APPROACHES TO CSR IN GLOBAL BUSINESS As one country cannot unilaterally regulate transnational power and behaviour even the

western, developed countries have an interest in development. TNC themselves recognise the need of uniform laws that may avoid many difficulties. Does Human Right law reach private Multinational Corporation? Human rights law can reach private corporations. A private corporation is simply a juridic person and has no immunity under US domestic or International law Iwanowa v Ford Motor Co- No logical reason exists for allowing private individuals and corporations to escape liability for universally condemned violations of International law merely because they were not acting under colour of law. Forced prison labour is not proscribed under International law. Multinationals UNDER SCRUTINY The conduct of multinational enterprises (MNEs) is increasingly being scrutinized due to: 1. The growth of international business 2. The increasing number & size of MNEs 3. High profile instances of alleged misconduct (e.g., Texaco, Unocal, Chiquita, Pfizer, Talisman) MNEs often operate in countries with weak regulatory regimes, even if headquartered in countries with strict standards They can use their resources to bribe local officials to deter regulation They sometimes cooperate with, or even support, regimes that engage in human rights abuses APPROACHES TO CSR Treating MNEs as inherently bound by standards of international law Imposing international standards on MNEs through domestic legislation or contract. Promulgation of non-binding standards / MNE self-regulation NGO / community pressure APPROACH #1: Treating MNEs as inherently bound by international law MNES AS SUBJECTS OF INTERNATIONAL LAW Some international crimes do not require State action (e.g., genocide, slave trading, piracy) + Aiding & abetting liability Some international instruments explicitly impose obligations on non- State groups or individuals Human rights treaties Pollution treaties [Draft Norms on the Responsibilities of TNCs] Some instruments implicitly contemplate MNE compliance Example: UN Declaration on the Rights of Indigenous Peoples UNIDRIP Statement of principles adopted by the UN General Assembly on September 13, 2007 Emphasizes the rights of indigenous peoples to live in dignity, to maintain their own traditions & to pursue self-determined development Requires their free, prior & informed consent to development or resource extraction on their lands UNIDRIP (contd) Article 32:

1. Indigenous peoples have the right to determine & develop priorities & strategies for the development or use of their lands or territories and other resources. 2. States shall consult & cooperate in good faith with the indigenous peoples concerned through their own representative institutions in order to obtain their free & informed consent prior to the approval of any project affecting their lands or territories 3. States shall provide effective mechanisms for just & fair redress for any such activities, & appropriate measures shall be taken to mitigate adverse environmental, economic, social, cultural or spiritual impact. APPROACH #2: Imposing international standards on MNEs through domestic law or contract DOMESTICATING INTERNATIONAL STANDARDS National law sometimes requires companies to comply with international standard. World Bank standards incorporate some human rights principles & require compliance as a condition of funding When States or local communities contract with an MNE, they can insist that international standards be built into the contract APPROACH #3: Non-binding standards / MNE self-regulation UN DRAFT CODE OF CONDUCT OF TNCS Devised by a UN Working Group in 1984; never adopted Developed countries objected to aspects that buttressed the position of host States, e.g.: MNEs should renegotiate contracts upon changed circumstances Endorsement of performance requirements / restrictions on foreign equity participation UN initiative launched by Kofi Annan in 2000 Much less ambitious than the draft Code Vague principles to which MNEs may voluntarily adhere (e.g., commitment to respect human rights, the environment & refrain from corruption) To become a participant, a company must submit a written statement signed by its CEO & endorsed by its Board committing to make the Compact an integral part of its operations & culture OECD GUIDELINES FOR MNES Voluntary guidelines for MNEs operating or headquartered in adhering countries Promulgated by the OECD in 2000 with MNE input & support; seen as a form of selfregulation heading off more intrusive governmental action National Contact Points: Governmental authorities in adhering countries that can collect complaints about MNE conduct & issue non-binding recommendations Problem 9-5 (p. 745) APPROACH #4: NGO & community pressure CREATING ACCOUNTABILITY Given the limitations of international standards & non-binding codes of conduct, NGOs & local communities play a vital role in making MNEs accountable for irresponsible conduct UNRELIABILITY OF DOMESTIC REGULATION Governments often lack the will or capacity to represent the public interest vis--vis MNEs Lack of experience / resources / institutional capacity Political instability

 Susceptibility to corruption Focus on short-term financial gains NGOS HELP FILL THE VOID Exposing unethical business practices Consulting with / advising local communities Generating adverse PR Research / scholarship Proposing model contracts or contractual provisions MITTAL STEELS MDA WITH LIBERIA Signed in 2005 with a transitional government 25-year concession featuring: 5-year tax holiday Freedom to set the price of iron ore on which the royalty was calculated Option to acquire GoL shares in the JV if it could not meet capital calls Transfer of a port & railway to the JV Stabilization clause Following Global Witness report, a 2007 renegotiation removed or modified each of these elements LOCAL SELF-HELP Faced with business activity that infringes on their rights or interests, local communities sometimes take matters into their own hands Political pressure on the government Protests / strikes Physical resistance / violence THE BUSINESS CASE FOR CSR In light of the risks of liability, adverse PR, & community opposition, MNEs are increasingly finding they need a social license to operate Organization for Economic Cooperation and Development guidelines Voluntary guidelines and hence not enforceable. Refrain from seeking or accepting exemptions not contemplated in the statutory or regulatory framework related to environmental, health, safety, labour, taxation, financial incentives or other issues Abstain from improper involvement in local political activities. Employment: Contribute to the effective abolition of child labour. c) Contribute to the elimination of all forms of forced or compulsory labour. d) Not discriminate against their employees with respect to employment or occupation on such grounds as race, colour, sex, religion, political opinion national extraction or social origin, unless selectivity concerning employee characteristics furthers established governmental policies which specifically promote greater equality of employment opportunity or relates to the inherent requirements of a job. In considering changes in their operations which would have major effects upon the livelihood of their employees, in particular in the case of the closure of an entity involving collective lay-offs or dismissals, provide reasonable notice of such changes to representatives of their employees, and, where appropriate, to the relevant governmental authorities, and co-operate with the employee representatives and appropriate governmental authorities so as to mitigate to the maximum extent practicable adverse effects. Other means may also be employed to provide meaningful cooperation to mitigate the effects of such decisions.

Bribery: Enterprises should not, directly or indirectly, offer, promise, give, or demand a bribe or other undue advantage to obtain or retain business or other improper advantage. Nor should enterprises be solicited or expected to render a bribe or other undue advantage Consumer Interest: When dealing with consumers, enterprises should act in accordance with fair business, marketing and advertising practices and should take all reasonable steps to ensure the safety and quality of the goods or services they provide There is no binding code of conduct for MNE. Should There Be One?? John Ruggie in his special report has concluded that States have the primarily responsibility to protect against abuses of human rights by corporations and private persons There can be no international law of corporate social responsibility and it is upto states to enforce local norms that safeguard internationally agreed human rights standards.