Sunday, February 24, 2013

Part 18: 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 18:  Does the U.S. NCP measure up (or Down) to the Activities of Other State NCPs Cont: The 2003 and 2004 Summary Reports?

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 continues consideration of the U.S. NCP in the comparative perspective of the NCP system from its domestic culture might be distinguished.

(Pix (c) Kelly Kay 2013)

Part 18: Does the U.S. NCP measure up (or Down) to the Activities of Other State NCPs Cont.: The 2003-2004 Summary Reports?

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 Annual reports for 2003 and 2004.

The 2003 Summary Report notes two major themes.  The first focused on the steady gains in visibility and user recognition of the MNE Guidelines.  The second focused on the challenges of making good on this increased recognition, that is, the challenge will be to ensure that the Guidelines realise their full potential as a vital tool for the international business community and for home and host societies."  (2003 Summary Report, 2).  There was little by way of institutional or organizational changes from prior years.  (Ibid., 2-3).

Likewise, promotional activities followed the same path as in  prior years.  The focus was structured to reach principal stakeholders in distinct ways.  Companies were targeted through events and literature distributions. (Ibid., 3 "Outreach to companies and other partners through mailings, distribution of leaflets, organisation of events"). Non OECD states were targeted through organized state to state contact, though in unspecified ways.  (Ibid).  In addition, NCPs appeared to continue to rely on 20th century techniques--articles in the national press or newsletters, participation in conferences,  and outreach to universities.  (Ibid.).  The closed and self-referential nature of these exercises  were both obvious but elicited no comment.  NCPs continued to treat the MNE Guidelines as the plaything of elites in closed circuit networks of insiders--conferences and outreach--while keeping the masses--including rank and file NGOs at arms length through systems of antiquated informational transparency that allowed stakeholders to look in but not participate in the actual operationalization of a system, the entry into the working circles of which were quite well guarded.  Within this context, high level promotion--through the ceremonials and declarations of elite conclaves of high status individuals representing high status and powerful institutional and governmental actors (including IOs)--is privileged and serves as an important assessment marker for success. (Ibid., 7-8).  Lower level reception is a more passive affair except at the highest level. (Ibid., 8 "The OECD Secretariat accepted invitations to participate in more than 30 meetings as part of its contribution to the promotion of the Guidelines. These included events organised by business associations and investment managers, think tanks, adhering governments, NGOs and trade unions.").

Consider in this light the sort of efforts undertaken.  (Ibid., 3-5).  Note in that context the difference in approaches between Australia and the rest of the reported NCPs:
Promotion at the WSSD. During the World Summit on Sustainable Development (WSSD),which met in August/September 2002 in Johannesburg, the German Federal Ministry ofEconomics and Labour and the Federation of German Industries (BDI) took part in the majorWSSD-related exhibition that showcased sustainable development experiences also in the context of the Guidelines.

Extractive Industries Transparency Initiative. On June 17, 2003, the Chair of the CIME -- who is also the Dutch NCP -- presented the OECD Guidelines and other OECD integrity instruments, to a high-level multi-stakeholder conference in support of the Extractive Industries Transparency Initiative (EITI), launched at the World Summit for Sustainable Development by Prime Minister Blair and supported in the June 2003 Evian Summit Declaration. . . .
Direct marketing. The Polish NCP noted that it had modified its promotional practices, moving away from broad events towards a more focused, “direct marketing” approach. For example, an informational lecture on the Guidelines was given at the prestigious Warsaw School of Economics (WSE). WSE students often seek employment with multinational enterprises and therefore constitute a good target group.

Incorporating the Guidelines into Australian reporting frameworks. The Australian NCP increased it efforts to incorporate the Guidelines into various domestic corporate governance and social responsibility reporting frameworks (e.g. Standards Australia’s Corporate Governance, Corporate Social Responsibility and Bribery papers, Australia’s Triple Bottom Line Reporting Guidelines, Australia’s Environmental Reporting Guidelines and the Australian Securities and Investment Commission’s Socially Responsible Investing Disclosure Guidelines).

Swedish Partnership for Global Responsibility. The Swedish NCP described ongoing developments in the “Swedish Partnership for Global Responsibility” (SPGR) – based on the Guidelines and the UN Global Compact and launched last year by the Swedish Prime Minister –of the Guidelines. . . .

European Multi-stakeholder Forum. A number of NCPs (Finland, Ireland) reported contributing to CSR events in connection with the CSR European Multi-Stakeholder Forum.
 This does not suggest a criticism so much as the observation that the MNE Guidelines were trapped within the small circles of elite governmental. enterprise and global NGO representatives, whose status might be dependent on keeping a right rein on the substantive development of the MNE Guidelines and its operationalization, while ensuring that the masses of followers would be appropriately informed, and their participation subordinated and managed.  The value of this conventional approach was to quickly naturalize the MNE Guidelines within these networked structures.  The down side of this approach, of course, was to keep the MNE Guidelines tightly bound with the interests of these stakeholders and the maintenance of their mutually beneficial relationships.  There was, of course, a hint of this in the 2001 Summary Report (2001 (Summary Report, 8-9), but its functional expression becomes clearer here as one observes the nature of the promotional activities lauded--controlled and vertically ordered. 

 While the inter-governmental promotion efforts remained substantially unchanged (2003 Summary Report, 5), the focus on the cross border utility of the MNE Guidelines, was deepened in substantial respect.  "Adhering governments have continued to explore ways of ensuring that their support for the Guidelines finds expression in other aspects of national policy. Many adhering governments seek to call attention to the Guidelines by referring to them in various ways in the context of export credit or investment promotion/guarantee programmes." (Ibid., 5).  The 2003 Summary Report described developments in the use of the MNE Guidelines for export credits and inbound investment (depending, of course, in the developmental stage of the state at issue). (Ibid., Table 1, 6-7).  The Table suggests, even at this early date, the development of substantial differences in approaches between NCPs.  Australia, for example, from the first, took an integrated approach to the application of the MNE Guidelines and devoted substantial resources to its application (voluntarily of course) in inbound and outbound investment.  France, in contrast, focused on the outbound element.The U.S. NCP made its position clear: "The Export-Import Bank and the Department of Commerce co-operate with the NCP on the provision of information on the Guidelines to applicants for their programmes in support of US business activities abroad." (Ibid., Table 1). States with substantially more inbound investment (Greece and the Czech Republic) focused on the MNE Guidelines and inbound investment.

The consideration of specific instance claims was particularly interesting.  In the 2001 Summary Report there was the sense of a tension between the promotional aspects of the MNE Guidelines--as a means through which businesses could voluntarily begin to reshape their operations in consultation with NCP officials through administrative activity--and the potential for the juridification of the MNE Guidelines through the specific instance claims.  Juridification, of course, would substantially shift the power to control the form, scope and application of the MNE Guidelines, and contribute to a more bottom up, or organic, development of the MNE Guidelines in ways that would deepen their impact and pressure enterprises more directly to comply in a predictable way subject to the threat of quasi-remediation.   The 2003 Summary Report suggested that juridification would be resisted. It refers to the role of the NCP as a "forum for discussion and assist the business community, employee organisations and other parties concerned to deal with the issues raised. Thus, the “specific instances” procedure provides a channel for promoting observance of the Guidelines’ recommendations in the context of individual companies’ operations." (Ibid., 8-9).

Of the sixty four specific instance claims filed, most were grounded in the labor rights provisions of the MNE Guidelines (Ibid., 9claims summarized ibid., 9-11). About ten of these claims were rejected.  The rejections revealed two interesting and to some extent disturbing trends.  The first was that at least early on, the NCPs rejected the possibility of polycentricity--that is that the NCPs rejected the idea that the MNE Guidelines provided an autonomous source for behavior norms with effect independent of other norms, whatever their respective binding strengths.  The majority premise appears to be that the MNE Guidelines become irrelevant wherever the rules of the domestic legal order in which the claim is being considered provides a resolution of the matter. (Ibid., 9, "sometimes because the matter was considered adequately covered by parallel legal proceedings.").  The second was the decision to accept a very narrow transparency with respect to specific instance claims.  (Ibid., "In 2003, two of the findings have been made public through NCP press releases"). Again, both the desire to avoid alienation of business stakeholders (because the standards were voluntary) and the determination to avoid any of the trappings of juridification likely played a part.  But to that extent, the NCPs appeared to make it clear that not all stakeholders were equally valued and within a vertically arranged order of precedence, enterprises preceded everything but states.  The functional effect, of course, would be to make specific instance claims less valuable to individuals not within the elite circles of people principally involved in promotional efforts.

The administrative, rather than the judicial, nature of the understanding of the MNE Guidelines was made clear by the 2003 Summary Report's discussion of the problems then plaguing the Democratic Republic of the Congo. (Ibid., 11). The genesis of the consideration of the use of the MNE Guidelines to the situation in the DRC  originated with an October 2002 panel of Experts Report.  "This report referred prominently to the Guidelines. In particular, the report alleges that 85 companies – including 57 companies based in 10 adhering countries – have not observed the Guidelines." (Ibid).  This report caused the OECD Committee on International Investment and Multinational Enterprises (CIME) to write to the U.N. Security Council for more information relating to the alleged violations of the MNE Guidelines.  The Security Council directed cooperation between the Expert Panel and the OECD,
Although there was general satisfaction that relations were established and that they had an opportunity to meet members of the Panel in April, there was concern that thus far no exchange of information has taken place. Some NCPs reported that they had been in contact with enterprises named in Annex III of the October 2002 report. Others mentioned that they had approached the Panel by various means, asking for information. The good offices of the CIME Chair have also been used for this purpose. However, since no additional information had been received at the time of the meeting, the NCPs felt that they were not in a position to address the question how the OECD Guidelines should be implemented by individual enterprises in the specific circumstances of the DRC. The NCPs asked the CIME Chair to write a follow-up letter to the Chair of the Panel, Ambassador Kassem. (Ibid., 11).
The basic response pattern is clear here--assessment of individual breach of the MNE Guidelines is acceptable where it is administrative in nature, that is where the object of the finding is to manage the development of the MNE Guidelines from the top of the authority chain. The approach is inter-governmental and administrative. But it is less authoritative in the context of ordinary course complaints originating from  lower status civil society actors against specific enterprises.  Quasi-judicial governance approaches are not at the center of the OECD's governance palette.

This governance framework did not go unnoticed.  Outsiders began with the 2003 Summary Report to raise issues of the scope of the MNE Guidelines and the viability of NCP procedures.  (Ibid., 11-16).  "TUAC and NGOs concerns focused on the slowness of responses and lack of transparency of many NCPs. BIAC stressed the need to respect the procedural Guidance (and expressed concern, in particular, about what it saw as a tendency to publicise “instances” that have not yet been concluded)." (Ibid., 14).  But these concerns were dismissed, and in the oddest of ways. With respect to issues of scope, CIME indicated a resistance to any change on the grounds that its objective was to remain loyal to the original intention of the adhering states and to protect the viability of the MNE Guidelines.  As a consequence, CIME determined that the principal objective of the MNE Guidelines was focused on investment, that "the Guidelines are a major corporate responsibility instrument that draws on and reinforces an established body of principles dealing with responsible business conduct", and that the principal investment nexus of the MNE Guidelines requires flexibility "of interpretation and adaptation to particular circumstances."  (Ibid., 12).

The procedural questions were decided through the construction of a questionnaire sent to NCPs. (Ibid 13). To no one's possible surprise,  the "responses show broad agreement in principle on procedural questions and confidence in the soundness of the Procedural Guidance set forth in the Council Decision and related Commentary." (Ibid).  What was more interesting was that, beneath the surface agreement there was a substantial amount of variation. That variation was particularly evident in the approach to the handling of specific instance complaints:

NCPs also noted that the proper handling of specific instances is often time consuming and that insistence on rapid treatment of instances could lower the quality of their outcomes. Some NCPs have imposed deadlines on themselves and some ask parties and others to respond within certain time frames. In contrast, other suggested that the voluntary nature of the Guidelines meant that time frames could not be insisted on and that NCPs had to resort to “asking nicely”. In some cases, the responses note that the workability of such deadlines remains untested. Some NCPs have observed that the procedures they had developed have proved impracticable and needed revision. Finally, NCPs agreed that timeliness would be less of an issue if parties were kept informed about progress on the handling of specific instances. (Ibid., 13)
But it was also evident with respect to issues of transparency. Wide variation was noted in the following areas:
informing parties of the progress in handling specific instances, provision of information to non parties, publication of the fact that a specific instance has been raised, making statements while the specific instance is being considered, publication of the reasons for not agreeing to consider a specific instance, and the naming of parties to a specific instance.(Ibid 14).
On the other hand, in response to "some NCPs expressed an interest in developing a “register” or “database” of specific instances designed to help NCPs share information on the status of specific instances. . . . [t]he Chair proposed that this issue be taken up by the CIME." (Ibid).  Most NCPs agreed that the complaining party bore the burden of producing information or evidence of violation.  Lastly, most NCPs were quite leery of even the smallest suggestion of polycentricity.
Ten of the 12 experienced NCPs noted that at least one of their specific instances involved business conduct that was covered by host country laws, regulations or administrative procedures. NCPs differed in their views on whether the fact that a specific instance concerned business conduct covered by host country procedures would influence their decision to agree to consider a specific instance. Nine NCPs state that it would -- or already has -- influenced decisions. One NCP has refused a specific instance on the grounds that it concerned business conduct that was also the subject of a legal procedure. Another accepted a specific instance being dealt with under parallel home country procedures, but had to modify its own procedures as a result. One NCP responded that it “encourages complainants to address their complaints/issues with the MNE directly and with the appropriate regulatory/legal authorities... prior to lodging a complaint with the NCP,” and that it would take such proceedings into account – without necessarily being bound by them -- when determining its approach to specific instances. (Ibid 14).
But it was more than leeriness expressed at this early time of NCP development.  Some NCPs were concerned that the juridification of the specific instance process was already placing some pressure on domestic legal orders, or serving as an alternative source for functionally binding governance. "Information provided by NCPs suggests that it is quite common to use the specific instances procedure in parallel with legal, regulatory or administrative procedures. The Japanese delegation to the CIME has circulated a room document requesting that consideration be given to this issue in the context of legal and other procedures in host countries." (Ibid, 15). There was only one NCP of the view that "making acceptance of a specific instance conditional on first exhausting legal remedies was not, in its view, consistent with its understanding of the role of the Guidelines"(Ibid). Even this small step toward polycentricity was grounded in vertical relationships among states.  The source was the sense that the domestic legal orders of non-adhering states might be insufficient to support governance systems compatible with the MNE Guidelines. "During the NCP meetings, the Dutch NCP noted that, even when used in conjunction with effective legal and regulatory institutions, the Guidelines could, in some cases, offer “value-added”."  (Ibid., 15).

"Overall, the report suggests that the gains in visibility and user recognition – already noted in the 2002 and 2003 reports – were consolidated over the June 2003-2004 period." (2004 Summary Report, 3The most interesting part of the 2004 Summary Report was the continuing difficulty of determining the relationship of the MNE Guidelines and the domestic law of states.  The issue of parallel proceedings, and the harmonization of NCP practice (already unraveling) touched on in the 2003 Summary Report, continued to engage NCPs.

With respect to the harmonization of NCP procedures, a number of NCPs (Czech, Swedan, Netherlands, Japan, Belgium,) volunteered to relate their practice experiences for discussion by the NCP group. (Ibid., 16).   The conversations among the NCPs produced the following findings (Ibid., 17):
•Satisfaction with the Council Decision and its Procedural Guidance. All five ‘volunteer’ NCPs confirmed their satisfaction with the official guidance for handling specific instances – it establishes a useful framework for considering specific instances without unduly limiting NCP’s room for manoeuvre.
•NCPs need flexibility in dealing with specific instances. The discussions brought into relief the diversity of NCP experiences. The circumstances underpinning the specific instances described by the “volunteer” NCPs varied considerably (complexity of issue covered, relationship between the NCP and the interested parties, availability of information about the specific instance, etc.).
•Balance between confidentiality and transparency. Public statements were made by some NCPs at the beginning and the end of the process of considering specific instances. The Swedish NCP noted that the handling of information disclosure over the course of the specific instance could have an “impact on finding a solution”. There seemed to be broad agreement on the usefulness of making public statements at the conclusion of their consideration of their specific instances -- four of the five NCPs issued such statements. In some cases, these statements represented a consensus among the parties to the instance while, in others, they expressed only the views of the NCP. The Czech NCP stressed that there can be no hard and fast rule as to whether companies should be named in these statements – companies’ names appear in two Czech public statements, but not in a third (where the NCP felt that anonymity was useful).
•Collecting information. While two of the “volunteer” NCPs described instances involving business operations in their own countries, three were asked to consider business conduct in non-adhering countries. Thus, access to information and knowledge of local circumstances were highly variable among the specific instances presented and NCP approaches to collecting information were also variable. While some relied only on information provided by the parties to the instances, others invested heavily in information collection – for example, members of the Swedish NCP travelled to Ghana on a fact-finding mission. The Swedish embassy in the region was also used as a source of information (a practice also adopted by other NCPs; see section VI.c).
•Establishing procedures. Most of the NCPs have either formal or informal procedures that seek to adapt the procedural guidance to local institutions and circumstances. The Netherlands’ procedural measures call for providing minutes of meetings within a week (the NCP notes that keeping parties informed of progress puts them in a position of seeing that dealing with a specific instance and trying to reach consensus among parties can be very time consuming).
What emerges here is a trend toward flexibility.  The approach appears to be to establish general framework rules and to permit a large amount of discretion within that framework.  This is particularly important both with the way in which specific instance proceedings were dealt with and more importantly with respect to issues of transparency.  There appears to be a consensus that information of a limited nature was important to distribute.  But there was no consensus of broad and robust transparency.  Press releases rather than more formal final statements with finmds appear to be the rule.  The identification of the parties  was also subject to a diverse set of views.  The Czech position was most interesting--giving the NCP discretion in particular cases to disclose or not.

With respect to parallel proceedings, consensus proved elusive. "The general impression left by the discussion is that NCP consideration of specific instances in parallel with legal and administrative proceedings continues to be an area of concern for Guidelines implementation. Not only is such parallel consideration quite common, but it would appear that many NCPs are unsure of how it should be handled. Numerous Working Party delegates expressed an interest in further work in this area." (Ibid., 18). This issue would erupt in more interesting form with the 2005 Report.

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