*Sandeep Menon Nandakumar

Transcription

1 THE SHORTCOMINGS OF CORPORATE ETHICS AND CORPORATE SOCIAL RESPONSIBILITY IN THE PROTECTION OF HUMAN RIGHTS *Sandeep Menon Nandakumar Introduction There was a time when we used to discuss and deliberate on acts of state and its impact on human rights of its citizens as well as the community. But things have changed and now the non-state actors such as the multinational corporations have replaced the position of the state in most of the academic and non-academic discussions. Moreover, in the present scenario, it has been extremely difficult for the state to control these non-state actors from abusing human rights. These multinational or transnational corporations which are in fact dominating the current world because of their huge financial power have been involved in grave violations of human rights including that of violating worker s rights, causing environmental pollution, employing child labour, violating basic access to health and shelter of workers and their families. This paper is an attempt to detail out various aspects of corporate ethics as well as corporate social responsibility and its effect upon the protection of human rights as both of them, to a very large extent, is voluntary and depends upon the motivating factor behind each corporate whether to follow them or not. The Need for Regulating Corporations The need for regulating corporations is very much necessary in the current scenario as apart from producing wealth they create a lot of risks to humans as well as to the ecosystem. 1 The role played by them and the impact which they can create is evident from the fact that out of the most top rated economies in the year 1999, 51 percentage were corporations. 2 It is further evident from the fact that their sales are large enough to beat the collective GDP of various countries and that the state in most of the cases has lost its valuable power to direct the nature of 1 Surya Deva, Human Rights Realization in an Era of Globalization: The Indian Experience (2006) 12 Buff. Hum. Rts. L. Rev. 93, Iris Halpern, Tracing The Contours Of Transnational Corporations' Human Rights Obligations In The Twenty- First Century (2008) 14 Buff. Hum. Rts. L. Rev. 129,

2 corporate responsibility. 3 Moreover most of the functions, which were vested with the state, is now exercised and controlled by big multinationals and the same is apparent in the area of energy, water, telecommunication and transport. The activities of the multinationals such as the activities of Barclay's Bank s business with the apartheid regime in South Africa and Wal-Mart for failing to discontinue dealers from committing labor misuses 4, TNCs as well as Coca Cola in Sudan, the incident of release of toxic gas from Trafigura in Abidjan affecting more than a lakh of people, the environmental degradation and poisoning caused by operations of Rio Tinto in Papua New Guinea, the frequent oil spill by Shell in Nigeria etc 5 clearly shows that it is high time that international standards, that too binding ones, are enacted so as to make the corporate enterprises promote and respect human rights both individual as well as collective ones. The activities of the corporations against the concept of human rights is also clear from reports of the NGOs against Shell s activities in Nigeria, dealings of Occidental Petroleum in Colombia, boycotts against ExxonMobil in Indonesia, Coca-Cola in Colombia, Unocal in Burma and so on. 6 There also have been instances where in United States in 1996, Kathey Lee Gifford who was an advocate of Children s rights was involved in a scandal of clothing line manufactured by the teen aged girls in a Honduras sweatshop. 7 3 Lary Cata Backer, Multinational Corporations, Transnational Law: The United Nations Norms on the Responsibilities of Transnational Corporations as a Harbinger of Corporate Social Responsibility in International Law (2005) 37 Colum. Hum. Rts. L. Rev. 287, Doug Cassel, Corporate Aiding and Abetting of Human Rights Violations: Confusion in the Courts (2007) 6 Nw. U. J. Int'l Hum. Rts Iris Halpern, Tracing The Contours Of Transnational Corporations' Human Rights Obligations In The Twenty- First Century (2008) 14 Buff. Hum. Rts. L. Rev. 129, Giovanni Mantilla, Emerging International Human Rights Norms for Transnational Corporations (2009) 15 Global Governance 279, Nancy L Mensch, Codes, Law Suits or International Law: How Should the Multinational Corporation Be Regulated with respect to Human Rights? (2006) 14 U. Miami Int l & Comp. L. Rev. 243,

3 Corporate Ethics and Corporate Social Responsibility Corporate Ethics which comprises of ethical standards and corporate social responsibility which comprises of the values and business practices which should be followed by the corporation together forms the corporate code of conduct in general. The reasons for introducing the same have been pointed out to be that the multinational corporations have been forced by the pressure from civil society to adopt these standards which are less evil than the binding standards and the increasing consumer awareness which has made the corporations to follow ethical behaviour. 8 There can be private corporate codes of conduct which are created by the multinationals themselves and they have several advantages such as the fact that the corporation can identify the needs of the employees which can also persuade other corporations to follow the same. 9 Apart from all these there are various industry association codes of conduct like the Responsible Care and the Electronic Industry Code of Conduct such as the Rugmark, the symbol which certifies the fact that the production of the material does not involve child labour; and the codes created by NGOs such as the CERES principles created by the Coalition for Environmentally Responsible Economics which are strictly non specific codes but it details out principles around which the corporations is supposed to make its own code. 10 It is stated that it was the International Chamber of Commerce which was the first business organization to adopt a voluntary guideline which was the Guidelines for International Investment in Though the UN in the year 1974 established the Centre on Transnational Corporations (UNCTC) to prepare a voluntary code of conduct it was discarded in 1992 as the states could not reach a consensus. 11 There has been a simultaneous development of codes of conduct primarily focusing on non discrimination at work and safe conditions of work such as 8 Danwood Mzikenge Chirwa, The Long March To Binding Obligations Of Transnational Corporations In International Human Rights Law (2006) 22 S. Afr. J. on Hum. Rts.76, 77 9 Nancy L Mensch, Codes, Law Suits or International Law: How Should the Multinational Corporation Be Regulated with respect to Human Rights? (2006) 14 U. Miami Int l & Comp. L. Rev. 243, Id at Danwood Mzikenge Chirwa, The Long March To Binding Obligations Of Transnational Corporations In International Human Rights Law (2006) 22 S. Afr. J. on Hum. Rts.76,

4 the Sullivan principles 12 which is an NGO code, the Slepak Principles, Macquidora Standards of Conduct as well as the Miller Principles. The OECD Guidelines that provide good practice standards was adopted in 1976 and are guidelines jointly addressed by governments to the multinational companies and it is clearly mentioned that the observance of the same is voluntary and not legally enforceable. 13 In the 2000 review a new standard was set out promoting respect to human rights. 14 The ILO Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy which was adopted 1977 and was subsequently amended in 2000 and offer guidelines to multinational corporations, governments as well as employers and workers in relation to conditions of employment, wages and industrial relations. The UN Global Compact which was launched in July 2000 is a framework for the companies for responsible business practices and has set out principles for the companies to follow in their activities in the areas of human areas, environment, labour standards and anti corruption. It is a voluntary enterprise and not a regulatory mechanism that relies on public accountability, transparency as well as disclosure to complement regulation and to provide a space for innovation. 16 In addition to all these, the Voluntary Principles on Security and Human Rights that was signed in also emphasize on the protection of human rights. There are various other voluntary initiatives too, as for example, the Kimberley Process Diamond Certification Scheme of 2002, the basic aim of which is to curtail the conflict diamonds that keep up the rebel groups in Angola and Sierra Leone and the Extractive Industries Transparency Initiative of 2002, th 12 Thomas N. Hale, Transparency, Accountability, and Global Governance (2008) 14 Global Governance 73, Para I (1) of OECD Guidelines: The Guidelines are recommendations jointly addressed by governments to multinational enterprises. They provide principles and standards of good practice consistent with applicable laws. Observance of the Guidelines by enterprises is voluntary and not legally enforceable. 14 Para II (2) of OECD Guidelines: Respect the human rights of those affected by their activities consistent with the host government s international obligations and commitments; the other provisions relating to 2000 review include provisions relating to abolition to child labour and discrimination, ensuring occupational health and safety and the like. 15 < accessed> 13 th September 16 < accessed 11th September 17 < accessed 11th September 456

5 focal point of which are issues regarding the publication of revenues which in one way is the cause of internal conflicts worldwide. 18 The UN Sub-Commission for the Protection and Promotion of Human Rights adopted the UN Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with regard to Human Rights in the year It has set up some binding human rights standards and the same was enacted to establish binding principles in place of the vacuum created by lapse in realization of voluntary corporate guidelines. 20 Effectiveness in the protection of Human Rights It is to be noted that the voluntary initiatives provide a long term prospect but with the uncertain sanction of peer or public pressure where as the legally binding ones gives assurance to norms but not their enforcement and it is the poverty of the choice between voluntary and binding models reflects that of present institutions of global governance. 21 The non binding instruments cannot be said to have no use and instead they have shaped their internal voluntary codes of conduct and also inspired domestic level litigation. 22 With regard to the scenario in Africa it has been mentioned that a mixture of voluntary initiatives, binding regulations and adherence by states to their duties under international law are necessary to protect human rights and in general it is hoped that voluntary codes over time gets the force of law. 23 It should also be noted that these voluntary initiatives do not replace exiting principles but are supplementary to them such as the standards set by the International Financial Corporation relating to child labour and environment, standards set by IMF and World Bank, the regional efforts such as the North American Free Trade Agreement (NAFTA) and the side agreements (on labour and environment) created thereafter, the incentive scheme under General system of Preferences by 18 Giovanni Mantilla, Emerging International Human Rights Norms for Transnational Corporations (2009) 15 Global Governance 279, < accessed 11th October 20 Danwood Mzikenge Chirwa, The Long March To Binding Obligations Of Transnational Corporations In International Human Rights Law (2006) 22 S. Afr. J. on Hum. Rts Paul Redmond, Sanctioning corporate responsibility for human rights (2002) 27 Alternative L.J. 23, Iris Halpern, Tracing The Contours Of Transnational Corporations' Human Rights Obligations In The Twenty- First Century (2008) 14 Buff. Hum. Rts. L. Rev. 129, Daniel Aguirre, Corporate social responsibility and human rights law in Africa (2005) 5 Afr. Hum. Rts. L.J. 239, 241,

6 the EU creating economic preferences to developing nations that have upgraded their labour and environmental regulations and so on. 24 But the problem with most of the corporate codes is that most of them are based on the concept of voluntarism which gives an option to the corporations to exercise their discretion whether to follow these standards in their business practices. An advantageous perception of the corporate ethics and corporate social responsibility is that as they are voluntary codes of conduct diverse actors can negotiate the provisions of these codes so as to reach a consensus that satisfies all of them. If they are fairly negotiated and complied with, they can have considerable authority but the sanction element is usually softer as most of the companies may face only damage to their reputation due to public disgrace. 25 It is also a fact that the voluntary initiatives have no authoritative international statement of corporate responsibilities in regard to human rights protection and that the content of codes is highly variable. 26 Most of the private corporate codes of conduct lack the essential features a code of conduct should have as most of them generally lay down an outline rather than concrete principles. A perusal of the Nike s code of conduct will reveal that though there have been principles enunciated so as to prevent forced labour or child labour apart from the environmental standards and minimum wage policy, nowhere it is seen that there is an effective monitoring mechanism or reporting measures in case of violations or sanction element to ensure that they are followed. 27 An effective mechanism can be seen in the guidelines of Levi Strauss & Co. where they have stipulated that in case a contractor does not follow the requirements demanded by the guidelines it may go for a corrective action plan within a stipulated time limit and in case of further violation; it may terminate the business deal with the concerned contractor. 28 It is also stated that the private company codes as well as the industry association codes are also ineffective as they are voluntary, non specific and lacks appropriate sanctions. Though NGO codes are voluntary, once a company accepts it the company agrees to the monitoring by 24 W.H.Meyer & Boyka Stefanova, Human Rights, the UN Global Compact and Global Governance (2001) Cornell Intl.LJ 501, 505, Giovanni Mantilla, Emerging International Human Rights Norms for Transnational Corporations (2009) 15 Global Governance 279, Paul Redmond, Sanctioning corporate responsibility for human rights (2002) 27 Alternative L.J. 23, Nancy L Mensch, Codes, Law Suits or International Law: How Should the Multinational Corporation Be Regulated with respect to Human Rights? (2006) 14 U. Miami Int l & Comp. L. Rev. 243, Id 458

7 the concerned NGO but in most cases the corporations prefer their own codes, if at all they decide to abide by some code, rather than the NGO codes. 29 Though the OECD guidelines have been successful in solving disputes such as the formulation of new resettlement plans by the company working in Zambia due to persuasion by Canadian NCP, improvement of conditions of labour in Guatemala and improvement of protection of human rights in regard to construction of the gas pipeline in Myanmar, the same could not change the behaviour of corporations due to the limitations in the enforcement mechanisms as there are no provisions for reparations or relief. The enforcement mechanisms do not incorporate any procedures for condemning noncompliant corporations and have been rarely implemented 30. It is also submitted that the human rights clause brought out by the review in 2000 needs much more elaboration so as to clarify the extent of obligations of the corporations. 31 The ILO Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy is also based on voluntary participation and the Governing body has not been vested with powers to find a violation of the principles or to award relief to the sufferers of those violations. Moreover there is little scope for extending the application of the declaration as its main focus is on labour rights and employment rights. It has been stated that like the OECD guidelines, the ILO Tripartite declaration is also not very effective due to its voluntary nature and due to the absence of strict enforcement measures. 32 It is agreed that the UN Global compact is not formed as a substitute to any existing system but to complement the other initiatives to increase legitimacy and universality 33 but the fact as to whether a company voluntarily joins the commitment and strives to protect human rights and other related rights is doubtful as the working primarily is based on the companies communicating their progress annually and getting the corporations listed as non-communicating 29 Id at Saman Zia-Zarifi, Suing Multinational Corporations in the U.S. For Violating International Law (1999) 4 UCLA J. Int'l L. & Foreign Aff. 81, Danwood Mzikenge Chirwa, The Long March To Binding Obligations Of Transnational Corporations In International Human Rights Law (2006) 22 S. Afr. J. on Hum. Rts.76, 84, Id at B. King, The UN Global Compact: Responsibility for Human Rights, Labor Relations, and the Environment in Developing Nations (2001) 34 Cornell Int'l L.J. 481,

8 on the website if they do not do so. The only sanction element is that the company will be delisted after the expiration of one year from the initial deadline. Unlike other corporate codes and standards, the UN Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with regard to Human Rights obligates the corporations to adopt, disseminate and implement internal rules of operation in compliance with the Norms and also to incorporate these norms in their daily business activities. 34 It is also important to note that the norms also provide for effective and adequate reparation to those that have been adversely affected by failures to comply with these Norms in the form of reparations, restitution, compensation and rehabilitation. 35 Bu it lacks legal force as it is stated that the Norms had not been requested by the UN Commission on Human Rights and it is also interesting to note that the Commission did not vote for or against the norms but simply set it aside. 36 It seems that the corporations are also finding the voluntary standards acceptable as they can use their own prudence and come to a conclusion as to what all standards should be declared as acceptable. This is because the corporations were not completely in favour of the UN Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with regard to Human Rights as most of the corporations were in opposition to the said norms and publicly lobbied states against these norms on the ground that the norms went too far on assigning obligations to corporations Para 15 of the Norms: As an initial step towards implementing these Norms, each transnational corporation or other business enterprise shall adopt, disseminate and implement internal rules of operation in compliance with the Norms. Further, they shall periodically report on and take other measures fully to implement the Norms and to provide at least for the prompt implementation of the protections set forth in the Norms. Each transnational corporation or other business enterprise shall apply and incorporate these Norms in their contracts or other arrangements and dealings with contractors, subcontractors, suppliers, licensees, distributors, or natural or other legal persons that enter into any agreement with the transnational corporation or business enterprise in order to ensure respect for and implementation of the Norms. 35 Para 18 of the Norms: Transnational corporations and other business enterprises shall provide prompt, effective and adequate reparation to those persons, entities and communities that have been adversely affected by failures to comply with these Norms through, inter alia, reparations, restitution, compensation and rehabilitation for any damage done or property taken. In connection with determining damages, in regard to criminal sanctions, and in all other respects, these Norms shall be applied by national courts and/or international tribunals, pursuant to national and international law. 36 Giovanni Mantilla, Emerging International Human Rights Norms for Transnational Corporations (2009) 15 Global Governance 279, Id at

9 The need for binding principles and standards The human rights abuses caused by Enron Corporation in India by torturing people who demonstrated against the company s power plant due to its adverse impact on environment should not be ignored. The preliminary ruling in John Doe v. Unocal Corporation 38 that if corporations are held responsible they may be less willing in the future to operate in countries with poor human rights records 39 which gives an impression favouring the corporations so that the state derives benefits at the cost of rights of innocent civilians clearly shows the need for an effective binding code of conduct at the international level. It is interesting to note the remarks made by the Chairman of the Board of Union Carbide Corporation that they (MNEs) are not likely to pile up exorbitant profits at the expense of a host nation or to run roughshod over its national interests without incurring several long term penalties. 40 But it is extremely hard to believe this especially when the same corporate entity caused lot of human rights abuses that affected lakhs of innocent people in India (Bhopal Gas Tragedy 41 ) due to the leakage of poisonous gas (MIC) and escaped liability by just paying a negligible amount to the innocent victims and when considering the fact that the high officials of the company were left unpunished. Not only the corporations but also the state should have preference for binding standards and principles over voluntary codes as it is clear that the corporations at present prefer only the voluntary codes. It is clear from the fact that the states who rejected the UN Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with regard to Human Rights are supporters of the voluntary initiatives, some of the examples being the United States and the United Kingdom being the facilitators of the Voluntary Principles on Security and Human Rights, and South Africa being an active player in Kimberley Process against conflict F. Supp. 880 (CD. Cal. 1997) 39 Lisa Trojner, Key Human Rights Issues in the New Millennium (2000) 27 Hum. Rts. 8, Henry J. Steiner & Detlev F. Vagts, Transnational Legal problems: Materials & text, (1 st edn University Case Book Series, 1981) Union Carbide Corporation v. Union of India 1989 SCALE (1)

10 diamonds. 42 The EU Commission s Green Paper issued in 2001 states that binding rules ensure minimum standards applicable to all, while codes of conduct and other voluntary initiatives can only complement these and promote higher standards for those who subscribe to them. 43 Though it is stated that regulations do not have to be binding and enforceable to be effective and it is enough if they have the prospective to modify corporate preferences and behaviour in line with a particular goal 44, legally binding international norms can assure uniform standards of human rights observance by corporations through collective participation in standard setting and enforcement. 45 It is stated that the main reason which acts as a hindrance in controlling corporations is due to the difficulty in striking a balance between the fact that the corporations engage in cheap labour so as to earn more profit whereas at the same time the state needs the capital that these corporations bring into the state which allows the state to raise its economy. 46 It is stated that the corporate codes, as they are voluntary, makes it difficult for the corporations to keep up their promises and at the same time the UN should stop its effort to make a binding set of principles like the UN Norms on the Responsibilities of Transnational Corporations and instead make the nations to follow the OECD guidelines as they are comprehensive and to allow some monetary reliefs in the form of incentives or lowering the nation s debt if they create an effective national level legislation to combat the human rights abuses by corporations. 47 But this lacks credibility as the OECD guidelines also suffer from the very same problem of being voluntary and lack of participation and anticipating a domestic legislation in each country will not be practicable as the same reasons of the nation itself getting benefitted from the MNCs applies in addition to the fact that it will be much beneficial to have an international standard set up especially when it is concerning human rights violations which has no territorial limits and frequently involving cross border issues. It has also been stated that international regulation of MNCs is preferable over national ones because of the diminishing nature of the national officials 42 Giovanni Mantilla, Emerging International Human Rights Norms for Transnational Corporations (2009) 15 Global Governance 279, 288, Jan Wouters & Leen Chanet, Corporate Human Rights Responsibility: A European Perspective (2007) 6 Nw. U. J. Int'l Hum. Rts.273, Jennifer A. Zerk, Multinationals and Corporate Social Responsibility: Limitations and Opportunities in International Law (1 st edn Cambridge Uni Press, New York 2006) 41, Paul Redmond, Sanctioning corporate responsibility for human rights (2002) 27 Alternative L.J. 23, 24, Nancy L Mensch, Codes, Law Suits or International Law: How Should the Multinational Corporation Be Regulated with respect to Human Rights? (2006) 14 U. Miami Int l & Comp. L. Rev. 243, 245, Id at

11 to control the behavior of corporations due to global dispersion of assets. 48 The binding principles and standards should also take note of the fact that those corporations who do not manufacture and sell goods to consumers but to other corporations are also covered and effectively monitored as they are the main ones who do not join the voluntary codes when compared to the rest. The need for a binding character is applicable also to corporate social reporting because if it is only a voluntary exercise it will gradually fade away as a public relations tool and will never be considered as a serious obligation to make the corporations accountable. 49 In short, the need for binding standards in place of private and other voluntary codes can be summed up in the following words, a corporation's own claims to corporate responsibility should be viewed with the utmost skepticism - it is likely to be little more than a slogan Emeka Duruigbo, Corporate Accountability and Liability for International Human Rights Abuses: Recent Changes and Recurring Challenges (2007) 6 Nw. U. J. Int'l Hum. Rts. 222, Julian Blanchar, Corporate Social Reporting (1998) 23 Alternative L.J. 172, Stephen Rix, Globalisation and corporate responsibility (2002) 27 Alternative L.J. 16,

12 Conclusion The basic problem with the corporate codes is that as they are voluntary standards which are devoid of binding enforcement mechanisms they provide the corporations a large amount of discretion in applying these principles and ensuring monitoring mechanisms. How much ever benefits are said to be accrued through these non binding voluntary codes, they can never act as a substitute for binding international standards. In most of the cases the regional level protections in the form of domestic legislations and case laws have been more efficient in tackling the issues and abuses created by the corporations. As, for example, greater success have been achieved by the ATCA in dealing with cases against Coca Cola, Shell, Del Monte, Royal Dutch Shell, Rio Tinto, Eastman Kodak, Unocal and the like. There have been no clear cut binding international standards to deal with the activities of corporate sector especially in the field of human rights and tackling the issues with the help of voluntary codes of conduct have proved to be ineffective in the light of various human rights abuses that have occurred worldwide. It is often said that the support of corporate enterprises is necessary in the market especially to protect and promote the economic, social and cultural rights, but it is really doubtful as to whether the corporate enterprises will be interested in following these standards and principles which are just voluntary in nature and work for the protection of human rights in their market dealings though some of them who may be self motivated may stick on to these principles after accepting them. Things would have been better if they had at least a strict independent monitoring mechanism, but most of the corporate codes lack the same which is one of their inherent weaknesses. 464