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Corporations and Human Rights: How to Fill the Gap
Alan AtKisson, 30 Oct 06
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Prof. John Ruggie of Harvard is also the UN Secretary-General's Special Representative on the issue of human rights and transnational corporations and other business enterprises.


Ruggie's current assignment is to survey the governance gaps and make recommendations. Here's a short summary of a talk he recently gave in Stockholm. It's worth learning about this topic, and the emerging solutions to it. What happens here will shape global governance (note: "governance" is not the same as "government") for generations to come. Human rights gets much less attention in this regard than, say, climate change; but the evolution in this field of international law is probably more compelling and decisive and will set a template in place for many other areas.

Ruggie noted that we are at an historical turning point in legal history. In legal terms, we are moving out of a state-based system to an individual-based system of international jurisprudence, at least in the area of human rights. Individuals can now be tried before international court on human rights violations. This is a fundamental change in how the world is governed.

There is now a move afoot by some actors to extend the reach of international law to legal persons as well -- that is, corporations. Imagine a corporation being tried in The Hague on human rights charges. This could happen in the not-too-distant future; indeed, if a company was clearly involved in an act of genocide, it could happen today.

But trial before international court is hardly a complete system of governance, and Ruggie's job is to look at what kinds of adjustment need to be made in global governance with regard to corporate behavior and international law, with regard to human rights.

The first question is: how do you engage the corporate sector in the promotion and protection of human rights? This is a very broad, historic question in the area of global governance, and the fact that it is pressingly urgent is a consequence of globalization. Obviously, nation-states play a role; but what role? And what to do when the local nation-state is essentially a toothless, or even corrupt, entity?

And what about more nuanced situations, which tend to fall under the label "complicity"? When is a company legally complicit in human rights abuse? Such critical definitions are still lacking, in whole or in part.

Also lacking are tools: there is no clear and unified guideline, for example, on how to do a human rights impact statement -- and few are being done (though some are). Ruggie's office will also be best practices, as well as making recommendations on new kinds of legislation, regulation, or standard-setting activity, so watch that space.

This is a challenging area to poke into, because there is very little consensus on what should be done. Human rights activists have tried to stretch the law to cover corporations, while companies have resisted and pushed for states being ultimately responsible. Ruggie's avoiding a "finger-pointing" approach to tackle the structural problems of gaps and failures in the systems of governance within the global economy -- especially in those areas euphemistically called "weak governance zones."

One reason for the urgency is that in this globalized world, corporations face increasing likelihood that they will get into trouble and find themselves doing business in places where human rights are being abused. Reasons:

1. The law of numbers. There are about 80,000 multinational companies in the world, and many of them have very little experience working internationally. A company in Kansas that has done business with other US states and Canada suddenly does business in the Democratic Republic of Congo. "It's not Kansas," notes Ruggie.

2. Company structures. Take Nike, the "global poster child of a multi-national corporation." It's a network organization; it owns a brand, but not much else. "The trade-off is you give up a certain amount of control over your sources. Each supplier becomes a vulnerable point.... That factory in Indonesia doesn't make the news for violations of labor standards; it's Nike that ends up on the front page."

3. Companies are working in worse and worse neighborhoods. "Take natural resources, mining, gas etc.: to get to new sources, you have to go places that are more and more problematic in terms of human rights." And extractive industries account for two-thirds of the reported human rights abuses these days. (Note: Footwear and apparel probably used to top the list, but this category has dropped now to a distant third, behind food and beverage, because of concerted efforts to reduce its exposure. Let's call that the Nike effect.) Most of these events happened in the 65 poorest countries in the world, which are paired with "weak governance zones" (current OECD euphemism).

Example: A "good company operating in a weak governance zone" will try to respond to community pressure to do positive things. An oil company will start to provide development funds to a certain group, for example -- without understanding that this particular group is in conflict with other similar groups. The conflict is exacerbated.

"Good companies" (Ruggie's quotes) are getting into trouble because they are trying to do the right thing ... and they are trying to do it because it needs to be done, but government is absent.

Another example: Ruggie went to a name-withheld country to visit a name-withheld mining company. The company had done all sorts of things to invest in community development, jobs, etc. Nevertheless, riots and protests rose up against the mining company. So he asked the mayor, what did you do during the protests? The mayor said, "I left town!"

It turns out that this mining company had done the sustainable development plan for the whole region ... and gotten into a business where it had no real competency, and no legal jurisdiction. It was, after all, a mining company. But it was stepping in because government was not (in this case not even physically) there.

On the other hand, bad companies (no quotation marks needed on that phrase, said Ruggie) exploit the fact that they work in "weak governance zones" ... and do their worst.

Next Ruggie surveyed the world of international standards, "soft law" documents, and voluntary guidelines, naming guidelines produced by the ILO, the OECD, etc. (He did not mention the Earth Charter, but he could have.) Interestingly, the boundary between voluntary and legally prescribed guidelines is blurring: for example, oil giant BP made a set of human rights-related guidelines part of a formal contract with a host country. Suddenly, those guidelines have the force of contract law. They are no longer strictly "voluntary." Also, some international finance institutions are requiring "social and environmental impact assessments" that include human rights ... which links access to credit to such "voluntary" reporting processes.

(Note: All of the above should give great hope to those working on civil society or multi-stakeholder initiatives to develop guidelines and standards; you may be writing tomorrow's regulatory framework.)

Also some countries where abuses are taking place are beginning to push for companies' home countries to take more responsibility for what those companies do.

The world has many puzzles to solve, including how to fill those zones of "weak governance" (e.g., Congo) and close the "protection gap" people in those zones experience; how to rein in state-owned companies (because you can't sue governments) that have their own capital and so no incentive to abide by any international standards; and how to fill in the area of tort law, which is so far missing from the scene in these international cases. One jumps from "voluntary initiatives" all the way to international criminal law on issues like genocide, with nothing in between.

One big missing piece: incentives. Ruggie noted during the Q&A session that climate change is now all the rage among corporations, because they have discovered that there is a big commercial upside in energy saving, new technologies, new markets etc. He noted Jeffrey Immelt of GE and his open letter to the Bush Administration, chastising them for dropping the competition ball on the global playing field because of their backward view of climate change. But where are similar letters on human rights? "What is the commercial upside for addressing human rights? How can we make human rights a branding opportunity?"

Ruggie's bottom line: "We're dealing with a fundamental, historical transformation. It will take a generation to work itself out. But it must be worked out. The stakes are too high. What is at stake here is 'sustainable globalization.'

"As Kofi Annan says, 'If we cannot make globalization work for all, it will work for none.'"

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Comments

Thanks Alan for both of your recent posts. Very informative. I'm very interested in the notion of corporations having the responsibilities and not just the rights of people. Very important, I'd like to contribute to this development somehow. So far I just communicate this idea whenever I can. Thanks again.


Posted by: Janelle on 31 Oct 06

Thanks for the great post. One thing I've been thinking a lot about lately is the our system of large public companies that make decisions to provide maximum share holder value for investors, which are mostly large mutual fund firms. I have a pretty sizable chunk of my 401K in mutual funds, and I must say, it's impossible to keep track of which companies these funds hold stock in and what they're up to. I would rather sacrifice a couple of percentage points of return if that what it would take for companies to behalf more responsibly. Green funds are some help, but ultimately don't do enough to ensure my investment money is being used in a humanitarian and environmentally responsible manner.

It's pretty easy for many Americans to vote with their spending dollar, but it's much hard to vote with their investing dollar. I'm not sure what the answer is, but this seems to be a big part of the problem.


Posted by: Eric Goetz on 1 Nov 06

A major element in the reforming of multi-national, or transnational corporations, or TNCs is that they are vastly powerful financially. What is never discussed here, and on most sites dealing with social, economic, and political problems is this. What is money? The answer at first may be painfully simple. It is just a medium of exchange. Yet, it is more than that. It is the POWER to CONTROL the use, and abuse of limited resources on the planet. By understanding its full nature, and purpose we can reform it into something in which nearly everyone, and everything could benefit including banks, corporations, and even global justice.

Here, I am drawing your attention to my research, and development project of Transfinancial Economics, or TFE. This is a new paradigm which would be highly attractive not just to the few, but more importantly to the many. I must point out that it requires intelligence, and vision to accept it as a serious proposition.

Essentially, it claims that taxes, and indeed, fundraising for most charitable NGOs would be superflous. Instead, new unearned money could be created, and inflation would be controlled electronically. Thus, devaluation of currency would not occur.

For corporations TFE will mean greater profits, and growth. But, it would also imply the emergence of NGOs concerned with corporate responsibility. These would be financed as never before, and hence, would have much greater power, and influence. They would be able to treat corporations on a level playing field. They could use business tactics to ensure that TNCs act more responsibly. They could even issue massive business grants (via a special bank), and subsidies whose sole purpose is to bring about certain social, and economics changes...yet, profit by it!! All this would please shareholders, and if any losses were occured in any positive reform programme these could be compensated for by the new unearned money.

TFE has the potential of becoming extremely popular with the voting public. I have also come to the realization that it is largely useless to oppose the present financial system. Instead, positive proposals are needed to reform it.

My research, and development project can easily be found on the internet via a simple word search.

RS.

It is unlikely that the development of new international laws will have that much effect on TNCs...especially if it goes against their commercial interests. They have become too powerful, but with TFE we have quite a different ball game.


Posted by: Robert Searle on 2 Nov 06



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