Corporate Watch, Issue 12, Autumn 2000.

Building a great reputation is not about words and fancy value statements communicated via glossy brochures which languish on coffee tables in reception lounges and in the department of corporate affairs. Reputation with stakeholders is gained by the systematic application of values into normal everyday operations. (Glen Peters, PricewaterhouseCoopers.) [1]

If the World Trade Organisation (WTO), International Monetary Fund (IMF) and World Bank are the body of globalisation's dark side, the Organisation for Economic Co-operation and Development (OECD) is its head. [2]   Although not such a post-Seattle household name as the others, the OECD is the source of the ideology which drives them. It is the crude, lumbering think-tank of the most wealthy nations, bulldozing over human dignity without pause for thought. Its tracks, crushed into the barren dereliction left behind, spell 'global free market'.

Premised on the economic repudiation of Communism, the OECD was central to the West's defences against the threat of an inhuman political and economic dogma. Yet in being so, the OECD merely helped to establish its own brutal ideology in the rejection of another and, tragically, created the conditions for conflict precisely in its simplistic attempts to maintain 'stability'.

The danger of ideology, be it communist, capitalist or whatever, is that the theoretical means to achieve the end of a better society tend to become pursued as ends in themselves. If, for example, it has been decided that collectivism and state ownership are the best way to run things, these principles can end up being imposed in blind faith, regardless of whether they actually achieve their aim. Subsequent failures in this way to raise everyone's quality of life are then explained away either as failures properly to implement the theory or as a necessary short-term sacrifice for longer-term gains. Thus, the ideology - protected in this bubble of dogma - comes to be imposed and justified ever more desperately in equal measure to its increasingly evident shortcomings.

Similarly, we find ourselves now in the topsy-turvy world of capitalist ideology as the OECD issues its updated guidelines on best practice governing the operations of transnational corporations (TNCs) in a global 'free' market. [3]   This non-legally binding, voluntary code of conduct is apparently intended to help ensure that global capitalism will, in fact, achieve the end of improving the quality of life for all. But as a non-enforceable 'gentlemen's agreement', it is utterly useless - as already demonstrated in the time since its adoption in 1976. And what a grotesque faith in the virtues of free market theory, that guidelines which exhort corporations to respect human rights and the environment directly are conferred an inferior status relative to the legally enforceable rules of the so-called 'deregulated' free market which are assumed indirectly to benefit all. A classic ideologically-inspired confusion between ends and means thus lies at the heart of the modern world order, the heart of humanity relegated to the status of a vestigial appendix.

We need to know the nature of the beast. Even before the end of World War II, in July 1944, the UN Monetary and Financial Conference in Bretton Woods, US, founded the economic power structures which dominate to this day: the IMF, the World Bank andthe General Agreement on Tariffs and Trade (GATT, now mutated into the WTO). [4]   The destruction of Europe had moved the US into position as the Western superpower, and these Bretton Woods institutions took it upon themselves to rebuild the post-war global economy in the ideological image of the American gold-rush. Part of the justification for this was the theory that the economic depression of the 1930s had contributed to the outbreak of war. However, perhaps what ought to be considered today is whether it was more the punitive and humiliating post-World War I Treaty of Versailles which provoked a nationalist backlash in Germany. It is arguable that similar modern day humiliations suffered by the poorest nations at the hands of the Bretton Woods institutions are creating those same conditions.

Fearful of leftist and Russian political and economic influence over Western Europe after World War II, the US stepped in with a massive European aid program, the Marshall Plan. This was administered on only roughly free market principles by the Organisation for European Economic Co-operation (founded in 1948) which, renamed the OECD, became the world's most influential economic think-tank, extending its dictates globally after NATO took over the European strategic baton from the Marshall Plan. [5]   This economic cartel has always been dominated by US financial and political might: a country’s voting power at the IMF and World Bank depends on its wealth, and the OECD is composed only of the world's rich nations. [6]   Poorer nations (or their often corrupt governments rather than their populations) have been offered loans conditional on adopting harsh economic and social reforms according to free market ideology (which hurt their populations rather than their governments). [7]   No matter democracy or quality of life!

The developing nations understood that while the US and Europe had grown economically with the help of subsidies and other economic protections, they were being expected to fend for themselves in a free market already dominated by the powers that be. They organised themselves, as the Group of 77, to reclaim a voice in the proceedings, but with minimal success. [8]  Although they prompted the formation, in 1964, of the UN Conference on Trade and Development (UNCTAD), set up to study and facilitate the conditions for fair development, they failed to secure a UN code of conduct for TNCs. This code was scuppered due mainly to disagreements over the right of a country to nationalise its own natural resources: securing exploitation of these was central to the developed world's power, the British- and American-initiated 1953 coup against Iran over oil expropriation being a prime example. [9]

Essentially, the wealthy nations wanted to secure a world of trade and investment where territorial ownership of resources meant nothing. For those with the means, it would be a free-for-all, and the imperative became to conjure up international rules which protected the foreign investments of the developed world's corporations. Open access to oil, minerals, land and cheap labour for those who already had the power to exploit them.

'Competition' became the mantra, an ideology which neatly dispensed with the realities of an unlevel playing-field. So, when in 1976 the OECD came up with a code of conduct for TNCs, it pulled off a public relations coup by being seen to be fair while knowing full well that equal terms for the strong and the weak could only help the former.[10]   And, as a merely voluntary code, it had no practical ethical impact anyway.

Instead, for example, in 1984 around 13,000 people died in Bhopal, India, after an explosion at a Union Carbide chemicals plant run on low safety standards which would not have been possible back home in the US. The lack of international regulation allowed Union Carbide to get away with a paltry payment of compensation to the victims which amounted to only a minor dent in its profits and left the company directors as yet happily unaccountable. [11]   Corporate rights had been enshrined in law; human rights had not. The situation remains the same today - as UNCTAD puts it, "The business community's aversion to binding international legal standards governing corporate operations contrasts with its strong advocacy of international law commitments applied to the obligations of governments towards foreign investors." [12]   The corporations want rights without responsibilities.

The bottom line is this: The OECD's guidelines, as non-enforceable, are the OECD's self-indictment. They are a statement of basic human values which they do not wish to see enshrined in law. The OECD's Multilateral Agreement on Investment collapsed precisely due to this lack of responsibilities to balance the rights which the MAI would have granted to big business. [13]

Hidden agendas and public relations - the wolf in sheep's clothing

Many multinational enterprises have demonstrated that respect for high standards of business conduct can enhance growth. Today's competitive forces are intense and multinational enterprises face a variety of legal, social and regulatory settings. In this context, some enterprises may be tempted to neglect appropriate standards and principles of conduct in an attempt to gain undue competitive advantage. Such practices by the few may call into question the reputation of the many and may give rise to public concerns. [14]

[The OECD] has responded to the need for a thorough consideration of the Guidelines so as to ensure their continued relevance and effectiveness in the rapidly changing global economy. New issues have gained prominence since the Guidelines were first issued in 1976 and the international consensus on appropriate business conduct is evolving rapidly... Public concerns about the impact of deepening globalisation on home and host societies meant that the most recent Review was conducted in a context of growing interest and visibility. [15]

The Guidelines are written from the point of view that human rights and environmental issues need to be addressed to the extent that they can impact on corporate reputation and therefore, ultimately, on profits. The Guidelines are more like an advice document to PR departments rather than a warning to company directors. Euphemisms abound - "a variety of legal, social and regulatory settings," for example. One way of describing Premier Oil's complicity in human rights abuses in Burma, I suppose, or BP's complicity in Colombia, or Balfour Beatty's in Turkish Kurdistan. [16]   "Such practices" may contribute to crimes against humanity but let's not quite admit this. Anyhow, more importantly they may damage corporate "reputation" and "give rise to public concerns." Not, of course, that "such practices" might be wrong, but that share prices might take a knock: products might be boycotted leading to further bad press, and there may even be some annoying demonstrations which prevent me from getting to a conference meeting on time. Now that's what I call an abuse of human rights!

The revised Guidelines churn out the usual platitudes about welfare, stakeholders, environmental protection, whistleblowing, bribery, transparency, child labour, forced labour and general workers' and human rights. And platitudes they are: when one arrives at the Guidelines' core quality - that of being non-legally binding and voluntary - you don't know whether to laugh or cry:

Some believe that, because the Guidelines are not binding, they cannot have as much of an impact on business conduct as binding laws. However, observance of appropriate behavioural norms in most societies is not due exclusively or even mainly to formal law enforcement - that is, to the detection and punishment of illegal behaviour. Rather much of it occurs because the people adhere voluntarily to norms out of cultural tradition or a sense of personal conviction or due to the influence of family, co-workers, friends and acquaintances... Here, the emphasis is not on judging firms but on promoting a real process of improvement in business conduct. [17]

Back down to earth. The problem is at least two-sided: firstly, the corporate malevolence and secondly, the scene of the crime. The scene is where the local legal and political institutions are not up to the job of protecting social justice. No country is perfect in this regard, but some are much worse than others, and it is where people and resources are least protected that big business bullies stand to gain the most.

The World Wide Fund for Nature submitted to the OECD a thorough and rigorous case study of P&O's proposed port in Dahanu, India, demonstrating quite clearly the utter ineffectiveness of non-legally enforceable guidelines. [18]   When WWF brought to the attention of P&O and our government the many violations of the Guidelines by P&O in its dealings over Dahanu, they were basically ignored:

[T]he DTI's overall response has been extremely disappointing and brings into question the effectiveness of the Guidelines in promoting corporate behaviour in line with the principles to which the DTI claims to be committed. The DTI has repeatedly maintained that there has been no obvious breach of the Guidelines by P&O. Furthermore, whilst the DTI has been reluctant to accept or examine the specific issues raised by WWF and others, they have been swift to accept P&O's statements at face value. [19]

There are some glimmers of consolation. In Britain, the traditional lack of corporate accountability for the deaths of employees and 'consumers' may be somewhat remedied by government plans to toughen the law on corporate manslaughter. [21]   National courts are beginning to take up cases against corporations based within their jurisdiction even though the alleged crimes occurred abroad. [22]   But until international trade law incorporates human and environmental protections at its core, or until international human rights and environmental law are updated and strengthened to cover any large organisation as well as the state, then the protests shall continue...

[1] Glen Peters, Reputation; the search engine of the future, in Visions of Ethical Business, No.1, Oct 1998, London: Financial Times Management, 1998, p.38.
[2] Some aspects of 'globalisation' may be good, such as the potential for far greater access to information over the internet.
[3] OECD Guidelines for Multinational Enterprises , 27.7.00, http://www.oecd.org/daf/investment/guidelines/mnetext.htm
[4] The IMF and World Bank (or International Bank for Reconstruction and Development) were instituted in December 1945. The General Agreement on Tariffs and Trade became effective in January 1948 and went through ever more ambitious rounds of trade liberalisation; from January 1995 it became a body in its own right, the WTO.
[5] The OEEC became the OECD in 1961.
[6] IMF 'should give poor countries bigger voice' , Financial Times 12.9.00; Reformers could make a world of difference , Guardian 13.3.00. In 1961, the OECD's members consisted of the United States and Canada in addition to its OEEC founders: Austria, Belgium, Denmark, France, Greece, Iceland, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Sweden, Switzerland, Turkey, United Kingdom, and West Germany.
[7] Take, for example, the case of Haitian rice: Free market left Haiti's rice growers behind , Washington Post 13.4.00. At the same time, the wealthier nations retain many barriers to free trade - e.g. U.S. resists plan to remove tariffs for poor nations , New York Times 8.4.00.
[8] Third world aims a spearhead at rich club , Guardian 25.8.00.
[9] Peter Muchlinski, Multinational Enterprises and the Law , Oxford: Blackwell, 1995, pp.592-7. Mark Curtis, The Ambiguities of Power: British Foreign Policy since 1945 , Zed Books, 1995, pp.88-94; Mostafa Elm, Oil, Power and Principle: Iran's Oil Nationalization and Its Aftermath , Syracuse University Press, 1994; Keith Fisher, The Price of Oil, The Price of Life , 10.98.
[10] Need for discrimination in the development issue , Guardian 27.12.99. Today's wealthy nations developed their economies behind trade barriers many of which, hypocritically, remain in place - e.g. Belinda Coote, The Trade Trap: Poverty and the Global Commodity Markets , 2nd edition, Oxfam, 1996, Ch. 8 & 9.
[11] Hunt on for missing gas blast boss , Observer 12.3.00; Dominic Ayine & Jacob Werksman, 'Improving Investor Accountability', in Sol Picciotto & Ruth Mayne (eds), Regulating International Business: Beyond Liberalization , London: Macmillan, 1999.
[12] UNCTAD press release, TAD/INF/2819 , 23.9.99, announcing its World Investment Report 1999: Foreign Direct Investment and the Challenge of Development ; Multinationals must take care in Third World, says UN , Independent 28.9.99.
[13] Nick Mabey, 'Defending the Legacy of Rio: the Civil Society Campaign against the MAI', in Picciotto & Ruth Mayne (eds), pp.68-9; Mexico threatens to scupper labour pact , Guardian 27.6.00.
[14] OECD Guidelines for MNEs - Preface.
[15] OECD Guidelines for MNEs - Frequently Asked Questions, http://www.oecd.org/daf/investment/guidelines/faq.htm
[16] Premier Oil admits abuses in Burma , Guardian 16.5.00; BP sacks security chief over arms deal , Guardian 17.10.98; Construction group threatens to leave Turkish dam project , Independent 17.8.00.
[17] OECD Guidelines for MNEs - Frequently Asked Questions.
[18] Sultana Bashir & Nick Mabey, Can The OECD MNE Guidelines Promote Responsible Corporate Behaviour? An Analysis of P&O's Proposed Port in Dahanu, India , WWF-UK Research Paper, November 1998, http://www.oecd.org/daf/conference/
[19] Ibid., p.11.
[20] "I don't want people to focus on the wide stakeholder approach, when it is an agenda which is not going to be delivered." Stephen Byers, Secretary of State for Trade and Industry, at the TUC/IPPR Seminar on Corporate Governance, 7.6.00; TUC says law review fails to prise open corporate doors , Guardian 23.8.00.
[21] Judgment day for corporate killers , Sunday Telegraph 28.5.00; Leading top executives to safety , Financial Times 25.10.99.
[22] Companies with nowhere to hide , Times 1.8.00; Asbestos miners win right to sue in Britain , Independent 21.7.00; Richard Meeran, 'The Unveiling of Transnational Corporations: A Direct Approach', in Michael K. Addo (ed), Human Rights Standards and the Responsibility of Transnational Corporations , Kluwer Law International, 1999, pp.161-70.