The FP Memo: A Strategy for Business and Human Rights

The United Nations has failed to produce a balanced set of enforceable rules to regulate the human rights impact of multinational corporations, squandering an opportunity to bolster public trust in globalization.

BY DANIEL LITVIN | NOVEMBER 1, 2003

MEMORANDUM:

TO: U.N. Secretary-General Kofi Annan
FROM: Daniel Litvin
RE: Raising Human Rights Standards in the Private Sector

Ensuring that companies respect human rights is an important and controversial challenge, one in which the United Nations has a unique role to play. As you, Mr. Secretary-General, have recognized, maintaining broad political consensus in favor of globalization and increased flows of foreign investment is crucial to raising living standards in the developing world. In addition to being inexcusable, human rights transgressions by multinational corporations threaten this consensus by giving ammunition to the many groups opposed to further global integration.

This memorandum argues that the United Nations must develop new standards concerning the relationship between corporations and human rights. It recommends drafting a set of principles that is tough on multinationals and backed by an enforcement mechanism but that also recognizes the difficulties companies face. The two most recent U.N. initiatives in this area, the so-called "Global Compact" and the Human Rights Norms for Businesses (the "Norms," as they are now known), both lack this balanced approach.

The failure of these initiatives to set reasonable and well-defined limits on the human rights responsibilities of companies helps explain the current hostility of business lobbies to any effort to create an enforceable code of conduct. A more realistic and fair approach can resolve this problem and win the support of both businesses and non-governmental organizations (NGOs).

What follows is a detailed look at the problem of human rights and multinationals; at the failure of U.N. efforts to address the problem; a proposed solution; and suggestions for that solution's implementation.

The Problem: Multinationals confer many benefits, but they also can cause or exacerbate a range of problems in the places they invest, particularly developing countries. At worst, these problems may include civil conflict, repression of minorities, abuse of workers' rights, and the perpetuation of abusive regimes (which obviously draw sustenance from foreign investment).

Only a tiny proportion of the world's 50,000-plus multinationals explicitly include respect for human rights in their codes of conduct, and among those that do, not many can claim to have honored this commitment in every aspect of their operations. Fully implementing a policy of social responsibility in a large, globally dispersed organization presents a genuine management challenge.

Even if multinationals were able to guarantee complete adherence to such a policy, how they would go about upholding human rights in practice is unclear, for the boundaries of their responsibility -- where it begins and where it ends -- are often undefined. This ambiguity is the nub of the problem.

Take the issue of labor exploitation. Most of the Western multinationals that have been accused in recent years of abusing workers (by employing underage children, for instance) did not actually commit violations themselves; rather, the guilty party was a supplier, or a supplier of a supplier. Multinationals certainly have some duty to try to prevent these abuses, but how far down the supply chain do their obligations extend?

Many human rights controversies involving multinationals can be attributed to the lack of a clear dividing line between the responsibilities of a company and a host government. No one disputes that companies ought to do everything they can to uphold the rights of their employees and of local communities and to generally be a force for good wherever they operate. But what that means in practice is unclear.

Should a company investing in a country where union organization is restricted -- China, for example -- contravene the law by hosting unauthorized unions in its factories? Is a company operating in a politically repressive state such as Burma, where a number of Western firms still have investments, obliged to petition the government on behalf of jailed dissidents?

Companies cannot simply ignore these issues, but limits to their responsibilities need to be set. At the root of these problems is the failure of states to protect adequately the rights of citizens. Profit-making enterprises have neither the expertise nor the capacity to supplant the role of government in this regard. Moreover, if a multinational were to intervene heavily in the internal affairs of a country, it would rightly be accused of neocolonialism.

 

Daniel Litvin is author of Empires of Profit: Commerce, Conquest, and Corporate Responsibility (New York: Texere, 2003), and director of Percept Risk and Strategy, a London-based firm that provides analysis to companies on social and ethical issues.