Part 6: The US National Contact Point.
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.
This post focuses on the architecture of the U.S. National Contact Point under the OECD Guidelines for Multinational Enterprises (2011) (MNE Guidelines). Subsequent posts will consider the American National Contact Point within the context of the NCP system and note the divergence of the US approach to that of important European counterparts.
The United States is a member of the Organization for Economic Cooperation and Development (OECD). Ambassador Karen Kornbluh currently serves as U.S. Permanent Representative to the OECD. But the U.S. position is founded on a core premise that colors its entire approach both to its engagement with the OECD in general and its implementation of the MNE Guidelines in particular. That premise is prominently flashed on the U.S. State Department's website: "Through its cross-country economic research, “soft law,” and peer reviews, the OECD provides the United States an opportunity for engaging with other countries on economic policy." (U.S. Department of State, 2012 OECD Ministerial Fact Sheet Bureau of Economic and Business Affairs, May 25, 2012). The OECD edifice and its MNE Guidelines architecture, then, are understood as a means of projecting U.S: influence beyond its borders (cf., U.S. Mission to the OECD, Outreach to Non-OECD Countries); it is not understood as penetrating within the borders of the United States. This creates a very odd relationship and a fundamental tension in the U.S. engagement--the U.S. position with respect to global activity can be inconsistent and in some cases irreconcilable with its position on internal or domestic U.S. policy.
This bi-furcation of approaches to the implementation of the MNE Guidelines produces the potential for the sort of sometimes extreme policy incoherence that is at odds with the thrust of OECD objectives, to which the U.S. is bound, and impediments to globalization which, when practiced by other states has been an object of criticism by the United States. (See Introduction). This tension produces a tendency to narrowly construct the U.S. engagement with the MNE Guidelines and its internalization within the U.S., while engaging more broadly with the shareholder focused Principles of Corporate Governance that better suit U.S. political objectives. (See, e.g., U.S. Mission to the OECD, Governance). A telling example, considered more extensively in subsequent posts, is the very narrow view of NCP function that the U.S: has aggressively asserted in meetings among NCPs. In its 2011 Annual Report, it was noted:
It was, however, also recognized that adhering governments to the Guidelines have differing views about the appropriateness of making determinations of whether the Guidelines have been observed or not in NCP final statements. The United States recalled that during the update process a decision was made by governments not to explicitly encourage or authorize the NCPs to make such determinations in their final statements. The United States expressed the view that the practice was difficult to reconcile with a procedure based upon “good offices” and that the objectives of those that advocate it would be equally well served by making recommendations on how to better fulfill the objectives of the Guidelines. The United States noted that the procedural guidance allows flexibility for NCPs. The NCPs, therefore, have considerable latitude in developing their own procedures within the framework of the Guidelines to best suit their own legal, political and cultural circumstances. The United States noted the relevance of these differences and the outcome of the Update to discussions of functional equivalence and peer learning. Germany and the United Kingdom expressed the view that the updated Guidelines do not prohibit assessments on a company's compliance with the Guidelines, and they explained that, in some instances (such as when conciliation/mediation fails or is declined), this may be necessary in order to make meaningful recommendations to a company. In their view, it would not be logical to make recommendations to a company on how to bring its practices into line with the Guidelines without first indicating if the company has departed from those Guidelines. (OECD Guidelines for Multinational Enterprises REPORT BY THE CHAIR OF THE 2011 MEETING OF THE NATIONAL CONTACT POINTS, p. 24)
With respect to the MNE Guidelines themselves, the U.S. position is relatively easy to distill from its public pronouncements and more intimate positions taken within the OECD. The U.S. acknowledges the stakeholder engagement foundation of the MNE Guidelines and emphasizes its international character as both non-binding and aspirational.
Investors, consumers, employees, civil society organizations, the general public, and governments expect businesses to operate in a socially responsible manner. The breadth of issue areas can be global in scope. Business and stakeholders often face a range of different standards for responsible practice. To provide a coherent and comprehensive approach to this shared objective, the 34 member governments of the Organization for Economic Cooperation and Development (OECD) and 10 non-member governments have negotiated and endorsed the OECD Guidelines for Multinational Enterprises. (U.S. State Department, U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises 2013).The character of the MNE Guidelines as recommendations frames the U.S. approach to the organization of its NCP and in the delineation of its scope of activities. Yet it must be emphasized that this is a very new approach. The U.S. NCP has undergone substantial change since 2010 when it was the subject of substantial review and modification to correct what was understood to be a number of weaknesses and difficulties that substantially impaired it ability to meet even the minimal obligations of the United States as an OECD adhering state. The extensive changes were described in the 2011 NCP Annual Report, reported as Annex A below (OECD Guidelines for Multinational Enterprises REPORT BY THE CHAIR OF THE 2011 MEETING OF THE NATIONAL CONTACT POINTS; page 8) ("The overall purpose of the initiative was to improve the U.S. NCP’s effectiveness, visibility, accessibility, transparency and accountability to ensure the U.S. NCP is operating consistently with the Guidelines."). The implicit critique of the way in which the NCP had been operated under the Bush administration and the early years of the Obama administration. What follows represents a substantial improvement, indeed. And yet, there is a substantial way to go. (Accountability Counsel, Advocacy to Improve the US OECD National Contact Point (Accountability COunsel is a member of the US NCP’s Stakeholder Advisory Board, which was formed in early 2012 by the U.S. Department of State.)).
The U.S. emphasizes the information and promotion functions of the NCP, and it tends to narrow the emphasis of its specific instance jurisdiction as only a species of its core mission to work with interested parties.
Governments adhering to the Guidelines each have a National Contact Point (NCP), whose main functions are to: (1) promote awareness of the Guidelines to business, civil society, and the general public; and (2) work with business, civil society and the public on all matters relating to the Guidelines, including in circumstances when a party raises concerns ("specific instance") regarding an MNE’s observance of the Guidelines. In some cases, NCPs may facilitate a voluntary mediation or conciliation process among the interested parties. (U.S. State Department, U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises 2013).These themes are developed within the organizational bones of the US NCP. Alan Yu and Gregory Maggio currently comprise the US NCP team. (State Department, U.S. National Contact Point). The U.S. NCP is located in the Bureau of Economic and Business Affairs (EB). This placement was the result of a move and a reorientation of the institutional position of the NCP. "The U.S. NCP function was moved from [U.S. Department of State’s Bureau of Economic, Energy and Business Affairs]'s Office of Investment Affairs, which is responsible for the formulation of U.S. investment policy, including policies related to the Guidelines update, to the Office of the Assistant Secretary, further ensuring the U.S. NCP undertakes its responsibilities in a more wholistic manner and independently of the State Department’s investment-related policy operations." (OECD Guidelines for Multinational Enterprises REPORT BY THE CHAIR OF THE 2011 MEETING OF THE NATIONAL CONTACT POINTS; page 8). The prior institutional placement had been wirdely critcized by the non-governmental human rights organizations.
Unfortunately, the record of the U.S. NCP has been deplorable. Until recently, the NCP was located within the State Department’s Office of Investment Affairs – completely subordinating it to officials whose job is to facilitate corporate development abroad – and had no dedicated staff. Of the dozens of complaints that had been submitted to the NCP over the course of about a decade, the NCP had not contributed to the resolution of a single one. Instead, the NCP had found technical reasons to reject the complaints, or in the case of several labor-related complaints, had simply delayed responding to the complainants until the workers’ attempts to organize were defeated and the issue was moot. (EarthRights International, ERI Joins U.S. Stakeholder Advisory Board for OECD Guidelines, February 8, 2012).
Still, the move and the new placement remain curious. "The Bureau of Economic and Business Affairs (EB) is led by Assistant Secretary Jose W. Fernandez. EB's mission is to promote economic security and prosperity at home and abroad. The Bureau's work lies at the critical nexus of economic prosperity and national security." (State Department, Bureau of Economic and Business Affairs). Again tone setting--the NCP is placed in a bureau concerned with economic security and the protection of US economic interests through intervention abroad, and tasked with ensuring coherent economic policy across the U.S. Government. (Ibid.).
Corporate social responsibility is not vested in the U.S. NCP. Rather, the Bureau of Economic and Business Affairs has designated a Corporate Social Responsibility (CSR) team in the Bureau of Economic and Business Affairs leads the Department’s engagement with U.S. businesses in the promotion of responsible and ethical business practices. Specifically, the CSR team is tasked as follows:
--Promote a holistic approach to CSR to complement the EB Bureau’s mission of building economic security and fostering sustainable development at home and abroad.The Award for Excellence suggests the outward focus of development of international consensus on principles of corporate governance principles and especially corporate CSR.
--Provide guidance and support for American companies engaging in socially responsible, forward-thinking corporate activities that complement U.S. foreign policy and the principles of the Secretary’s Award for Corporate Excellence (ACE) program.
--Build on this synergy, working with multinational companies, civil society, labor groups, environmental advocates, and others to encourage the adoption of corporate policies that help companies "do well by doing good." (Stated Department, Bureau of Economic and Business Affairs, CSR)
The Secretary of State's Award for Corporate Excellence (ACE), established by the State Department in 1999, recognizes the important role U.S. businesses play abroad as good corporate citizens. The Award sends a strong signal of the Department's commitment to further corporate social responsibility, innovation, exemplary practices, and democratic values worldwide.But curiously, the focus of the award is on corporate action beyond the borders of the U.S. with effect on host states of use to U.S. political and economic interests. Little effort is made to coordinate such worthy activities with corporate efforts of a similar kind within the borders of the U.S. Thus, for example, the 2012 winner of the award in the multinational category was Intel Corporation in Vietnam. (U.S. State Department, Home » Under Secretary for Economic Growth, Energy, and the Environment » Bureau of Economic and Business Affairs » Award for Corporate Excellence). But there is no indication that there is any value attached to the advancement of the values transposed into Vietnam to Intel's operations within the United States. The picture produced,. of course, is of a bi-furcation of policy--what is rewarded for extraterritorial activity need have no domestic application. That the award was generated through the State Department, which has a specific jurisdiction is hardly an excuse--these awards could as easily be coordinated with th Commerce Department. That is is not, and that such an idea might seem novel or incomprehensible, or impossible, suggests again the quite significant division between internal and external corporate policy.
The U.S. NCP is operated as a part of the EB Bureau’s corporate social responsibility team. (U.S. State Department, U.S. National Contact Point). As part of the U.S. CSR team, the US NCP works through consultation that is focused on its promotion function and to a lesser extent its specific instance operations. The object was to move the focus of the NCP's business from investment policy to a more human rights friendly environment. "NCP staff will be supplemented by an experienced policy analyst on corporate social responsibility matters assigned by the State Department’s Bureau of Democracy, Human Rights and Labor." (OECD Guidelines for Multinational Enterprises REPORT BY THE CHAIR OF THE 2011 MEETING OF THE NATIONAL CONTACT POINTS; page 8).
With respect to its promotion activities:
The NCP is committed to its obligation to further the effectiveness of the Guidelines by undertaking promotional and awareness-raising activities. The NCP conducts an active outreach program aimed at business, labor, NGOs, the general public, academia, and international organizations.With respect to its specific instance obligations,the US NCP understands its obligation as focused on "resolution of issues that arise between MNEs and civil society stakeholders relating to implementation of the Guidelines. The NCP can offer a forum for confidential discussion, including but not limited to facilitating voluntary mediation or conciliation between the relevant parties. For further information." (U.S. State Department, U.S. National Contact Point).
The NCP offers itself as a resource to all of the above interests, as well as to U.S. government agencies and U.S. Embassies around the world. The NCP team welcomes the opportunity to meet with groups or individuals, and to speak at conferences, at public or internal meetings, or in academic settings. The NCP is available to participate in person, by video conference or other means. (U.S. State Department, U.S. National Contact Point).
The description of the specific instance process is enlightening. The specific instance procedural guidelines may be accessed HERE.
Specific Instance ProcessThe NCP approach to process emphasizes the building of mutual trust and seeking consensual resolution. It avoids any form of action that might lead to determinations of failures to comply with the MNE Guidelines or recommendations respecting ways in which corporate behavior might be modified to conform to the MNE Guidelines requirements. The US NCP worries about the "gaming" of the specific instance process--that is the use of this process by parties, mostly non-state actors, to induce changes in corporate behavior or to leverage communication through complaints--precisely those motives that are never far from the calculus of domestic public interest litigation. Additionally, transparency is not high on the list of principles to be advanced through the specific instance process. The US NCP appears to take a broad view of confidentiality requirements, which, when coupled with the suspicion that complainants might be invoking the specific instance process to advance some agenda or other not related, in the NCP's view, to the business at hand, suggests the possibility that the specific instance process is at best tolerated but not viewed as either sound or central to the NCP mission. But that, of course, is a matter of policy, unstated directly, but functionally facilitated by the web of presumptions and the administration of specific instance complaints. We test that in the posts that follow. The result, though an imporvement from the activities of the U.S. NCP before 2011, is still criticized. The EarthRights International critique is typical:
One of the functions of the NCP is to provide, in appropriate circumstances, a forum to assist MNE’s and interested parties (such as employee organizations or NGOs), in resolving questions regarding the consistency of an MNE’s activities with the Guidelines. A request for such assistance is referred to as a "specific instance." The NCP determines whether a specific instance merits its involvement based on procedural guidance developed by OECD Member states in consultation with stakeholders. This guidance is set forth in the Decision of the Council on the OECD Guidelines for Multinational Enterprises. The NCP undertakes its responsibilities in a manner that is impartial, predictable, equitable, accountable, and compatible with the principles and standards of the Guidelines.
Expectations of the Parties
The Commentary on the Procedural Guidance for NCPs states, "The effectiveness of the specific instances procedure depends on good faith behavior of all parties involved in the procedures. Good faith behavior in this context means responding in a timely fashion, maintaining confidentiality where appropriate, refraining from misrepresenting the process and from threatening or taking reprisals against parties involved in the procedure, and genuinely engaging in the procedure with a view to finding a solution to the issues raised in accordance with the Guidelines."
Establishing mutual trust in the specific instance process is an essential element for any successful effort by the US NCP to help parties reach a consensual resolution. All parties share a responsibility in this objective. The US NCP expects parties not to exploit or otherwise capitalize on information provided during the proceedings to prejudice another party. Examples could include a party publicizing the contents of its specific instance for tactical advantage over the other party, or a party intimidating or taking retribution against another party or affected persons as a result of a specific instance submission.
Confidentiality of communications is a basic tenet of the specific instance process. The US NCP expects parties to a specific instance to respect the confidentiality of all communications with the US NCP, beginning with the submission of the specific instance. The US NCP may consider a party's failure to honor expectations regarding confidentiality and trust to be bad faith, which could lead to the US NCP ending its involvement in the specific instance. In such situations, the US NCP, in its discretion, may issue a statement with an assessment of the circumstances leading to the termination.
Lead Responsibility Among NCPs
Normally, requests for assistance in specific instances should be raised with the NCP of the country in which the concern arose (the "host" country). If the host country does not adhere to the Guidelines and/or does not have an NCP, the issue should be raised with the NCP in the country where the enterprise is headquartered (the "home" country). NCPs in home countries and host countries are expected to consult with each other regarding their respective activities. (U.S. State Department, Home » Under Secretary for Economic Growth, Energy, and the Environment » Bureau of Economic and Business Affairs » OECD » U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises » Specific Instance Process).
ERI will continue to push for expanded and meaningful access to remedies for communities impacted by overseas businesses activity. Whether the OECD Guidelines and the U.S. National Contact Point will play a meaningful role in the realization of this goal is yet to be known. Only through newly filed and resolved cases, will the updated Guideline and NCP reform efforts be judged. (EarthRights International, ERI Joins U.S. Stakeholder Advisory Board for OECD Guidelines, February 8, 2012).OECD Watch has also been critical on the grounds suggested above: "civil society members of OECD Watch from the U.S. are disappointed that the newly released procedures represent only slight improvements and continue to be flawed in key areas as to render the NCP mechanism of little use for impacted communities, and missing a key opportunity to demonstrate US active engagement in the Guidelines." (OECD Watch, Towards Pro-Active Implementation of the OECD Guidelines: OECD Watch submission to the 2011 Annual Meeting of the National Contact Points, June 2011).
All of this is subject to another post 2010 innovation--the Stakeholder Advisory Board. Established in January 2012 the "Stakeholder Advisory Board (SAB) will provide recommendations to the Department’s Advisory Committee on International Economic Policy on implementation of the OECD Guidelines, including their public promotion, collaboration between the U.S. National Contact Point and stakeholders to anticipate and address future challenges in a proactive manner, and the operations of the U.S. NCP. The SAB is comprised of leaders from business, labor, civil society, and academia." (U.S. Department of State, Home » Under Secretary for Public Diplomacy and Public Affairs » Bureau of Public Affairs » Bureau of Public Affairs: Office of Press Relations » Press Releases » Press Releases: 2012 » Press Releases: January 2012 » Advisory Board on Implementation of OECD Corporate Social Responsibility Guidelines). The members are drawn from a broad section of stakeholders and interested outsider groups. Their names are listed in ANNEX B, below. Earthrights International described the creation of the Stakeholder Advisory Broad as "a small but notable advance for corporate accountability." (EarthRights International, ERI Joins U.S. Stakeholder Advisory Board for OECD Guidelines, February 8, 2012).
FROM : OECD Guidelines for Multinational Enterprises REPORT BY THE CHAIR OF THE 2011 MEETING OF THE NATIONAL CONTACT POINTS; page 8
Box 1.1. United States NCP Reform
In July 2010, the Assistant Secretary for the U.S. Department of State’s Bureau of Economic, Energy and Business Affairs (EEB) launched an initiative to review the U.S. NCP function, in conjunction with the 2011 Update of the Guidelines. The overall purpose of the initiative was to improve the U.S. NCP’s effectiveness, visibility, accessibility, transparency and accountability to ensure the U.S. NCP is operating consistently with the Guidelines.
The initiative included publishing a notice in the U.S. Federal Register requesting public comments and announcing a public meeting, which was held on 2 November 2010. The EEB Assistant Secretary asked the U.S. Federal Advisory Committee on International Economic Policy (ACIEP) to undertake a thorough review of the U.S. NCP and to provide recommendations on how to improve
its functioning. The ACIEP presented its recommendations formally on 16 February 2011. The EEB Assistant Secretary also recruited a senior officer to be the first full-time dedicated U.S. NCP.
The U.S. NCP function was moved from EEB’s Office of Investment Affairs, which is responsible for the formulation of U.S. investment policy, including policies related to the Guidelines update, to the Office of the Assistant Secretary, further ensuring the U.S. NCP undertakes its responsibilities in a more wholistic manner and independently of the State Department’s investment-related policy operations.
At the 20 June 2011 meeting of the ACIEP, the EEB Assistant Secretary announced improvements to the U.S. NCP function as a result of the year-long review and reform initiative. The improvements incorporate the updates in the Guidelines and most of the consensus recommendations in the ACIEP’s report. They include structural modifications to the U.S. NCP, as well as expanded procedures for handling specific instances, consistent with the guiding principles of impartiality, predictability, equitability, and compatibility with the Guidelines. Going forward, the U.S. NCP will also focus on a more “positive, pro-active” approach to promoting the Guidelines that will seekto identify, analyze and resolve potential problems in order to avert adverse impacts, and will endeavour to increase general outreach activities. All of these improvements are designed to increase the U.S. NCP’s visibility, accessibility, transparency and accountability.
The U.S. NCP will continue to be headed by a senior career officer housed within the EEB Bureau at the State Department. In addition, the U.S. NCP staff will be supplemented by an experienced policy analyst on corporate social responsibility matters assigned by the State Department’s Bureau of Democracy, Human Rights and Labor. The U.S. NCP is currently being integrated into a newly created corporate social responsibility (CSR) team within EEB’s Office of Economic Policy Analysis and Public Diplomacy, which will enable the U.S. NCP to draw upon the existing expertise of officers who already work on CSR issues and to maximize the use of existing resources and contacts for outreach and promotion.
In order to provide for the periodic review of the work of the U.S. NCP by stakeholders, the EEB Assistant Secretary will ask the ACIEP to establish a U.S. NCP Stakeholder Council under its Subcommittee on Investment to provide advice and assistance through the ACIEP to the U.S. NCP on strategies, policies and procedures related to the U.S. NCP’s responsibilities, as well as to work closely with the U.S. NCP on a “positive, pro-active” approach to promoting the Guidelines. The EEB Assistant Secretary will consult with the ACIEP on the duties, composition and other issues related to the establishment of the U.S. NCP Stakeholder Council.
The U.S. NCP has also published an updated procedural guide for handling specific instances. This modified guide is consistent with the updated Guidelines and with the guiding principles of impartiality, predictability, equitability, and compatibility. It also takes into account most of the consensus recommendations of stakeholders in the ACIEP’s report of 16 February 2011.
Stakeholder Advisory Board Members February 2013
The members include:
- Trevor Gunn, Medtronic
- Owen Herrnstadt, International Association of Machinists and Aerospace Workers
- Barbra Anderson, Sabre Holdings
- Natalie Bridgeman Fields, Accountability Counsel
- Brian Campbell, International Labor Rights Forum
- Lewis Cohen, SI-WEL International
- Lance Compa, Cornell University
- Celeste Drake, AFL-CIO
- Dierdre Fitzpatrick, Service Employees International Union
- Kristen Genovese, Center for International and Environmental Law
- Adam Greene, U.S. Council for International Business
- Clifford Henry, Procter and Gamble
- Jonathan Kaufman, EarthRights International
- Ray Marshall, University of Texas