December 1998
USCIB POSITION PAPER ON CODES OF CONDUCT
This paper lays out a U.S. business position on the role of corporate codes of conduct, a key element in the ongoing debate on corporate social responsibility in the context of a global economy. Multinational corporations (MNCs) have an obligation to adhere to the law and practice of the sovereign states in which they operate. Most can and do play an important role in improving the social, environmental, and labor conditions in the communities in which they operate. The paper addresses the main issues concerning imposed codes of conduct and third-party monitoring of corporate practices.
Emotional Debate has Obscured Reality
Globalization is being used to drive a broad national and international debate about a range of social and environmental issues. This debate has produced an active push by a variety of parties for codes of conduct applicable to individual companies, their contractors and suppliers in every country where they operate. Some of these codes are designed to apply to entire industry sector groups.
Labor and environmental groups and their supporters argue that MNCs, by their global reach, are eluding national regulatory controls and influence. Alleging that globalization results in lower environmental and labor standards, commonly mischaracterized as “a race to the bottom,” these groups assert the right to impose restrictions on corporate actions, as well as a right to monitor and judge corporate behavior.
Multi-country attacks and boycott campaigns directed by advocates of various codes have been aimed at individual companies and their brands, and have been used to exert pressure on MNCs to adopt specific codes. Companies in competitive consumer goods markets have been principal targets. These pressures have led some of them to adopt codes advocated by outside groups.
In the often emotional and misleading debates, the many positive contributions MNCs make are overlooked or purposely ignored. The evidence is clear that MNCs have helped raise living standards around the world and have acted as engines of development and growth through the economic activity they generate, their transfer of technology and skills, and improved labor, health, safety, and environmental conditions.
These contributions are well documented, but too often ignored. See, for example: UNCTAD 1993 and 1994 studies of Employment and MNCs; ILO studies 1970’s and 1980’s of MNCs' employment impact in developing countries; World Bank 1995 report on MNCs and job creation; 1990's OECD jobs studies.
Three Types of Codes Guide Multinational Corporations
Internal Codes
Existing internal company codes or statements of principles and policies cover a variety of business issues. MNCs generally follow modern human resources and health, safety, and environmental management practices. This is good business. These practices provide realistic, flexible solutions to the range of issues that companies encounter around the world.
Most multinational companies have long acknowledged their responsibility for good business practice in environmental management, health and safety, employee relations, child labor, and general ethical standards. The internal policies, guidelines and practices of these companies are consistent with, and often exceed, international multilateral guidelines. They are designed to maintain or improve the competitiveness of companies over time and in highly diverse parts of the world, as well as ensure that companies comply with the laws in all countries in which they operate.
Internal policies, standards and practices are certified by a variety of means consistent with a company's history, culture, goals, location and industry. These policies for the most part include communication with employees, with shareholders, and in many instances, with various stakeholders in the broader community.
Business sectoral codes
A number of business organizations have adopted both national and international and subject-specific business codes and manuals of best practices. Examples include:
· ICC (International Chamber of Commerce) Business Charter for Sustainable Development ‑ 1991.
· ICC Rules of Conduct to Combat Extortion and Bribery in International Business Transactions ‑ 1977, revised 1996 and 1998.
· IOE (International Organization of Employers) Employers’ Handbook on Child Labour - A Manual on Best Practices in the area of elimination of exploitative child labor ‑ 1998.
Specific industries have developed their own codes as well. The chemical industry has developed Responsible Careâ, an international, voluntary initiative to improve the industry’s health, safety and environmental performance. Through Responsible Careâ, chemical companies in a participating association share and teach each other the management practices that result in performance improvement.
A number of ICC codes address marketing and advertising. Additionally, an increasing number of multinational companies and their suppliers and vendors adhere to established international standards such as ISO 9000, which relate to quality, and ISO 14000 concerning environmental management systems.
Multilateral Voluntary Codes
Two existing multilateral, governmentally-agreed, voluntary codes add to the comprehensive framework that guides business behavior.
· The OECD Guidelines for Multinational Enterprises of 1976
· The ILO Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy of 1977.
The first of these multilateral guidelines addresses a broad array of business practices, including social, and environmental issues. The second is more specifically focused on social issues and labor relations. Both agreements are periodically reviewed and are subject to clarification procedures that are meant to assure that the provisions of these instruments are clear and relevant to specific situations that have arisen.
Given the increasing pace of change, these three types of codes should continue to be reviewed regularly and adapted as necessary, keeping in mind the importance of stability in order to maintain confidence and certainty for business over the medium to long term.
Taken together, this network of codes and principles provides adequate guidance to MNCs.
U.S. Business Leadership Crucial to Success of ILO Initiative on Workers’ Rights
The June '98 ILO Conference adopted without a dissenting vote the “ILO Declaration on Fundamental Principles and Rights at Work,” embodying the core rights derived from the ILO Constitution and applicable to all Member States. The Declaration’s follow-up procedure should enable the ILO to monitor and guide Member States’ progress towards achieving the Principles. The Declaration represents ‑ for the first time ‑ an internationally agreed-upon set of principles regarding labor rights that are applicable to all 174 Member states of the International Labor Organization, the lead U.N. agency for international employment and labor policy and practice.
The USCIB is proud that it sparked this effort and that, together with other members of the International Organization of Employers, it succeeded in enlisting the active support of member companies, trade unions, and ILO member states.
The Declaration reaffirms universal and fundamental principles of workplace rights, namely:
· freedom of association and the effective recognition of the right to collective bargaining;
· the elimination of all forms of forced or compulsory labor;
· the effective abolition of child labor;
· the elimination of discrimination in respect of employment and occupation.
This instrument provides a political track (parallel to the ILO’s juridical track) for addressing egregious violations of these Principles. It is addressed to governments, which must ensure the effective implementation of the Declaration. Companies cannot be held accountable under the Declaration, because different governments will implement the Declaration in different ways through legislation, regulation, and policies. In our own and other countries, there will be wide differences in how the Principles will be applied in jurisdictions below the federal level.
External Imposition of Additional Codes of Conduct Can be Confusing, Contradictory and Counter-Productive
The following positions stated by the USCIB reflect what we believe to be the preponderance of views of global corporations concerning new codes of conduct for industry. They emerge from a recent examination of issues with corporate representatives and leaders of employer organizations, including UNICE, from all regions of the world.
The supply chain - unmanageable expectations
The preponderance of the business community rejects the notion that companies can be held responsible for the overall behavior and policies of their subcontractors and suppliers throughout the supply chain. One model code (International Confederation of Free Trade Unions/International Trade Secretariat) requires companies to be responsible for the labor practices of their contractors, subcontractors and principal suppliers. The company itself could be faced with sanctions for the violations of its suppliers. This degree of responsibility is unrealistic, overly simplistic, and legally dubious. While it may be possible for a small number of companies to monitor behavior of a limited number subcontractors as a matter of company policy, it is impossible to make this practice binding in any way. Most of our MNCs have suppliers that number in the scores of thousands. Suppliers themselves could be subject to multiple and conflicting requirements imposed by their customers’ codes.
Standardizing codes - conflicting priorities
The business community rejects the notion that standardization is necessary or desirable. Proposals for codes have come from a wide variety of sources, including governments, labor organizations, and a broad array of other non-governmental organizations. Each has different priorities and goals. Various codes and theirrequirements could conflict with one another. A one-size-fits-all approach is bound to conflict with the company's policies and practices, based on its history, culture, philosophy, and the laws and regulations of the countries of its operations.
Independent monitoring - lack of accountability
Corporations recognize their responsibility to stakeholders, their communities, and society at large. Cooperation between corporations and a variety of groups can be a positive force for competitive and profitable companies, and for the communities in which they do business. However, business overwhelmingly rejects demands by outside groups that seek to impose codes and assert the right to independently audit companies’ compliance. Company practice varies. Some rely on internal monitoring or audits. Others retain outside firms to assist them in assuring that their internal guidelines are implemented throughout the corporation. Trade unions are of course accountable to their members, and where they are recognized as bargaining agents by individual companies, may receive information as appropriate on company performance.
Trade unions with no recognition status with a company, and NGOs, may receive information on company performance in keeping with a company’s policy on relations with the broader community and stakeholders. In special circumstances, a company may seek the expertise of a specific group or even an international organization (e.g., the IPEC Program of the ILO).
However, business rejects as a matter of principle the imposition of a right to outside monitoring by groups with no responsibility with regard to a company’s performance and with no accountability.
The opportunity
Everyone benefits from a cooperative, flexible and open working environment with sound policies and practices consistent with the framework and guiding instruments described above.
Business will continue to lead by example and communicate what companies stand for, their employment and environmental practices in home and host countries, and their contributions to economic growth and social well being.
