Global Policy Forum

A Strategy for Campaigning Human Rights
and Environmental NGOs

By Chris Marsden *

Joel Bakan's 'The Corporation - the pathological pursuit of profit and power' (1) deserves a response. It is a serious challenge to all of us who believe that although large companies are a major cause of sustainability problems (2) they must also be a crucial part of seeking and developing solutions. It is a particular challenge to anyone who promotes corporate social responsibility (CSR) (3) as a constructive approach to sustainable development.

Bakan argues that the evolution of corporate law in both the US and UK during the nineteenth century ‘transformed the corporation into a person, with its own identity, separate from the flesh and blood people who were its owners and managers and empowered, like a real person, to conduct business in its own name, acquire assets, employ workers, pay taxes, and go to court to assert its rights and defend its actions' (4) but, of course, without the morality and conscience that is commonly part of an individual's persona. Indeed he argues that the institution of 'the corporation' is legally required to pursue its own self-interest irrespective of the harm or the denial of opportunities it may inflict on others. It is, in effect, a pathological externalising machine. ‘Though they can be positive – jobs are created and useful products developed by corporations in pursuit of their self interest – it is no exaggeration to say that the corporation's built-in compulsion to externalise its costs is at the root of many of the world's social and environmental ills. That makes the corporation a profoundly dangerous institution.' (5) ‘Yet oddly, we are asked to believe that corporate persons – institutional psychopaths who lack any sense of moral conviction and who have the power and motivations to cause harm and devastation in the world – should be left free to govern themselves.' (6)

Finding the right balance between enabling free enterprise to create our wealth and dealing with the problems of market failure has long been a concern for those seeking to govern for the public good. However, the implications of unbridled corporate power have increased hugely in scale and significance since the massive boost to market economics ideology given by the collapse and discrediting of Soviet style communism. Since 1989 the corporation has been able to take advantage of the growing popular belief that freedom is good and government is bad. As the representative of 'legal persons', the corporate lobby has largely succeeded in persuading politicians that what is good for the company is generally good for the country and its people and that what is good for the company is less regulation, more privatisation and lower taxes.

No one has been more influential in promoting this case than Milton Friedman. He argues that while corporations are good for society they should never try to do good for society unless it is in the interests of their shareholders to do so. The moral imperative of corporations is to make as much money for their shareholders as possible. To pursue social and environmental goals at the expense of profitability would be immoral. It can only be justified if so-called socially responsible actions are in the interests of shareholders; in other words if there is a business case. By implication, therefore, all corporate social responsibility policy statements can only be justified if they are hypocritical window-dressing or 'greenwash'. ‘Hypocrisy is virtuous when it serves the bottom line. Moral virtue is immoral when it does not' (7) Milton Friedman asserts in an interview with Joel Bakan, but in the same interview he also agrees that ‘corporate externalities have enormous effects on the world at large' (8). It is difficult to understand how the renowned economics professor reconciles these two statements. It can only be that he assumes that business takes place within a governance structure where the government and legal system effectively force companies to take account of those externalities or face appropriate penalties.

Yet governments increasingly fail to do this and the rule of law at present actually reinforces the power of corporations. Particularly in the US and the UK, it gives the corporation most of the rights of an individual and the requirement to operate entirely for the benefit of its shareholders. As companies generally have access to many more resources than individuals and other organisations, this gives them hugely disproportionate power to defend themselves against any accusations of wrongdoing in countries with effective legal systems. Large companies from Continental Europe and Japan come from different governance traditions particularly with regard to their close association with government and, in the European case, also trade unions. This has traditionally led to a more built in approach to social responsibility, though not without their own problems of conflict of interest and corruption. Nevertheless, the economic efficiency and conformity demands of financial and market globalisation seem to be forcing companies from these parts of the world to adopt an increasingly Anglo-American approach, while their host national governments adopt an ever more enabling laissez faire business environment.

In the domain of weak international law and governance and in countries with weak legal systems and weak, even corrupt governments, the problem is even worse. These are areas where most large transnational corporations operate and where they are often hugely powerful in terms of both the impact of their own business operations and the influence they bring to bear. Whether or not they choose to recognise it and use it positively, these corporations exercise huge influence on the way business is done, on how it is governed and, indeed, on wider issues of governance such as human rights. The current reality is that an institution that Bakan claims is only interested in the pathological pursuit of profit and power is playing a role in the governance if issues crucial to our collective future.

So what is to be done? The corporate lobby argues that the world is best run by self-regulating corporations, driven by self-interest, competing freely to provide its citizens with the goods and services they want. But, as Bakan points out (9), the market has never been a system for solving the world's problems. It is a theology without morality. It has no sense of right and wrong, justice, common as opposed to individual interest nor any long term vision. Huge numbers of people in the world are denied basic subsistence, the common interest or externalities are judged by companies on the basis of their own self-centred cost-benefit analyses and market short-termism prevents adequate thinking and action on long term issues like global warming.

Bakan's broad conclusion is that in order to make companies manage and internalise their externalities, national governments must be persuaded to regain control of them through regulation and fiscal penalties. He argues that robust nongovernmental institutions and community activism, though vital contributors, can never be a substitute for government regulation. ‘Many among the corporate elite and their defenders would likely sing ‘Hallelujah' the day activists against corporate abuse abandoned government. That is, after all, what many business leaders want: replacement of government regulation of corporations with market forces, perhaps shaped by the oversight of nongovernmental organisations (with no legal powers) and the demands of conscientious consumers and shareholders (with minimal effects). In this scenario, corporations get all the coercive power and resources of the state, while citizens are left with nongovernmental organisations and the market's invisible hand – socialism for the rich and capitalism for the poor, to borrow a phrase from George Bernard Shaw.' (10)

There is enough substance in Bakan's argument to provide serious challenge to all those concerned with promoting corporate social responsibility as a vital contributor to sustainable development, whether in NGOs, national and international government agencies or within companies themselves. What should their strategy be?

Firstly, some agreed long term vision is needed regarding the future governance of corporations. For all the failings of democracy and concerns about the motivation and honesty of government officials (11), the ideal would seem to be a set of internationally collaborating, representative national governments holding corporations to account through strong internal regulations backed by strong international law and enforcement institutions.

Whatever the ideal vision might be, however, it is clearly a long way from being achieved. Any strategy must take account of current reality and start from where the world is now. That reality is close to that described in the ‘Hallelujah' quotation above by Bakan. The perceived imperatives of international competitiveness have driven many national governments to deregulate markets, privatise public utilities, reduce the corporate tax burden and go soft on corporate environmental and social externalities. This ‘governance deficit' has partly been filled by increased power and activism of NGOs, ethical investment initiatives and consumer activism. This has encouraged some companies, often driven by well-intentioned leaders and internal specialist teams, to understand their external impacts better and take more account of them in their business decision making – in effect to assume an autonomous governance role. But, when real choices about shareholder value versus interests external to the company have to be made, can corporate self-governance, however well-intentioned, ever be relied upon?

Given this reality, the strategy for campaigning NGOs must focus on how to make the current situation better while working towards the ‘ideal' of restored representative government power. There are three interrelated paths to follow, all of which depend on one major thrust – increasing the quantity and quality of information about company impact on social and environmental issues. The first is to make the market take more account of externalities. The second is to work on the personal ethics of business leaders, their management teams and ordinary employees so that they are fully aware of the impacts of their decisions and activities. Thirdly, the de facto governance role that corporations are already exercising needs to be more widely recognised and they must be pressed into being more accountable for their performance of that role. Over time, with plenty of publicity, the successes and, more likely, the inadequacies of using organisations like companies and NGOs as a permanent solution to dealing with the world's social and environmental problems will hopefully become clearer. This understanding should be used to press national governments and international governance agencies to produce and enforce the necessary codes of practice, rules and regulations.

Market theory has always assumed ‘perfect' conditions. These include ‘perfect' knowledge, that is all buyers and sellers have all the information they need to make optimum decisions. This is clearly not the case in markets where large corporations are able to control much of the information available on the product, its production process, its supply chain and the social and environmental external impacts. Corporations own much of the expertise. They decide how much information to share and what spin to give it. They have enormous resources to promote image and therefore public perceptions, lobby politicians and government and to defend themselves against allegations of wrongdoing – far more than any individual human legal person or NGO.

To make these markets work better so that environmental and social impacts are more taken into account, NGOs need to do all they can to raise the amount of knowledge available to the media and to decision-makers: consumers, investors, procurement officers, local communities, trade unions, government agencies and politicians. This strategy is designed to raise the cost to companies of doing harm and to raise the benefits to them of doing good, thereby encouraging them to internalise more of their externalities in decision making. In other words it is aimed at strengthening the business case for social responsibility. A good example of an attempt at this strategy is the work of the Business & Human Rights Resource Centre (12), which runs the leading Internet site providing information on what companies are doing both to enhance and constrain human rights. The work depends on an international network of experts plus a small central team, making full use of the latest communication technology to draw attention to reports and breaking news from many sources, for instance from NGOs, academics, journalists and companies themselves. Its purpose is to make available information in an easily accessible way, for others to take action as they think fit. It is not enough just to be a passive source of information, however. The Centre is developing the capacity to alert over 10,000 opinion formers around the world with the most important stories via e-mail on a weekly basis. When an item to be included in the alert criticises a company's conduct, the company will be contacted in advance and invited to submit a response for inclusion alongside the criticism. This will keep the alerts balanced, and encourage companies publicly to address important concerns being raised by civil society. By accompanying critical reports with company responses, readers will be able to evaluate the two sides and get closer to the truth.

The second strategic path is to work on the consciences of those leading and working in the corporations themselves. Even if Bakan is right in asserting that the purpose of the corporation as an institution is the pathological pursuit of profit and power, it is nevertheless run by people; people with consciences, self-esteem, people who have peer groups, families and friends whose good opinions they value. Company leaders and managers may be constrained by law, conviction and self-interest in terms of salary, bonus and job security to pursue shareholder value but relatively few will deliberately take decisions that are ethically wrong or clearly endangering the environment or human rights. In reality they often have considerable personal power and autonomy in their decision making and most of them actually want to do a good and worthwhile job that will be rewarded both materially and in terms of self-fulfilment and the good opinion of society. This is where the moral case takes over from the so-called business case for CSR and with sufficient knowledge can become the definitive rationale for positive CSR.

Few people will knowingly pursue a profitable opportunity at the expense of others' lives or obvious hardship and few people will want to work for an organisation that does. Such decisions, when they do occur, can be the product of self-serving rationalisations based on arguments like ‘when in Rome do as Rome does' or ‘doing the greatest good for the greatest number' and then conveniently forgetting about the need to compensate those who lose out. Sometimes they may be the product of managers leaving their personal values at home and not questioning sufficiently what they assume to be the corporate imperative. There does seem to be a corporate psychology at work whereby managers somehow become de-individualised in large companies, which enables them to become party to decisions they would never countenance in their lives outside the company. More often such decisions are simply the result of sheer ignorance of the potential harmful or beneficial external impacts. This may be ignorance based on ostrich-like mentality or, more likely, a business history and experience where such matters have never before been on their radar screen. Again it is the job of campaigning NGOs constantly to raise these concerns with company leaders, so that they, their management teams and employees are fully aware of their external impacts. They must be denied the excuse of ignorance. Companies must be pestered into clarifying their policy on these matters, identifying who is in charge of its implementation and then held to account for their performance – ideally not just the companies but also the individual directors themselves. Those that do not have adequate policies or do not live up to their policy statements must be named and shamed in ways that get to company managers and employees, present and future, alike – so that they ask the questions from inside as strongly as NGOs ask them from the outside.

The third strategic path should be the product of this continual campaign of knowledge generation about what companies are doing, good and bad. It is considered axiomatic in this paper that private enterprise corporations, properly regulated to serve the common interest as well as that of their shareholders, are an integral part of any sustainable development solution. Their positive contribution to producing valued goods and services and the income flows they generate for people individually and collectively through taxes is irreplaceable. And, whether we like it or not, they have an important role to play in the governance of sustainability issues until such time as the vision of strong, internationally collaborating, representative national governments is achieved.

Transnational companies are making decisions on the governance of issues which have global and local impact all the time and many of these affect human rights and the environment. Globally, these decisions include whether or not to take a precautionary approach to global warming, how to use existing world trade agreements to promote the use of genetically modified crops, how to market life-saving drugs to poor countries and how strongly to pursue money laundering. At country level, pre-investment impact analysis increasingly includes considerations of social and environmental issues, even if only from the selfish perspective of the company. Decisions to go into a country or region with existing or potential social or environmental issues or, if already there, to stay in or pull out can be crucial. If they go in or stay how much will they have a positive effect? If they pull out will they simply let in competitors who may have less market need to be seen to perform responsibly? To what extent should the company pursue its own global way of doing things or adopt local practices, for instance on facilitation payments? Which human rights amongst its own people, its suppliers and contractors and immediate local communities should the company insist on immediately, which should it work towards over time and which should it leave pending? How far should it use its contacts with government ministers and officials to exert influence on social and environmental policies? In remote areas how should it handle the expectations of local people for it to extend to them the health and infrastructure services it provides for its own staff and contractors? How should it manage a conflict between the interests of a national government from which it has gained its formal licence to operate and an indigenous community where it is operating? In situations of violent conflict, how should it manage its own security and its relationships with the state security forces?

These are all governance decisions, decisions which ideally would be made by or at least be overseen by representative government. National governments and internationally, the UN, should have effective procedures for monitoring business in respect of human rights and the environment. Adoption of the UN Norms on Business and Human Rights would, for instance, be a good start. Governments and stock exchanges should demand of companies the same level of disclosure on social and environmental impacts as they demand for financial information. Campaigning for this must be a top priority for NGOs. Until this is successfully achieved, however, it is up to NGOs, acting as stakeholder representatives of civil society for their particular area of interest and expertise, to do all they can to achieve greater transparency of these governance decisions by companies and, thereby, greater accountability. It will always be an uphill struggle. There are thousands of multinational companies and, as Bakan has argued, they have most of the resources and what law there is on their side. NGOs do have one distinct advantage, however. They broadly have the trust of the public, especially the well known names such as Amnesty International, Christian Aid, Greenpeace, Friends of the Earth, Human Rights Watch, Oxfam, and The World Wide Fund for nature. This trust should be fostered. NGOs themselves need to become much more transparent in what they do and accountable for their actions. In this way there is a fighting chance that they can act as a stop-gap counterveiling power to that of transnational corporations until the case for full corporate accountability becomes so unanswerable so that it is eventually, by whatever means may be appropriate, made an enforceable legal requirement.

About the Author: Chris Marsden is Chair of Amnesty International UK Business Group and Chair of Trustees of the Business & Human Rights Resource Centre.

Notes

1. The Corporation – the pathological Pursuit of Profit and Power by Joel Bakan, 2004, Free Press. "The Corporation" has also been produced as a documentary film; see www.thecorporation.tv for details.

2. Sustainable development was defined by The Bruntland Report ‘Our Common Future', United Nations World Commission on Environment and Development, 1987 as ‘development which meets the needs of the present without compromising the abilities of future generations to meet their own needs'. The concept is as much about the conservation and development of social capital, including human rights, as it is about environmental capital.

3. The phrase corporate social responsibility with its acronym CSR is used in this paper as it has become the popular shorthand for companies taking responsibility for managing their social and environmental impacts according to internationally recognised principles. Whether or not this is beyond the letter of the law in any particular country depends on the law in that country. It is not synonymous with corporate philanthropy or community investment nor is it a nice to do voluntary activity. It is integral to doing business responsibly, whether motivated by market forces, ethical values or government incentives. CSR should perhaps be re-branded simply as CR, corporate responsibility or, given the corporation's legal position as a virtual person, corporate citizenship.

4. The Corporation Page 16

5. Ibid Page 61

6. Ibid page 110

7. Ibid page 34

8. Ibid page 61

9. Ibid page 142

10. Ibid page 151

11. ‘Public institutions are inherently flawed according to Friedman and other privatisation proponents, because they rely on an unrealistic – that is not entirely selfish and materialistic – concept of human nature' Ibid page 117

12. See www.business-humanrights.org