Public Eye on Davos 2004
Corporate Accountability: The Limits of Corporate Self-Regulation (22.01.04)
Corporate Accountability: The Limits of Corporate Self-Regulation
Panel Discussion 21 Jan
Panel:
The panel was opened by Peter Utting who began by saying that between the two different forms of self-regulation, voluntary and binding, there is no inherently superior approach. However, the orthodoxy of the day holds that the only legitimate approach is that of voluntary regulation and not a legalistic approach. Utting referred to the latest box office hit «Pirates of the Caribbean» in which the heroine demands of her captors that they respect the Pirates Rule. The pirate, who decides to take her hostage, replies that the Pirates Rule is more of a guideline or a suggestion than a rule and if he weren’t to follow it, which he won’t, who cares? Corporate voluntary self-regulation is much the same, according to Utting and he posed the question «how do we get legally binding regulation back on the agenda?»
Utting also noted that the issues that have found their way onto these codes of conduct and voluntary rules are not yet those that, even if they were followed to the letter, will make a big difference to the overall question of development. Improving the conditions of employees working for transnationals in the South is a worthy goal, but without tackling issues of transfer pricing policies, taxation, corporate power, etc., mal-development or underdevelopment will not be cured. Overturning the principle of national treatment, which forbids protection of infant industries, should be high on this agenda.
Utting concluded by reminding us that the notion of corporate accountability means that someone has to be «held to account» and efforts to add teeth to existing regulations must be supported. Ultimately this is a political, not a technical, issue and any outcome will reflect the current constellation of social forces nationally and internationally, according to Utting. Clearly, the dominant forces today are those that favour the voluntary, self-regulation approach.
Klaus Werner spoke passionately about what he sees as the failures of voluntary codes such as the Global Compact. He has concluded that if you study the corporate names on the many codes of conduct and the like, and study the lists of the worst corporate citizens you cannot help but notice that the lists are almost identical. Therefore, he proposes that the presence of a company’s name as signatory to a code of conduct can be seen as something like an admission of guilt. The more codes they sign up to, the worse they are likely to be.
According to Werner, corporations who defend such voluntary agreements on the basis that industry can regulate itself and that binding regulations are therefore not necessary are arguing the absurd. If we followed such logic, we could do away with enforcing all kinds of laws, such as those protecting private property, traffic laws, laws against violence, etc., if everyone would just pledge to obey them. Werner claims that the new corporate-driven reporting systems set up to measure compliance to social and environmental standards are for public consumption only because these same companies turn around and violate their own principles in the same breath.
What is needed, according to Werner, is a determined struggle by members of civil society against the largest corporations who have amassed so much power and so much wealth. In a world in which the richest 380 people control as much wealth as the poorest 2.5 billion, only a struggle which reverses this can be judged to be successful.
Manzoor Ahmad of Pakistan confirmed that abuses by transnational corporations continue regardless of their commitment to uphold social and environmental standards. He also highlighted the complicity of many governments in this. Although he claimed that the WTO provides a mechanism through which arbitration of disputes between governments is possible, he noted that the retaliatory steps permitted by the WTO are unworkable in practice. If, for example, Pakistan were to score a victory and the WTO allowed them to mount sanctions against EU imports coming into Pakistan this is not likely to harm the EU significantly. However, the EU could counter by levying duties on Pakistani exports to the EU and this would severely damage the Pakistani economy. Thus, also the dispute settlement mechanisms of the WTO look good on paper they do not redress the inequality of power within the global economy.
The chair, before opening up the discussion to questions from the public, took the opportunity to reiterate the fact that many corporations are guilty of double standards, saying one thing and doing another. Hidayati concluded that without a binding regulatory framework meaningful corporate accountability cannot achieved.
Panel:
 | Peter Utting, Deputy Director, United Nations Institute for Social Devlopment |
| | Klaus Werner, Journalist and Author of „Schwarzbuch Markenfirmen“, Austria |
| | Manzoor Ahmad, Ambassador and Permanent Represenetative to the WTO for Pakistan |
| | Moderation: Nur Hidayati, WAHLI/Friends of the Eearth |
The panel was opened by Peter Utting who began by saying that between the two different forms of self-regulation, voluntary and binding, there is no inherently superior approach. However, the orthodoxy of the day holds that the only legitimate approach is that of voluntary regulation and not a legalistic approach. Utting referred to the latest box office hit «Pirates of the Caribbean» in which the heroine demands of her captors that they respect the Pirates Rule. The pirate, who decides to take her hostage, replies that the Pirates Rule is more of a guideline or a suggestion than a rule and if he weren’t to follow it, which he won’t, who cares? Corporate voluntary self-regulation is much the same, according to Utting and he posed the question «how do we get legally binding regulation back on the agenda?»
Utting also noted that the issues that have found their way onto these codes of conduct and voluntary rules are not yet those that, even if they were followed to the letter, will make a big difference to the overall question of development. Improving the conditions of employees working for transnationals in the South is a worthy goal, but without tackling issues of transfer pricing policies, taxation, corporate power, etc., mal-development or underdevelopment will not be cured. Overturning the principle of national treatment, which forbids protection of infant industries, should be high on this agenda.
Utting concluded by reminding us that the notion of corporate accountability means that someone has to be «held to account» and efforts to add teeth to existing regulations must be supported. Ultimately this is a political, not a technical, issue and any outcome will reflect the current constellation of social forces nationally and internationally, according to Utting. Clearly, the dominant forces today are those that favour the voluntary, self-regulation approach.
Klaus Werner spoke passionately about what he sees as the failures of voluntary codes such as the Global Compact. He has concluded that if you study the corporate names on the many codes of conduct and the like, and study the lists of the worst corporate citizens you cannot help but notice that the lists are almost identical. Therefore, he proposes that the presence of a company’s name as signatory to a code of conduct can be seen as something like an admission of guilt. The more codes they sign up to, the worse they are likely to be.
According to Werner, corporations who defend such voluntary agreements on the basis that industry can regulate itself and that binding regulations are therefore not necessary are arguing the absurd. If we followed such logic, we could do away with enforcing all kinds of laws, such as those protecting private property, traffic laws, laws against violence, etc., if everyone would just pledge to obey them. Werner claims that the new corporate-driven reporting systems set up to measure compliance to social and environmental standards are for public consumption only because these same companies turn around and violate their own principles in the same breath.
What is needed, according to Werner, is a determined struggle by members of civil society against the largest corporations who have amassed so much power and so much wealth. In a world in which the richest 380 people control as much wealth as the poorest 2.5 billion, only a struggle which reverses this can be judged to be successful.
Manzoor Ahmad of Pakistan confirmed that abuses by transnational corporations continue regardless of their commitment to uphold social and environmental standards. He also highlighted the complicity of many governments in this. Although he claimed that the WTO provides a mechanism through which arbitration of disputes between governments is possible, he noted that the retaliatory steps permitted by the WTO are unworkable in practice. If, for example, Pakistan were to score a victory and the WTO allowed them to mount sanctions against EU imports coming into Pakistan this is not likely to harm the EU significantly. However, the EU could counter by levying duties on Pakistani exports to the EU and this would severely damage the Pakistani economy. Thus, also the dispute settlement mechanisms of the WTO look good on paper they do not redress the inequality of power within the global economy.
The chair, before opening up the discussion to questions from the public, took the opportunity to reiterate the fact that many corporations are guilty of double standards, saying one thing and doing another. Hidayati concluded that without a binding regulatory framework meaningful corporate accountability cannot achieved.
