Revised OECD Guidelines for Multinational Enterprises:
Overview and Analysis

September 2000


On June 25, 2000 OECD Ministers adopted the final text and implementation procedures of the revised OECD Guidelines for Multinational Enterprises.  The adoption of the Guidelines followed two years of negotiations between OECD member governments in consultation with the Business and Industry Advisory Committee (BIAC), the Trade Union Advisory Committee (TUAC), and non-governmental organizations.

First drafted in the mid-1970’s, the OECD Guidelines were originally adopted as a partial response to an initiative from governments to regulate the activities of multinationals.  The process culminated in an agreement in the OECD whereby business agreed to endorse a set of voluntary guidelines on corporate behavior and governments adopted commitments granting companies national treatment and limiting conflicting national requirements.  The resulting voluntary guidelines covered a range of subjects, including employment and industrial relations, environment, competition, tax, and general policies.

Following the unsuccessful OECD negotiations to develop a Multilateral Agreement on Investment (MAI) and the protests surrounding the WTO Seattle Ministerial, there has been much public debate on the impact of globalization and calls for social responsibility of multinational corporations.  Within this context, the OECD began a major revision of the OECD Guidelines in 1998, seeking to produce relevant and effective Guidelines to respond to concerns about the social, economic and environmental conduct of firms at home and abroad, while improving the climate for international investment.  The more elaborate implementation and follow-up procedures stem from concerns that the Guidelines did not go far enough and were not given much attention by multinationals and OECD governments.

The text of the revised Guidelines contains recommendations addressed by governments to multinational enterprises.  They are voluntary principles and standards for business conduct.  The commentaries to the Guidelines have been prepared by the OECD to provide information on and explanation of the Guidelines text and implementation procedures.

Major revisions to the Guidelines include:

The labor chapter encourages firms to work toward the elimination of child labor and forced labor.  All “core labor standards” are now covered by the Guidelines.  Further, there are requirements for management to consult with labor representatives on “matters of mutual concern.”  The level of management officials involved is open to question.

The environment chapter encourages firms to raise their environmental performance through such measures as implementing an Environmental Management System, stronger disclosure of environmental information, and better contingency planning for environmental impacts. 

There is a recommendation that firms encourage their suppliers and sub-contractors to undertake practices compatible with the Guidelines

There is a recommendation on human rights, and new chapters on combating corruption and consumer protection have been added. 

The chapter on disclosure and transparency are updated to reflect the OECD Principles on Corporate Governance.

Detailed implementation procedures were developed to outline how governments will implement the Guidelines through National Contact Points (NCPs).  NCPs are the offices within the adhering governments that undertake promotional activities, handle inquiries, and contribute to the solution of problems involving any matters covered by the Guidelines that have been brought by concerned parties.  Of note are specific procedures for dealing with charges that a firm may have violated the Guidelines, either in a country adhering to the Guidelines or in a non-adhering country.

The USCIB played a major role in the revision of the OECD Guidelines.  Working together with other national business associations through BIAC, the USCIB made considerable progress toward a document that business could endorse.  In April, BIAC sent a “vital issues” paper to the member governments setting forth some 30 areas of concern for the international business community.  During the April negotiating session, most of the business concerns were met.  However, several remained and a second “vital issues” paper was sent to governments for the May session.  The results were mixed.  Three of the “vital issues” were not dealt with satisfactorily.  They include supply chain responsibility; consultations on labor management issues; and implementation in non-adhering countries.

Remaining areas of concern:

Supply chain responsibility: The text recommends that enterprises encourage their business partners, including suppliers and sub-contractors, to apply principles of corporate conduct compatible with the Guidelines.  Today, a multinational firm’s suppliers and sub-contractors can easily number in the tens of thousands, many of whom are unknown to the firm.  U.S. Government representatives have assured us that this is well understood and will be reflected in the so-called “green book,” a commentary on the Guidelines.

Consultation on labor-management issues: The Employment and Industrial Relations Chapter suggests that companies enable labor representatives to consult with senior management on “matters of mutual concern.”  These officials should be of the level of authority to conclude labor agreements.  As “matters of mutual concern” is left undefined, senior management could be placed in a position to consult on virtually any aspect of business, including strategic issues.  Again, we have been assured that what is intended here is that management officials with authority for the issue in question be involved.

Implementation in non-adhering countries: The Guidelines are one element of the OECD Declaration on International Investment and Multinational Enterprises, with the other elements being the national treatment instrument for foreign investors and an instrument on conflicting requirements.  For businesses located in OECD countries and a handful of non-OECD countries adhering to the Declaration, the Guidelines must be implemented in a manner consistent with the other elements of the Declaration.  There is no similar, unequivocal commitment for businesses operating in non-adhering countries.  Thus, while U.S. firms operating in non-adhering countries would have to meet Guidelines’ standards, their domestic competitors would not.  In addition, the non-adhering host countries would also not be committed to the national treatment and conflicting requirements obligations of the Declaration.

In addition to registering our concerns with the OECD, they were outlined in a multi-business organization letter to Secretary Albright and other cabinet members immediately prior to the Ministerial. In his reply to our letter, Under Secretary Alan Larson assured business that in various ways our issues were addressed.  Further, he stated that the U.S. Government “…will not stand for the Guidelines becoming a source of irresponsible or unreasonable demands…or a vehicle to tarnish the reputation of U.S. firms that are good corporate citizens.”  He added, “If we are wrong, however, we will not hesitate to withdraw our support.”

Although the international trade union movement believe the implementation procedures do not go far enough to hold firms accountable, they intend to use them to name and shame firms they believe are in violation of the Guidelines.  Under Secretary Larson’s comments came after statements by leaders of TUAC and the International Confederation of Free Trade Unions (ICFTU) in this regard.  TUAC General Secretary John Evans stated, "We will use the new and expanded implementation procedures of the Guidelines to hold multinationals to a high standard of conduct wherever they operate."

The United States and other OECD governments are anxious for the business community, through BIAC, to endorse the Guidelines and support their promotion.  After the Ministerial, USCIB President Tom Niles told Under Secretary Larson that U.S. business would require some positive experience in implementation of the revised Guidelines before considering any type of endorsement.  At the September 20 meeting, the U.S. Council expects Under Secretary Larson will press for business endorsement of the Guidelines, even if it means leaving aside endorsement of the implementation procedures.

After reviewing the revised OECD Guidelines, business needs to discuss how and in what time frame we can move forward, and what type of endorsement we may wish to provide the Guidelines.  Some options for discussion include:

Reject the Guidelines and implementation procedures.

Accept the Guidelines and implementation procedures.

Accept the Guidelines only; postpone any endorsement of the implementation procedures until we have more concrete information on how governments plan to use the implementation procedures; and promote only the Guidelines.

Postpone endorsement of the Guidelines and/or the implementation procedures; and postpone any promotion of the Guidelines, pending more information on governments’ intentions. 

For further information:

For a copy of the revised Guidelines, visit www.oecd.org/daf/investment/guidelines.  If you have any questions or comments, please contact Steve Canner, Vice President for Investment Policy at 202-371-1316 or by e-mail at scanner@uscib-dc.org.