Monday, February 18, 2013

Part 17: The U.S. National Contact Point: Corporate Social Responsibility Between Nationalism, Internationalism and Private Markets Based Globalization

 (Pix Source HERE)


This Blog Essay site devotes every February to a series of integrated but short essays on a single theme. For 2013 this site introduces a new theme: The U.S. National Contact Point: Corporate Social Responsibility Between Nationalism, Internationalism and Private Markets Based Globalization.

Part 17:  Does the U.S. NCP measure up (or Down) to the Activities of Other State NCPs: The 2001 and 2002 Summary Report?

This series builds on some ideas I have been working through for a number of years relating to a fundamental shift in the approaches to corporate governance that broaden the ambit of corporate governance issues from a singular focus on internal governance (the relationships among officers, shareholders and directors) to one that includes corporate behavior and the standards by which officers, directors and shareholders exercise their respective governance authority. This shift also changes the scope of what is understood as "law" to be applied to issues of corporate governance, from one principally focused on national law to governance norms that may be sourced in the declarations and other governance interventions of public and private international bodies. Lastly, it appears to point to an evolution to the role of the state from the principal source of standards and enforcer of law to a vehicle for the implementation of international standards  in which enforcement power is left to global market actors--principally consumers and investors function of the decisions of global actors.  All of this is inconsistent with traditional notions of the role of law, the scope of corporate governance and the nature of corporate social responsibility int he United States.  The extent to which the United States participates in the construction of these autonomous international systems may suggest the direction in which government policy may be moving away from the traditional consensus of corporate responsibility to something perhaps entirely new.

The examination of the US NCP has suggested a pattern of behavior that has been consistent across Republican and Democratic Administrations despite the well publicized re-imagining of the US NCP in 2011. The principle outlines of this behavior evidenced a strong policy that appeared to understand the MNE Guidelines project as substantially one directed outbound--that is that it served as an instrument of foreign but not domestic U.S. policy. In contrast, the OECD Principles of Corporate Governance tends to reflect and is incorporated as part of domestic U.S. policy.  As part of the foreign policy of the United States, the MNE Guidelines project are treated as an aspirational set of principles with no governance effects.  U.S. policy and practice is meant to reinforce the notion that these principles are hortatory, which should not be transformed, or  converted, either through elaboration in glosses from authoritative sources, or in their application in particular cases, or in the efforts to promote the MNE Guidelines, into something that acquires the characteristics of governance instruments. That approach substantially weakens the utility of the MNE Guidelines directly, and indirectly the U.N. Guiding Principles on Business and Human Rights, as a source of standards for governance norms at the international level, even as enterprises and their stakeholders continue to develop these norms and apply them to their conduct.

But is the conduct of the U.S. NCP and the policy premises this conduct applies unusual in this respect, or does the U.S. NCP reflect a common OECD NCP culture? This post begins to consider the U.S. NCP in comparative perspective which will be carried over a number of subsequent posts.
(Pix (c) Kelly Kay 2013)

Part 17:  Does the U.S. NCP measure up (or Down) to the Activities of Other State NCPs: The 2001 and 2002 Summary Reports?
[UNDER CONSTRUCTION]

The OECD has done a fairly good job of information gathering since the adoption of the MNE Guidelines in 2000.  The information can provide a crude basis of comparison of the approach of the US NCP as compared to other state NCPs.  It can also alert as to points of significant divergence among NCPs.

Annual Meetings of OECD NCPs. As provided for in the implementation procedures of the MNE Guidelines, the NCPs meet in June each year at OECD Headquarters to share their experiences and to report to the OECD Investment Committee. Each OECD NCP submits its annual report, and together all NCPs discuss activities associated with the Guidelines at a national level.  The NCPs also use the occasion to hold consultations with business, labor and NGOs.

Summary reports of the NCP meetings:
2011 2008 2005 2002
2010 2007 2004 2001
2009 2006 2003

Access the annual reports on the OECD Guidelines for Multinational Enterprises

Every year the OECD also holds a roundtable on corporate responsibility, addressing emerging issues and new developments, in conjunction with the annual meetings of National Contact Points.  These are meant to inform the work of the NCPs, though they do not bind any adhering state.
This post examines the NCP Annual reports for 2001 and 2002.



The 2001 report provided an opportunity to reflect on the first year of the operation of the NCP system.  As would become common thereafter, the Summary Report  was "based on written reports submitted by individual NCPs, consultations with business, trade unions and NGOs and the discussions during the NCP meeting." (Summary Report, supra, 2).  Another custom was also established: the NCP Annual Meeting was preceded by consultations with Business Industry Advisory Council (BIAC), Trade Union Advisory Council (TUAC) and non-governmental organizations, and was followed by a Roundtable on Global Instruments for Corporate Responsibility. (Summary Report, supra, 2).  The Summary Report was organized in four parts: (1) institutional arrangements; (2) information and promotional activities; (3) specific instance activities; and (4) progress for future action.

From the first, it became clear that there would be substantial variation in the organization of NCPs within adhering states. (Summary Report, supra, 3).  "The NCPs reports show 17 “single department” NCPs and 5 “multi-departmental” NCPs (that is, involving several ministries). Five of the NCPs are tripartite, involving business and trade union representatives and several ministries. One NCP (Finland) is “quadripartite,” involving several ministries, the social partners as well as NGO representation." (Summary Report, supra, 3).  Interestingly, many OECD states placed their NCPs within their Commerce Ministries.  The United States, Sweden, Japan, and New Zealand, from the first placed, placed their NCPs within its foreign ministry; Greece, Spain, Poland, Turkey and the United Kingdom placed theirs within their foreign or international investment units but within their trade or commerce ministries.  (Summary Report, supra, Annex 1, 9-13).

The institutional structures, however, masked a system that was grounded in informal consultation. (Ibid., 3). Initially, NGOs were reported to be skeptical of the NCP system and its work.  "Some NCP reports note that NGOs were not always enthusiastic about participating in Guidelines implementation. The Swedish report states that NGOs’ expressions of interest in the Guidelines were “limited”, while the Canadian report notes that NGOs seemed quite skeptical about the Guidelines’ effectiveness." (Ibid, 3).

Promotional and information activities were of a preliminary nature during the first year of operation.  (Summary Report, supra, 4). Initial objectives included the translation of the MNE Guidelines into "nearly all of the languages" of reporting countries, and the preparation of handbooks, booklets and press releases, the later sometimes prepared in consultation with stakeholder groups. (Ibid., 4).  Early efforts were also undertaken to place some of the relevant materials on line, sometimes in dedicated websites and other times within web sites maintained by the relevant ministry. (Ibid).

Status enhancing activities were of critical importance in the first year: "Promotion activities by Ministers tend to raise the political profile and weight of the Guidelines. Various activities by Ministers -- speeches, letters and meetings -- are mentioned in the NCP reports [e.g. Denmark, the European Commission, Germany, Ireland, Netherlands, Sweden (at State Secretary level)]." (Ibid., 5). Indeed, it was noted that a:
number of the reports describe efforts to raise the visibility of the Guidelines within adhering governments. The UK NCP has sent a “telegram to all British posts overseas requesting their active participation in promoting the Guidelines” . The Netherlands NCP presented the Guidelines during that country’s annual ambassadors’ conference and keeps Parliament informed of its proposed activities. Sweden has sent copies of the Guidelines to all of its embassies. The Department of Foreign Affairs and International Trade in Canada has taken steps to inform its staff about the Guidelines and provides information sessions on the Guidelines for its overseas trade officials. The Swedish Foreign Minister, in the course of a Parliamentary debate on corporate activity and human rights in Sudan, stated that, rather than developing new behavioural norms, the Swedish government “wants to ensure that existing rules, in particular the OECD Guidelines, are followed.” (Ibid., 5).
The export driven orientation of some NCPs was also noted, though indirectly.  That orientation manifested itself most strongly in the way that some NCPs cultivated their investment promotion and export credit agencies.  Prominently among these was the U.S. NCP. (Ibid., 5).

More enthusiastic were efforts were undertaken to develop a status enhancing conference circuit, and ties to appropriate contacts among the business community, NCOs, consulting groups and universities.  Most NCPs managed to participate or organize at least one conference or at seminars organized for stakeholders. "The European Commission sponsored a conference in May, which its report describes as 'a significant step in the implementation process of the Guidelines at European level.'" (Ibid., 4).  The business community appears to have warmed up to the NCP organization most enthusiastically, followed by trade unions, especially in those states with stronger connections between the state and trade union organizational apparatus. NGOs, on the other hand, took a more hands off approach--sending out notices to targeted enterprises demanding adherence to the MNE Guidelines and organizing conferences.  (Ibid., 4-5).

During the first year, specific instance work was at a preliminary stage.  But several themes emerged that proved significant.  The fist was the tendency of the officials in the OECD headquarters to begin to think of specific instance complaints as "cases", but also to do so tentatively and self consciously.  (Ibid., 6). The word was placed in quotations, suggesting both the sense of a functional equivalence between specific instance complaints and others that might have a quasi-judicial character, and the certainly that these proceedings were not cases leading to determinations of "law". The second, was the way in which NCPs from the first adopted quite distinct approaches to the handling of specific instance complaints. This distinction would only widen from 2001 and they remain deeply embedded in the NCP system.   
Some NCPs have developed procedures for dealing with specific instances to enhance all parties’ understanding of what the process consists of and to enhance the fairness of the process. The UK NCP publishes its procedures on its web-site. The French NCP is developing an internal code of conduct for conducting discussions of specific instances. The Korean NCP has defined general procedures for their handling and for acquainting the relevant ministries of the result. Australia is working with business, labour and NGOs to put “appropriate procedures in place for dealing with issues when they arise”. The Hungarian NCP has issued procedural guidelines for dealing with all types of Guidelines-related enquiries. Other NCPs prefer to gather practical experience as a basis for possible development of additional procedures. (Ibid., 6).
The third was the early practice in some states of bringing actions against domestic companies for breaches in non-adhering states.  This would significantly extend the reach of the MNE Guidelines but subject enterprises to an autonomous set of regulations--these enterprises would be expected to adhere to the MNE Guidelines even in those states where the MNE Guidelines principles were not adopted and might be incompatible with host state law or practice.This last raised some initial concern.  (Ibid., 6).

The last section, discussing progress for future action, was fairly frank in exposing the challenges facing the NCP system. 
The frank assessment in the Polish NCP report is telling: “Despite many efforts aimed at making the Guidelines better known by the parties concerned, they are still not widely recognised in Poland as an effective instrument for assuring the appropriate standards of business conduct.” The same observation would probably be valid for many other adhering countries as well. (Ibid., 6).
Trust is a particularly curious thing in the report.  On the one hand, the Summary Report describes the need to ensure policy coherence within adhering states.   "One theme apparent in the NCP discussions and reports relates to how adhering governments can show that they take seriously the recommendations they make in the Guidelines by linking them to other policies affecting their enterprises’ international activities." (Ibiod., 7). Policy coherence is fundamental to the success of the MNE Guidelines. It was an important element ion the development of the Guiding Principles for Business and Human Rights no incorporated nto the MNE Guidelines. (Prepared Remarks by SRSG John G. Ruggie, Public Hearings on Business and Human Rights Sub-Committee on Human Rights European Parliament, Brussels, 16 April 2009, "There is “vertical” incoherence, where governments sign on to human rights obligations but then fail to adopt policies, laws, and processes to implement them. Even more widespread is “horizontal” incoherence, where economic or business-focused departments and agencies that directly shape business practices. . . conduct their work in isolation from, and largely uninformed by, their government’s human rights agencies and obligations.").  Yet it is also clear that policy coherence is understood as limited by practical considerations--and principally the need to retain the support of the business community. "While many NCPs underscored the desirability of coherence between the Guidelines and other policies, some were also concerned that such linkages, if not carefully designed, could undermine the voluntary nature of the Guidelines and break the thread of trust connecting the business community to the Guidelines process." (Ibid., 7).  But there is irony here--NCPs solicitous of business interests in limiting policy coherence are likely to reduce the support and trust of the NGO community in their work.

Beyond the tension inherent in the trust building project, and its related obligations to enhance policy coherence, the Summary Report noted additional challenges.  These included the tension between domestic legal orders and the MNE Guidelines themselves.  The Summary Report noted the "challenge of enhancing the value added of Guidelines implementation procedures (or of determining whether they have any value added at all) relative to other national proceduresdid emerge as an issue." (Summary Report, supra, 7).  An additional concerns included the special case of Burma (Ibid,).

But, by the end of the Summary Report's discussion, it was clear that the relationship between the business community and adhering states that seemed to take center stage.  It is also clear that while there was little interest in keeping the trust of labor organizations or human rights NGOs in the MNE Guidelines process, the needs and demands of the business community was treated as substantially privileged. On the one hand, at leats two European states sought to use the MNE Guidelines instrumentally to enhance governance over multinational enterprises.
two NCPs (Austria and Sweden) also cited a need for improvements in how the Guidelines are used to influence business conduct. In particular, they stressed the importance of developing a distinctive and balanced approach to Guidelines implementation that reflects the NCPs dependence on the trust and co-operation of the business community in order to promote meaningful change. This approach would highlight and promote the many instances of “best practice” in business conduct that are called to the attention of the NCPs. However, it also involves the search for ways to help correct alleged deficiencies in corporate behaviour, while preserving the trust and co-operation of companies whose activities have been called into question. (Ibid., )
On the other hand, the NCPs appeared concerned about the reactions of the business community--euphemistically denominated as issues of "balance." (Ibid., 7-8). 
The business community expressed concern about the balance of CIME’s efforts to promote the Guidelines in comparison with its efforts to promote other elements of the OECD Declaration. It feared that these efforts were disproportionate relative to those expended on the other instruments in the Declaration. (Ibid., 7-8).
It is clear that, at least at the beginning, the willingness of the business community to participate, and their understanding of the extent of the governance efforts of states within the MNE Guidelines framework, that appeared to disproportionately affect the construction of the MNE Guidelines system.  This, in turn, would become an important argument pressed for years to come by an NGO community increasingly critical of the bias of the system itself. (Jernej Letnar Cernic,  Corporate Responsibility for Human Rights: A Critical Analysis of the OECD Guidelines for Multinational Enterprises, Hanse Law Review 3(1) 2008).


The 2002 Summary Report of the Chair of the Meeting on the Activities of National Contact Points (21 September 2001)


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