been enacted in the U.S. by state and city governments. Most prevent those state and city governments from dealing with companies doing business in Burma (Myanmar) because of the human rights situation in that country. The states with selective purchasing laws on Burma are Massachusetts and Vermont.[203] Over 20 cities have enacted such laws on Burma, starting in 1995 with Berkeley (California), Madison (Wisconsin) and Santa Monica (California), and now including New York City, Los Angeles, Portland, San Francisco and Oakland.[204] Several localities in Australia recently took a similar step.[205] And Burma is not the only target: Berkeley, Oakland and Alameda County adopted selective purchasing laws on Nigeria during the period of military rule in that country, and Berkeley also targets companies doing business in Tibet if their operations have been criticised by the Tibetan government-in-exile.[206]
Multinational corporations might not have been too worried in 1995 when two college towns and Santa Monica passed these selective purchasing laws, but when the state of Massachusetts and some large cities made the move in 1996 it caused shock waves. Corporations including Unocal reportedly stepped up their lobbying against such laws.[207] The corporate anti-sanctions group called USA*Engage started keeping track of state and local selective purchasing laws on its website.[208] The list of states and cities continued to grow longer. University students and others organised boycotts of companies doing business in Burma.[209]
Meanwhile a number of multinational corporations decided to pull out of Burma, including Apple Computer, Philips Electronics, Eastman Kodak, PepsiCo, Atlantic-Richfield, and Hewlett-Packard.[210]
U.S. Secretary of State Madeleine Albright, addressing the National Conference of State Legislatures on 17 April 1998, expressed broad support of selective purchasing laws, saying that she and "President Clinton recognize the authority of state and local officials to determine their own investment and procurement policies, and the right - indeed their responsibility - to take moral considerations into account as they do so."[211]
Less than two weeks later the business community decided to do more than lobby against selective purchasing laws. In late April 1998 the National Foreign Trade Council (NFTC) brought a lawsuit in U.S. federal court alleging that the Massachusetts selective purchasing law on Burma was unconstitutional because it infringed on the federal government's exclusive foreign affairs power. The NFTC is a coalition of 580 major U.S. corporations; the organisation says its members account for 70% of all U.S. non-agricultural exports.[212] The NFTC secured a protective order so that it did not have to reveal (except to the judge) the names of the individual companies that were alleging they were harmed by the Massachusetts law; those corporations feared that if they were publicly named they would be subjected to consumer boycotts.[213]
Simon Billenness of Trillium Asset Management (a Boston-based socially responsible investment advisor) criticises the NFTC's case:
[T]he NFTC and its allies fail to explain adequately why only cities and states should be barred from incorporating moral concerns into their choices in the marketplace. After all, consumers are free to boycott companies that violate their moral concerns. Even corporate members of the NFTC, such as Levi Strauss & Co. and Liz Claiborne, are on the record as ending their contracts to buy from Burmese factories because of the military regime's pervasive abuse of human rights.[214]
The European Union (E.U.) submitted an amicus curiae brief in the Massachusetts case on the side of the NFTC, arguing that the Massachusetts law should be struck down because it interfered with free trade and foreign relations between the U.S. and E.U.[215] Indeed the E.U. and Japan (concerned that some of their own multinationals were losing business because of selective purchasing laws) had been threatening to bring a formal case against the U.S. in the World Trade Organization if the Massachusetts law was not repealed.[216]
Others filing amicus curiae briefs against the Massachusetts law included the U.S. Chamber of Commerce, the National Association of Manufacturers, and the American Petroleum Institute.[217]
The State of Massachusetts argues that its selective purchasing law is constitutional, in part because the U.S. Congress had implicitly permitted the state's law when Congress in 1996 - months after enactment of the Massachusetts Burma Law and similar local laws - imposed economic sanctions on Burma but took no action to pre-empt state and local laws. Massachusetts also argues that it is simply exercising its right to spend its own money as it sees fit in a free market, and that the "market participant doctrine" (an exception to the Commerce Clause of the U.S. Constitution) grants cities and states considerable leeway when they participate in the marketplace.[218]
An amicus curiae brief filed by human rights organisations supporting the State of Massachusetts says: "International human rights law establishes a recognized standard of public morality endorsed by the federal government and reserved, in large part, for implementation by the states." The brief says that when the U.S. federal government ratified the U.N. Charter and human rights treaties, it delegated to the states the necessary authority to implement those treaties, and therefore the Massachusetts Burma law is a legitimate response to the human rights record of Burma's military rulers.[219]
In November 1998 the federal district court struck down the Massachusetts law as unconstitutional, on the basis that it violates the federal government's power to regulate foreign affairs.[220] The Attorney General of Massachusetts appealed the ruling. On 22 June 1999 the U.S. Court of Appeals, while agreeing that human rights conditions in Burma are "deplorable," upheld the lower court's ruling, finding that the Massachusetts law was unconstitutional on three counts: it interferes with the federal government's foreign policy powers, it impinges upon Congress' powers to regulate foreign trade, and it was pre-empted by the federal sanctions on Burma.[221] Massachusetts Attorney General Tom Reilly has asked the U.S. Supreme Court to review the case;[222] he commented in July 1999: "This law is about working for basic human rights and it's about a state's right to choose who it does business with. We believe that the Constitution allows the state to apply a broad and principled standard to buying goods and services. I will continue to defend the Massachusetts Burma Law vigorously."[223] In October 1999 it was reported that 14 states were planning to file an amicus curiae brief supporting the State of Massachusetts: "The states fear they'll be forced to trade with countries run by brutal regimes if the high court upholds a lower court decision striking down the Massachusetts law."[224] Other groups signing onto briefs supporting the State of Massachusetts included 11 cities and counties, 44 non-governmental organisations and 54 members of Congress from both parties.[225] If the lower court's decision is not overturned by the Supreme Court, selective purchasing laws in states and cities across the U.S. could be affected. Simon Billenness notes that there is much at stake:
At risk is the rich legacy of state and city action that rose to prominence in the campaign against apartheid in South Africa. The NFTC and its corporate backers clearly see the case as an opportunity to obliterate this method of activism. The result would be to dramatically reduce the tools available for American citizens to hold multinational corporations accountable for their actions abroad.[226]
Burma's military government has closely followed the Massachusetts case. A Burmese Government spokesman reportedly said, speaking on condition of anonymity:
We are following the court hearing with much interest because it seems that this is one of the very few cases where states and cities can infringe on the federal government's exclusive foreign affairs power. We always believe that the truth will eventually prevail and hope those states which have imposed sanctions due to incorrect information or misinformation will come to realize the true situation in Burma and redeem themselves before they commit an unrepairable harm to their own respective states.[227]
Meanwhile, human rights advocates are threatening consumer boycotts of certain large corporations (including those on the NFTC board) if they are denied recourse to selective purchasing laws.[228] If selective purchasing laws are no longer an option, more attention will be given by states, cities and universities to divestment of their investments in any companies doing business in Burma. Indeed a Burma divestment bill reportedly was pending before the Massachusetts state legislature in July 1999.[229]
2.9 Lawsuits against companies
Groundbreaking lawsuits have been brought against multinational corporations for alleged misconduct relating to human rights. For example, in the U.S. lawsuits have been filed against Unocal for abuses in Burma, Shell and Chevron for abuses in Nigeria, The Gap and 17 other clothing retailers for abuses in Saipan (a U.S. territory in the Pacific), Nike for abuses in Asian factories (see section 5.2 of this report), and Texaco for abuses in Ecuador.[230]
2.10 Petitions to revoke corporate charters
On 10 September 1998, thirty citizens' organisations and individuals filed a 127-page petition calling on the California Attorney General to revoke the charter of Unocal oil company. The petition said that Unocal had a record of being a "repeat offender" of environmental, labour and deceptive practices laws, and that through its operations in Burma and Afghanistan (and its links with those governments) it had been complicit in human rights violations in those countries. California law allows the Attorney General to go to court to dissolve a corporation for wrongdoing and to sell its assets to others who will operate in the public interest.[231]
Law professor Robert Benson, the lead attorney for the petition against Unocal, said "there has to be a point at which corporate repeat offenders are permanently prevented from doing further harm….The state permanently revokes the licenses of hundreds of doctors, lawyers, accountants and others every year - why not corporations?"[232] Richard Grossman, co-founder of the Program on Corporations, Law and Democracy (one of the petitioning groups), said that the courts have "always held that corporations are artificial entities, 'mere creatures of the state,' and must be summoned to answer to the people for usurpations of power and violations of the public trust such as those repeatedly committed by the Union Oil Company of California [Unocal]."[233]
On 15 September 1998, three business days after the petition against Unocal had been filed, California's Attorney General declined to institute legal proceedings against Unocal.[234] He did not explain the reason for his decision. In April 1999, after a new state Attorney General had been elected, a coalition of nearly 130 groups and individuals (including 50 law professors) filed a similar petition against Unocal; in May the new Attorney General declined to take action against Unocal without explaining his reasons for doing so.[235]
At the end of 1998 Unocal announced that it was withdrawing from the consortium that had planned to build a pipeline across Afghanistan. The New York Times wrote about this on 5 December 1998:
The decision was made under the pressure of low world oil prices, feminist groups that assailed Unocal's contact with the Taliban, the fundamentalist Islamic movement that rules Afghanistan, and concern about the presence of the accused terrorist Osama bin Laden in the country. The Feminist Majority Foundation, a Los Angeles group, petitioned the State of California to revoke Unocal's charter, and Mavis Leno, the wife of "The Tonight Show" host, Jay Leno, attended a company shareholder meeting last June to complain about its dealings with the Taliban.[236]
Moves to revoke corporate charters have been rare in the past, but a few have been successful. In 1976 the Attorney General of California asked a court to dissolve a private water company for allegedly delivering impure water to its customers; in that case the company settled the case, agreeing to sell its assets to a public water company and go out of business. In 1998 New York's Attorney General dissolved the corporate charter of the Council for Tobacco Research (which had been an advocate for the interests of the tobacco industry) after the Council agreed to go out of existence as part of a settlement of litigation against the tobacco industry in other states. New York's newly elected Attorney General, Mark Spitzer, promised during his campaign to be aggressive in revoking the charters of corporations when it is warranted.[237]
Corporate charter revocation laws in the U.S. codify the English common law writ of quo warranto, and therefore charter revocation may be a potential remedy available in other countries as well.[238]
2.11 Shareholder resolutions and annual meetings
Shareholder resolutions about social issues rarely succeed in terms of being approved by a majority of shareholders, but they do draw attention to social issues and add to the pressure on companies. Tim Smith of New York-based Interfaith Center on Corporate Responsibility, an association of nearly 275 Protestant, Roman Catholic and Jewish institutional investors, says that the face-to-face meetings and discussions he holds with companies as a result of shareholder proposals are far more important than the referendum and voting results.[239]
Shareholder proposals on human rights issues have also led to shareholder questions at corporate annual meetings and demonstrations outside those meetings, frustrating company managers by putting them on the defensive in a forum that they intended to be an orchestrated showcase of their company's achievements. A 1998 article noted two examples of such influence:
At the company's May 14 [1998] annual meeting, Mobil Chairman Lucio Noto stated that he would bring up with the Nigerian military junta the cases of two imprisoned oil workers union leaders: Milton Dabibi and Frank Kokori. This statement came in response to a tearful question directed to Mr. Noto by Cordelia Kokori, Frank Kokori's daughter. Both union leaders have since been freed as Nigeria's new military rulers have released nearly all political prisoners.
On August 11 [1998], ARCO announced that it would completely withdraw from Burma. The company maintained that it was pulling out for business reasons only. However, it is clear that the escalating campaign simply wore down the company and that ARCO's Chairman, Mike Bowlin, was fed up by the way in which Burma dominated the company's annual meetings.[240]
A 1996 survey of 100 top CEOs in Canada found that "shareholder activism and unpredictable questions top the list of 'worst nightmares' at annual meetings."[241]
On 20 May 1998 the U.S. Securities & Exchange Commission (SEC) decided that companies should not be allowed to exclude all shareholder resolutions raising workplace issues and matters of significant social policy. This reversed a 1992 SEC ruling (the Cracker Barrel case) that allowed companies to exclude such resolutions. The 1998 decision was a victory for social and environmental organisations and concerned shareholders, who had joined in an intense lobbying campaign aimed at getting the SEC to reverse its restrictive 1992 ruling.[242]
The Interfaith Center on Corporate Responsibility (ICCR) regularly publishes information about shareholder resolutions related to social responsibility.[243] A recent ICCR publication profiled 224 shareholder resolutions to 151 companies in 1999.[244] A number of these resolutions related to human rights issues, for example the following resolutions concern human rights in China:
i) Boeing: The resolution asks Boeing to adopt "basic human rights criteria for its business operation in and/or with the People's Republic of China" and to describe how it intends to implement them.
ii) Exxon: The resolution asks Exxon, in relation to an exploration venture in China, to review its "code of business conduct with the view to including in it an explicit commitment to human rights, social justice and environmental responsibility" towards the communities in which the company operates.
iii) General Motors and Lucent Technology: Resolutions ask each company to adopt "policies for all dealings with China," including that it will not accept goods or services produced by slave or forced labour, not sell to any facility using slave or forced labour, and will pursue the right to on-site inspections to determine the existence of slave or forced labour.
iv) Morgan Stanley: The resolution refers to Morgan Stanley having underwritten bonds for China's State Development Bank, which loaned funds for the controversial Three Gorges dam. The resolution asks Morgan Stanley to report on its underwriting, investing and lending criteria, "with the view to incorporating criteria related to a transaction's impact on the environment, human rights and risk to the company's reputation."[245]
The Washington, D.C.-based Investor Responsibility Research Center (IRRC) includes a Social Issues Service that "offers impartial research and analysis on corporate social responsibility issues, particularly those raised in proxy statements and at corporate annual meetings."[246] IRRC's Social Issues Service often addresses international human rights issues. For example, among its 1996 publications were in-depth background reports on "Human Rights and Labor Rights Issues,"[247] "International Business and Human Rights in Nigeria,"[248] "U.S. Business and Labor Rights in China,"[249] and "U.S. Business in Burma (Myanmar)."[250] IRRC also publishes a monthly newsletter entitled Corporate Social Issues Reporter.[251]
A new internet site, "The Shareholder Activism Center" (www.socialfunds.com), allows investors to tell companies their views on social issues (including human rights issues) when they arise in shareholder resolutions. Using the site, anyone (whether or not a shareholder) can send their views to an individual company or to a group of companies linked by issues. The messages do not constitute actual shareholder votes. The site was developed by the Interfaith Center on Corporate Responsibility.[252]
2.12 Socially-responsible investment
In November 1997 the Social Investment Forum estimated that $1.185 trillion was invested in the U.S. in managed portfolios using at least one social investment strategy; that was a 30-fold increase from 1984, and represented nearly one in ten dollars under professional management in the U.S. in 1997.[253] The number of U.S. mutual funds using social screens grew from four in 1984, to 45 in 1995, to 144 in 1997.[254]
In a 1994 article the President of Calvert Group, which operates socially responsible funds in the U.S., commented:
SRI [socially responsible investing] funds with stringent criteria in the area of human rights actively seek out companies that are making serious efforts to promote human rights at home and abroad. This may take the form of developing policies and programmes that follow higher standards than those required in host countries or adopting explicit human rights principles to guide their international operations….As the world moves ever closer to becoming a truly integrated global economy, human rights and the other key aspects of the behaviour of companies are likely to take on increased importance for more and more investors who will demand just as much emphasis on people as on profits.[255]
In the U.K. at the end of 1998 there were reportedly about 40 funds invested according to ethical criteria, with new launches almost monthly. The total invested in those funds was approximately £2 billion, four times the amount invested five years earlier.[256]
Organisations that provide social screening information to funds and investors are increasingly including human rights as one of the factors in their assessment of a company's record. Most of these screening agencies are based in North America and Europe, and unfortunately they often have difficulty obtaining information (positive or negative) about the details of a multinational company's human rights record (and social record generally) in its operations outside North America and Western Europe.
Therefore it is encouraging that in other parts of the world there are investment funds and screening organisations being established that monitor the social record of companies operating in their geographical area. For example, in 1992 the Community Growth Fund (CGF) was launched in South Africa as an investment fund for the retirement funds of seven black trade unions, with a set of 17 social criteria to determine its investments.[257] The criteria, revised over the years, include "good conditions of employment," "commitment to development," "community participation and support," and "social impact."[258] The Labour Research Service, based in Cape Town, conducts social screening of companies for the CGF.[259] Companies that did not meet the CGF's social criteria have reportedly taken steps to improve their record. A 1995 article noted: "It is not financial clout that makes acceptance or rejection by the Community Growth Fund a critical issue. It is the signal which acceptance or rejection sends out - not only to the company's labour force and the broader labour movement but also to an increasingly perceptive section of the business community. Rejection by the fund…is a tip-off that while the financials may look impressive, all is not well on the operational front, specifically with regard to industrial relations."[260]
By 1998 at least 13 other socially responsible investment funds reportedly had been launched in South Africa. These funds tend to focus their portfolios on the general upliftment of previously disadvantaged communities through infrastructure development in under-serviced areas, job creation, and economic enablement. A survey by the firm Alexander Forbes found that these investment funds have generated good returns for the investor.[261]
2.13 Monitors take advantage of the communications revolution
The Environmental Defence Fund's website (www.scorecard.org) is packed full of scientific information about the pollution record of individual corporations, ranked by industry and by type of pollution. It allows anybody in the U.S. to type in their postal code and get a list of the top ten polluters in their neighbourhood. Click on one of those polluters and you get a draft letter that you can edit asking the company why it has failed to improve its environmental performance. The site also provides a list ranking the environmental record of states, so U.S. citizens can write to their governor calling attention to areas where the state government has fallen short. A recent article in The Economist sees this website as an example of a democratisation of information, creating a new balance of power where the citizen no longer is in a position of weakness when challenging business and government on environmental and social issues:
An old lop-sidedness in democracy - big business and big government are better informed than individuals, so win most of the big arguments - is suddenly corrected. It used to be that executives and bureaucrats could assure small-fry citizens that problems had been analysed, scientists consulted, safeguards put into place. Now citizens no longer need to accept those assurances helplessly. They can log on to the Internet and check them, with a few clicks of a mouse.[262]
Human rights and development organisations may not be able to duplicate the features of the Environmental Defence Fund's website; social issues cannot be quantified and ranked in the same way as pollution levels. Nevertheless, they are also taking advantage of the communications revolution. They are using the internet to gather and publicise information about the social record of companies worldwide. Pierre Sané, Secretary General of Amnesty International, noted recently: "The fact is that human rights groups are now so numerous that it makes it much more difficult to suppress information, especially in the age of the Internet."[263]
2.14 A need for more attention to the private sector's responsibility to promote human rights
Much of the focus of those monitoring business and human rights has been on alleged acts of irresponsibility, often by companies in the oil, mining or apparel industries. The scrutiny of these companies and any others allegedly contributing to human rights violations needs to be continued, indeed heightened. Acts of irresponsibility by business should always be a top priority for human rights monitors.
But human rights and development advocates, and the business community itself, also need to give increased attention to articulating and monitoring the positive responsibilities of all companies to promote human rights and sustainable development. This is particularly important now because a new league of multinational companies, the "knowledge-based companies,"[264] are becoming larger and more powerful. Their work focuses on technology, computer networks, software, semiconductors, telecommunications, the internet and biotechnology. Their names include Microsoft, Intel, Cisco, Lucent, AOL, Yahoo and Amgen.
If anyone doubts the astounding growth and economic power of these companies, the market capitalisation (commonly referred to as "market cap": the total market value of all outstanding shares, computed by multiplying the number of shares times the market price) of Microsoft on 10 April 1999 ($475.7 billion) was larger than the market cap of all the following oil companies put together (all figures reflect 10 April 1999)[265]: Exxon ($181.6 billion), Mobil ($73.4 billion), Chevron ($61.4 billion), Texaco ($31.0 billion), Total ($29.8 billion), Atlantic Richfield ($25.1 billion), Enron ($21.2 billion), CONOCO ($15.0 billion), Phillips Petroleum ($12.2 billion), Unocal ($8.8 billion), and Occidental Petroleum ($6.4 billion). If Exxon and Mobil are deleted from that list, Intel ($217.5 billion) had a market cap greater than the other nine oil companies combined. Cisco ($188.7 billion), Lucent ($168.2 billion) and America Online ($163.7) each had a greater market cap than eight of those oil companies put together (excluding Exxon, Mobil and Chevron). Even Yahoo ($41.5 billion) had a market cap almost equal to four oil companies combined: CONOCO, Phillips, Unocal, and Occidental. On 22 April 1999 the market capitalisation of Royal Dutch/Shell was $187 billion; BP Amoco was $171.2 billion.[266] In December 1997 the market cap of General Electric was roughly $241 billion, then greater than the combined value of the stock markets of Malaysia, Indonesia, Thailand, the Philippines and Korea.[267] Today Microsoft's market cap is larger than that of General Electric. There are many more technology companies than oil companies or apparel companies, they are growing at a much faster rate, and most of them are already international players.
The new technology companies are much less likely than some traditional companies to be displacing people, having contacts with a country's security forces, causing major environmental damage, operating sweatshops, using forced labour or using child labour. Their success is not based primarily on extracting resources from the earth or physical labour from people; it is based mainly on mobilising knowledge from the brains of their employees and utilising skills of a highly-trained workforce. As Peter Drucker says:
The industries that have moved into the center of the economy in the last forty years have as their business the production and distribution of knowledge and information, rather than the production and distribution of things. The actual product of the pharmaceutical industry is knowledge; pill and prescription are no more than packaging the knowledge.[268]
An April 1999 International Herald Tribune article drew attention to this focus on knowledge: "With cash, stock options and the promise of vast resources, Microsoft Corp. is luring faculty elites to its research center at a pace so fast that some campus departments say they are being picked clean."[269]
What responsibilities do these huge technology companies have to use their tremendous resources, skills and influence to contribute positively to the societies that supply them with markets, workers and customers? How should they be contributing to sustainable development and to civil society? What role should they play in improving education, reducing poverty, protecting the environment, and promoting human rights and the rule of law?
The human rights guidelines for companies articulated by human rights organisations, development agencies, business people and others (referred to elsewhere in this report) help to answer these questions. But more work needs to be done by human rights and development advocates to explain the positive responsibilities of business, to challenge companies to act, and to engage directly with the "knowledge companies" that so far have tended to be on the sidelines of human rights debates.