Taming Mammon: Time for regulating corporations
Although the UN continues to repose its faith in the capacity of big business to promote sustainable development and has entered into a compact with TNCs which have a notorious record of environmental and human rights violations, the push for an international convention to regulate corporate activities continues.
Yin Shao Loong
A PROPOSAL for an international framework convention on corporate accountability created a stir of excitement amongst otherwise diffuse proposals and talk of partnerships with business that pervaded the second preparatory meeting for the UN’s World Summit on Sustainable Development (WSSD) in January.
Most of the groups gathered for the Multi-stakeholder Dialogue (MSD) perked up when the initiative was proposed by the NGOs during the first session of the MSD. Friends of the Earth International had previously raised the issue at a three-day meeting of NGOs prior to the MSD. The idea found widespread support from those attending and groups rapidly set to work to make this a key issue at the PrepCom. At the same time, New York newspapers were reporting daily on a string of Enron executives being summoned to testify before the US Congress for a host of possible crimes in the biggest corporate bankruptcy in the country.
The most muted reception unsurprisingly came from the business and industry group, represented by the newly-formed Business Action for Sustainable Development (BASD), a joint entity of the International Chamber of Commerce (ICC) and the World Business Council for Sustainable Development (WBCSD). An initial cautious response to the proposal for a framework convention on corporate accountability was followed in later sessions by a studied attempt to act as if it had never been mentioned.
Nonetheless the threat had been duly noted. In a speech two weeks later at the Business in Environment Conference in the UK, Lord Holme of Cheltenham, Vice Chairman of the BASD and a former director of mining giant Rio Tinto, tried to present the suggestion for a framework convention on corporate accountability as the proposal of a ‘fundamentalist minority...who see all capitalism as evil and...want to bind Gulliver hand and foot’ forced onto a much more reasonable ‘majority’ who wish to see Gulliver tread more carefully and avoid squashing people.
Far from missing the mark on the driving forces of concern for corporate regulation, Holme was seeking to shift the poles of the debate to suit the ends of the big-business community (the BASD primarily represents transnational corporations). By attempting to single out a portion of his opponents as a ‘fundamentalist minority’ amongst a liberal majority, Holme was seeking to divide his opposition and force them to conform to his terms.
This divisive strategy worked effectively in the early days of the so-called ‘anti-globalisation’ movement with the debates over protest violence (against police and property). It further had the effect of strengthening the legitimacy of moderate corporate accountability groups based in the (usually developed) metropoles versus grassroots campaigners and communities who faced corporate criminality on the ground (e.g. mining, industrial agriculture, logging, big dams, biopiracy, tourism). Like the debate in the anti-globalisation movement, the judgement arrived at is not so much on the methods of resistance but, more dangerously, on who holds a ‘valid’ viewpoint or critique of the problem. Radical ideas thus get sidelined by association with radical actions.
Holme’s point was to engineer a situation where regulators only listen to the voices big business would like them to hear rather than those who have valid contentions of justice and accountability that could unseat the privilege big business presently enjoys.
Reining in TNCs
The last decade has been a prolific one for transnational corporations (TNCs). The neoliberal policies of the Reagan and Thatcher era facilitated the transition to an orthodoxy of economics and governance that allowed corporations even freer rein than they had previously enjoyed. The fall of the Soviet Union in 1989 marked the beginning of a 10-year partnership with governments to show serious cracks by the time of the protests that marked the November 1999 Seattle meeting of the World Trade Organisation (WTO).
Corporations learned to enjoy deregulation (sometimes with beneficial re-regulation thrown in when they expanded corporate rights and freedoms as seen in the Uruguay Round/WTO agreements), the rise and rise of the New Economy underlay the promise that the West was ‘dematerialising’ and what was good for the West was good for the rest. Developing countries caught the fever and thought that they could leapfrog into the Internet Revolution. The ‘best’ companies abandoned real and dirty material products for the virtual world of trading speculative derivatives.
Then the bubble burst, ‘dot-coms’ became ‘dot-bombs’, telecommunications firms went bust, and Enron, it was revealed, was not the champion of a new paradigm of production (selling energy futures instead of energy) but a failed exemplar of the age-old paradigm of wealth creation, the swindle. The Enron swindle struck at the heart of dreams of the democratisation of American-style corporate capitalism that ownership and control would increase for the workers through stock ownership. It was not envisioned that this would provide greater opportunities for the private sector to appropriate the earnings of workers and drain them away in the frantic stocks gold-rush of the ‘technology bubble’, or, in the particularly egregious case of Enron, forcing workers to buy company stock while directors were selling theirs.
Enron turned out to have made and even unmade rules, but it got too greedy and it got caught. The majority of commentators in American and British papers have tried desperately to avoid confronting the well-known fact that Enron and Arthur Andersen were not ‘aberrations’ in capitalism but the white-collar standard tendency.
Arthur Andersen’s other ‘Big Five’ accounting siblings have been rather silent on its discrepancy. Could it be that they are silently contemplating the injunction ‘let he who has not sinned throw the first stone’? The Big Five have spread so widely that they are in many cases flirting with conflicts of interest: the same firms that help corporations avoid taxation are also commissioned to audit the finance ministry accounts in several countries. No surprise then that Arthur Andersen (now facing death-by-merger) has been dropped from several government contracts.
The shock of the Enron-Arthur Andersen scandal is not that it revealed that corporations would freely indulge in criminal activity. Rather, it was that some of the largest corporations would brazenly ignore the only written rule of corporate business: ‘Exploit anybody, but don’t exploit your shareholders.’
These recent events have given the movement for corporate accountability the shot in the arm that it needed to bring a more critical viewpoint to bear.
Sustainable development and the greenwashing of big business
Along with the ‘dematerialisation’ of the 1990s came the re-invention of those companies who continued with the ‘dirty’ real production. Companies were presented as being no longer the source of major environmental problems or precipitators of political coups (like United Fruit). Instead, they were part of the solution to the world’s problems, they possessed the ‘skills’ and ‘creativity’ to ‘deliver progress’. Big business managed to sell the world the myth it made of itself.
One of the most lasting early coups in the ‘greenwashing’ of business was the conquest of the 1992 Rio ‘Earth Summit’ (the United Nations Conference on Environment and Development, UNCED). Chairman Maurice Strong, a Canadian businessman, granted a privileged place to the newly formed Business Council for Sustainable Development (BCSD). The BCSD had been assembled out of the world’s largest transnational corporations - Shell, Rio Tinto, Dow, Societe Generale, 3M, Nippon Steel, DuPont, ABB, ALCOA, Procter & Gamble, and others - by Swiss millionaire Stephan Schmidheiny in order to present the ‘business case’ at Rio. The aim was precisely to secure for transnational corporations an inviolable position on matters of sustainable development. Without this foothold sustainable development would end up as a process largely determined by the UN, its member states and non-commercial civil society.
The unsustainable production paradigm practised and promoted by the BCSD’s members would have been the first to come under the microscope. It was a situation that big business and industry had to stop before it got out of hand.
Schmidheiny is now largely forgotten, and his flagship book Changing Course has proved to be nothing more than a miserable distraction. He was nonetheless successful in his mission; rather than reconciling capitalism and the environment, the 10 years after Rio have led to an intensification of a protectionist trade agenda institutionalised in the WTO and a deepening environmental and social crisis in the Third and ex-Second Worlds.
The BASD is the direct heir of the BCSD and plans to maintain at the Johannesburg WSSD what its predecessor achieved at Rio. The presentation of the ‘business case’ has led to no progress whatsoever since Rio. Given the chance at Johannesburg, it will ensure that the next decade will be even worse as the implementation crisis of sustainable development continues unchecked.
Greenwashing by business has become an industry standard since Rio. It has in fact spawned a sub-industry of its own comprised of accountants, consultants, faux-experts, auditors, and advertisers. It has generated a massive revisionist machinery that obscures profound issues of social and environmental justice, and the development crisis of the South. It has shaped the view of Third Way thinkers that Margaret Thatcher was right, ‘there is no alternative’ to the neoliberal project, unfettered capitalist expansion is the only possible solution. This is supported by a depoliticised language of ‘corporate social responsibility’, that business only has to ‘improve performance’ through ‘voluntary initiatives’.
Voluntarism is not enough
Lord Holme would have us believe that voluntary disclosure and self-regulation by business is sufficient: ‘More and more businesses are declaring their values, publicising their policies and setting out their standards. That is as it should be. The modern world rightly requires power to be accountable - we live in a ‘show me’ not a ‘tell me’ world - and large companies are powerful bodies - perhaps not always as powerful as their critics like to imagine but sometimes more powerful than their directors like to acknowledge. The outside world has the right to know where companies are coming from and to know both how well they comply with regulation and, even more importantly, how well they live up to their own standards.’
By believing that presenting a good face, producing reports and showing compliance with self-established values constitute a viable standard of accountability of the world’s most powerful economic organisations, ones which can affect the fate of countries, Holme is asking for an inordinate amount of trust for companies which have consistently prioritised profit at the expense of the environment, labour rights and the political freedom and development rights of host countries. It is akin to saying we should trust Enron CEO Kenneth Lay because he was a successful businessman and denies any knowledge of ‘wrongdoing’ in Enron. Of course corporations will show their ‘best face’ as long as they can to avoid scrutiny. Can we honestly take a proposal seriously that asks us to accept the words of people who are strongly inclined to pursue financial interest over other values, even human life?
Unfortunately Holme’s excuses have proven powerfully effective at cowing governments and swelling the ranks of the corporate social responsibility sector. It has forced governments to engage in a policy of appeasement.
Consequently efforts at corporate accountability and regulation have been forced to bend to the prevailing current of the times which tended to view widespread environmental destruction, corruption and labour exploitation as anomalies rather than the mainstream of transnational business practice. However, it has proved impossible to sustain this. The popularity of Naomi Klein’s No Logo was symbolic of a much larger understanding that all was not well ‘when corporations ruled the world’. The eruption of the Seattle and Genoa protests were deeply unsettling to the big business forces and their Third Way allies. The 11 September events granted only a temporary respite from the increasing pressure on big business to be made accountable.
Rather than a ‘show me’ world, demonstrators were taking to the streets and encircling corporate headquarters crying, ‘We’ll show you!’ The BASD’s inaugural meeting in Paris, October 2001 was surrounded by protestors denouncing the creation of another business network. BASD chair Sir Mark Moody-Stuart, formerly chair of Shell, struck a more co-optive note than Lord Holme. ‘We welcome their presence. We welcome their passion,’ Sir Mark said of the protestors. ‘These people have as much of a contribution to make to the process of sustainable development as the business community does.’
The belief that the big-business community can make a constructive voluntary contribution to sustainable development still remains accepted by the UN after a decade of increasing evidence to the contrary. Nonetheless Moody-Stuart was joined in the BASD launch by Nitin Desai, Secretary-General of the Johannesburg Summit. Ten years after Rio it is not the Secretary-General of the Summit who has awarded business a special place. This time it is the UN Secretary-General Kofi Annan, who recently appointed Moody-Stuart as one of 11 business magnates on the 17-member Global Compact Advisory Council.
Global Compact: UN Inc.?
The UN has shown worryingly little resistance to the prevailing corporate ideology of the 1990s. The Global Compact initiative launched in 2000 has gone further than Maurice Strong’s strategy for the Earth Summit; now the entire cash-strapped UN has been opened to ‘public-private partnerships’. Cosmetics firm Aveda can partner with the UN Educational, Scientific and Cultural Organisation (UNESCO) to conserve worldwide ‘beautiful faces’ (i.e. heritage sites), Coca-Cola partners with the UN Development Programme (UNDP) to narrow the digital divide in the Third World (still dreaming of leapfrogging into the Internet Revolution), and there is talk of corporations funding civil society organisations.
The initiators of the Global Compact saw it as a non-binding way to bring corporations into the fold of the UN by getting them to agree to support nine principles derived from key UN agreements. Kofi Annan hoped to use it to bring corporate behaviour in line with universal values. The Compact would provide the model for future UN-business partnerships. Partner companies, whose membership was kept largely secret (until criticisms led to the publishing of the list on the Compact website), have had the opportunity to use the UN logo on publications even though Global Compact officials have insisted that the use of the logo is strictly controlled.
A simplified version of the logo has already been used without attribution by DaimlerChrysler, photos of CEOs with the Secretary-General are already a powerful visual currency in the ‘bluewashing’ of mega-corporations, and several known members of the Global Compact have already violated principles since joining the Compact.
US-based CorpWatch, on behalf of the Alliance for a Corporate-Free UN (see box), has produced Greenwash+10: The UN’s Global Compact, Corporate Accountability and the Johannesburg Earth Summit, which has detailed the concerns over the UN-business partnership. Global Compact violators include Aventis, Nike, Rio Tinto, Norsk Hydro, Unilever and the International Chamber of Commerce, which have betrayed principles on human rights, the precautionary approach to environmental challenges, environmental responsibility, freedom of association and the right to collective bargaining.
The Alliance has also called for a framework convention on corporate accountability and has attempted to engage with the Global Compact office on tightening the corporate accountability factor within the UN.
The Global Compact displays some of the worst trends in the corporate appeasement ideology of the 1990s by granting business the institutional legitimacy it desires in exchange for non-legally binding adherence to principles. It is only marginally different from the trust-based ‘accountability without regulation’ that Lord Holme calls for.
Many of the flaws stem from the Global Compact’s origins as a derivative of 1990s business school orthodoxy which really believed that large corporations were dynamic engines of skill and creativity which aberrantly found difficulty in adhering to universal values such as respect for human life. Corporations bore the burdens of the world now that states had relinquished their responsibilities (rather than being often forced to do so), and all they wished for was less restrictive regulation in order to do good deeds (which were somehow achieved by improving the mysterious ‘shareholder value’). Theirs was not to question why (there was regulation), theirs was but to serve. This naive-pragmatist model positions the Global Compact as a ‘multi-stakeholder learning network’ in which corporations can absorb universal values presumably by osmosis.
Gross optimism deflated
This perverse faith in the corporate Big Brother who will miraculously take care of the world’s problems was closely related to the hasty claims of an arrived utopia with the bubble economy that rose around New Economy capitalism. Pro-Global Compact commentators within the UN have gushed about ‘hope of a truly social capitalism, the level of stock ownership has never been as broadly distributed as it is today, and demographic changes ensure the continued swelling of pension funds. Long the target of market planning, the educated consumer now doubles as educated investor. The interests of civil society and those of shareholders are slowly converging.’
Although it was already clear when that was written that this ‘universal’ largesse was restricted to a small percentage of the world population, that most humans have never owned stock let alone a pension fund, the gross optimism of this position which celebrates the apparent convergence of corporate and social interests and values is now clearly deflated by the Enron scandal. (Of course, defenders will still insist that Enron was an aberration, a containable virus, not the symptom of a disease-ridden system.)
By transplanting a business school fantasy into the highest level of an intergovernmental body with the reach and scope of the UN, its architects have recapitulated the defining folly of the 20th century, that good intentions and fine ideas will suffice to save the world. Our reality is far more remorseless than that, we are often wisely reminded that the road to hell is paved with good intentions. The call for a framework convention on corporate accountability to emerge from the WSSD is the product of decades of peoples’ movements who no longer wish to suffer from the greed of large corporations. Experience has shown that talk of good intentions is always compounded with bad faith. The call for strict business regulation is more than a fine idea, it is an absolute and urgent necessity. No less than the fate of the planet and its people hangs in the balance.