Business Respect - CSR Dispatches No 57 - 1 Jun 2003

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An email newsletter with news and discussion focusing on corporate social responsibility globally, looking at the companies in the news and the emerging issues. Linked to the website at http://www.mallenbaker.net and produced every two weeks.

In this issue, we consider a socially responsible company has any business lobbying and campaigning to shape public policy.

In the news:

Feature articles on the internet:

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Topics:

Want to read a hyperlinked version of this issue? You can find one on the website at http://www.mallenbaker.net/csr/nl/57.html.

Copyright 2002 Mallen Baker. All rights reserved. For information on how to subscribe, go to http://www.mallenbaker.net/csr/nl/subscribe.html

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Welcome

The most fundamental expression of citizenship is surely to take part in the political discourse of your country - to play an active part in influencing the decisions that govern how things get done. So it is on an individual level, and so it is on a corporate level.

Few areas create such unease as the role of the corporates in influencing public policy. Companies are nervous about being open about it. The public feels nervous that undue influence is being exercised. The NGOs are outraged about it. So we thought it was time we reflected on whether and how a socially responsible company responds to the public agenda.

And so interesting we find it that the new vote on the website now asks you for your views on the subject. It goes something like this:

When it comes to lobbying on matters of public policy, companies should:

1. Lobby away - legislators are grown ups
2. Lobby and / or pay donations - but they must disclose what they do
3. Do nothing - corporate lobbying should be banned

Over to you ...

Mallen Baker
Vanessa Wood
editors@mallenbaker.net

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CSR News 1 Jun 2003

India: WHO calls on film industry to stop promoting smoking

The World Health Organisation (WHO) has criticised the film industry, and in particular 'Bollywood' movies, for glamourising smoking through a constant use of characters who give a positive view of the habit.

The industry should, it said, "stop being used as vehicles of the death and disease that tobacco brings."

The message came as a result of a WHO study that showed an overwhelming majority of Hindi films showing tobacco use, reinforcing the notion that smoking is a socially desirable activity.

The move comes at a time when the film industry worldwide is reconsidering some of the social messages it sends, particularly with regard to the use of violence. Such sentiments are not new, of course. Decades ago Stanley Kubrick banned the showing of his film 'A Clockwork Orange' after reports of copycat violence in the style of the film."

Microsoft settles competition suit for $750m

Microsoft has agreed to pay $750m to settle a lawsuit with AOL over anti-competitive behaviour relating to its website brower and AOL'S Netscape Communications.

Under the terms of the settlement, Microsoft will give its rival a royalty-free seven-year licence for its Internet Explorer technology, and will provide information to ensure AOL's products will run better on the Windows platform.

The suit was one of the long-running series of accusations that Microsoft used its dominant market position to crush competitors. Such moves have now become largely historical, with the Microsoft Internet Explorer browser now having become the de facto standard.

Both companies said that the end of the lawsuit market a period that would hopefully see a more co-operative relationship forming. This was signalled by an initial agreement to collaborate on digital media.

PriceWaterhouseCoopers blamed for text message sackings

2500 people have been laid off from the UK's largest personal injury claims company, Accident Group, many of them being informed that they would not be paid by text message.

The chairman of the company expressed his dismay at how the move had been handled by administrators PricewaterhouseCoopers, and said that although 'the buck stops with me' he had no control over how redundancies had been announced.

Text messages were sent with details of a recorded message which told staff that if they had not already received a letter they were to consider themselves redundant. The message also said that they would not be paid for May.

Angry staff gathered at the company's Manchester offices, and some newspapers reported that there had been some looting of computer equipment and other property.

The move was taken as the parent company, Amulet Group, failed. The group was run by Mark Langford who achieved a profile last year when he helped to raise £6m for the National Society for the Prevention of Cruelty to Children.

Various bodies lost no time in lining up to criticise the company's text-sackings. Brendan Barber, general secretary of the Trades Union Congress said that such matters should always be dealt with 'face-to-face'.

Singapore: Suddenly two business ethics centres appear

The Consumers Association of Singapore (Case) has managed to spawn not one, but two similar centres to promote corporate social responsibility within two weeks of each other.

The first was created by former Case veteran Stephen Loke, a partner of Loke & Seah, who led a walkout from Case with a number of senior colleagues some months back complaining about the consumer body's direction. Loke's not-for-profit Centre for Corporate Social Responsibility was announced recently.

Now the parent organisation has declared its intention to do the same thing. It announced that it is setting up a service standards committee to review how companies can bring a greater ethical framework to how they do business.

The aim of the committee is to estabish a CSR standards framework to which companies can adhere.

Case said that the intention was to move from simply fire-fighting, picking up the cause when things had gone wrong, towards a more proactive approach of promoting good business practice.

Both initiatives have denied that two almost identical bodies arising from a similar starting point was a problem.

Halliburton settles accounting suits for $6m

Halliburton, the company formerly led by US Vice-President Dick Cheney, has agreed to pay $6m to settle a series of class-action lawsuits over allegations of improper accounting practices.

The terms of the agreement absolves all Halliburton officers and directors - including Mr Cheney - of any responsibility for the claims. The company has not admitted to wrongdoing.

Although the figure around this settlement is relatively unimportant to the company, it remains under pressure on another front - outstanding claims on asbestos lawsuits. Such suits have already paid a heavy toll on some of the most exposed companies, such as ABB.

US Government backs suit against Warner-Lambert illegal payments

The US government has filed a statement arguing against the dismissal of a case against the pharmaceutical company Pfizer. The company's subsidiary, Parke-Davis, is alleged to have offered illegal payments to doctors in support of its drug marketing and to have promoted drugs for non-approved uses.

Pfizer merged with Parke-Davis and its parent company after the events allegedly took place.

The drug at the centre of the suit is Neurontin, which is prescribed for epilepsy. The case argues that the company manipulated study results to promote the drug for non-FDA approved uses. Under US federal law, it is not illegal for doctors to prescribe drugs however they believe will be to the benefit of patients. Drug companies are not, however, allowed to promote drugs in a way that encourages doctors to use this to extend the boundaries that define the acceptable use of that drug.

The case arose after a whistleblower who worked for the parent company Warner-Lambert made allegations that the company was using financial incentives to do just that.

Japan: Snow Brand employees get suspended jail sentences

Two employees of Snow Brand Milk Products have been given suspended jail sentences for their part in the major food-poisoning scandal that has dogged the reputation of the group since 2000.

The former head of the Taiki factory that produced the contaminated milk products received a two year suspended sentence and a fine, whilst the former chief of the skimmed milk manufacturing division got 18 months. Both were found guilty of professional negligence, leading to the sickening of over 13,000 people.

The court however rejected charges that the men caused the death of an elderly woman, convicting them instead of negligence leading to injury. The Public Prosecutor's Office has said that it may appeal the latter ruling. (The Japan Times)

Australia: Mayne sues Pan Pharmaceuticals over product recall

Mayne Group, the major Australian hospital operator, has announced it is to sue Pan Pharmaceuticals to recover at least A$25m in costs following the product recall of Pan's medicines.

Pan was ordered to recall around 1,500 of its products, including Cenovis, Nature's Own and Natural Nutrition, following safety and quality breaches - a move which pushed it into voluntary administration.

Mayne's shares dipped after the company said that all the costs from the recall would be carried as a significant item in the company's full-year results, due soon.

UK: Corporate killing law targets companies not directors

The UK government has announced that new legislation on corporate killing will target companies, but will not personally prosecute individual directors under any lower burden of proof than currently exists.

Individual directors can already be sent to jail under existing provisions, but must be proven to have personally acted - or failed to act in the face of an explicit duty to do so - in a way as to directly contribute to an instance of fatality. In practice, this requirement has proven almost impossible to fulfil except for directors of small companies.

During consultation on the proposed new law, there was an outcry from businesses alarmed at the potential impact of such provisions on the willingness of people to serve as company directors. Disasters have routinely been followed by a quest to find businesses or individuals to blame, and business leaders feared that any such disaster would end up invariably scapegoating the most convenient individual.

Nigeria: Econet Wireless commended for crisis centre

Econet Wireless Nigeria has been labelled 'one of the best things to happen to Nigerians in the crucial aspect of corporate social responsibility' following its Crisis Centre's rapid response to save the lives of two telecomms workers.

The commendation was delivered in a letter from the Chief Operating Officer of DAAR Communications, whose employees had been rescued by the Econet Crisis Centre following a road accident.

The Centre was created against a steady stream of cases in Nigeria of lost life that could have been avoided with rapid medical intervention. Econet Wireless Nigeria has partnered with Critical Response International to provide an emergency service to fill this gap.

GlaxoSmithKline loses historic shareholder vote on pay

GlaxoSmithKline made UK corporate history as the first company to lose a motion on a simple majority on the company's remuneration report. 50.72 percent of shareholders voted against the report.

Investors were reacting primarily to controversial elements within the package - particularly the 'golden parachute' pay package for Glaxo's CEO Jean-Pierre Garnier.

Expectations had been high that the company would scrape through once proxy votes were counted, but in the event the protest against the 'fat cat' package proved sufficient.

The vote is theoretically only advisory, and the company could press ahead. However, the scale of the humiliation from the vote is likely to mean some degree of adjustment. The company's chairman, Christopher Hogg, said that the concerns were taken 'very seriously'.

CSR FEATURES from the Internet

Pillar of corporate social responsibilty - 2 Jun 2003 FROM Daily Nation (Kenya)

Not long ago, businesses all over the world were driven purely by the profit motive. As long as they were profits, they did not bother to give any returns to the community around them.

However, today the situation is different. The people are demanding more than mere taxes from the business world. Corporate social responsibility (CSR) dictates that business organisations give back part of what they earn to the community.

Read full story

Firms buy into corporate social responsibility - 30 May 2003 FROM Business Report

Major South African companies in mining, energy, chemical, water and food industries had indicated to the Global Reporting Initiative (GRI) that they had either already used or intended using GRI guidelines to create their own sustainability reports, the African Institute of Corporate Citizenship (AICC) said yesterday.

Among the companies to do so are Barloworld, British American Tobacco South Africa, Eskom, Mondi Paper, Pretoria Portland Cement, Sasol, SABMiller, Umgeni Water, AngloGold and Gold Fields.

Read full story

What would Larry Bird say? - 30 May 2003 FROM ESPN

So Ralph Nader, the consumer advocate, believes that LeBron James, the $90-million shoe endorser, should fight for the rights of third-world "sweatshop" workers.

Nader, in conjunction with the sports industry watchdog group League of Fans, wrote James and his representatives in April urging the hoop prodigy to "separate himself from Michael Jordan," the mother of all sneaker pitchmen, and support justice for exploited overseas factory workers.

Read full story

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Bringing corporate lobbying into the light

Article by Mallen Baker

The phrase 'the business of business is business' - familiar to the point of mundanity as it is - is believed both by sceptics of corporate social responsibility and some of those CSR champions whose principal focus remains the business case. Nowhere is it held to have more relevance than when it comes to a question of the role of companies in the formation of public policy.

Businesses make money. Governments govern. Therefore, whenever a point of policy comes up, such as the adoption of genetic modification as a process, businesses will often hold up their hands and declare that the controversy is one for politicians to sort out. Business must make money, and governments must provide the legal framework of what is acceptable within which the market can be left to work.

There is a great deal of legitimacy in this. Politicians, whatever their collective faults, are directly accountable to the people who elect them. Their actions are scrutinised to the point of sadism by a sceptical news media, and their decisions are daily challenged.

No such accountability holds for corporations. The flow of information from producer to consumer is not such that the company can be said to be held responsible for its actions in anything other than a hit-and-miss way, when something has gone seriously and publicly wrong.

Likewise, the SRI community notwithstanding, the main body of shareholders continues to enjoy the benefits of ownership whilst showing a marked disinclination to grasp the responsibilities of ownership. Consequently, companies are not wholly held accountable for anything other than their success in boosting the shareprice.

This is all well and good, but corporations do routinely seek to influence public policy. Companies will lobby around government instruments affecting the markets within which they operate. They may seek to influence debate on a broad question of public concern - such as policy responses to climate change. They may support political parties or politicians financially, with an expectation in some places of heightened access to that politician when it counts.

Attitudes to such activity differs significantly across the world. In the UK, any suggestion of corporate lobbying is treated with a certain degree of disdain, supported by genuine public outrage if it is believed that a political donation might have bought any greater access to a government minister than that available to anyone else. In the US, of course, such activity is often seen as a prerequisite to being able to do business. It isn't so much that the giving of political donations opens doors - it is sufficiently ubiquitous that the non-giving of political donations closes them.

I have certainly been told by one US business unit that a corporate policy of no political donations made business harder in the US compared to competitors who had no such restriction.

So let's take a business case approach to corporate social responsibility. The business of business - primarily - is business. Within that, the company has a duty to maximise its positive impact on society - to minimise its environmental impact, maximise the well being of its own people and so on. Is it possible to come to the conclusion that such a business-driven socially responsible company should always unambiguously eschew political lobbying or corporate donations?

After all, if BP could announce a no-donations policy last year, that surely indicates that mainstream, serious businesses see some real ethical compromise here.

Needless to say, it isn't that simple - unless you believe that business lobbying will always be to the benefit of short term profit at the expense of social needs. But the fact is that in some areas of public policy, it is the businesses whose perspective on change is the most relevant, and far reaching.

The resistance to climate change comes partly from a deep seated fear that robust action to reduce emissions must necessarily harm the economy. Businesses who have looked at the figures and worked out that they will actually be more efficient and more profitable with such action have a key role to play - surely - in informing that debate. And if businesses of that view have a right to make their views known, so too do those businesses whose analysis - for whatever reason - have drawn them to the opposite conclusion.

Phillip Watts, Chairman of Royal Dutch/Shell made the point in the WBCSD's 'Walking the talk'. "[Members of the WBCSD] want to prepare their companies to take advantage of those trends - whether these trends be toward eco-efficiency, corporate social responsibility, transparency, or new partnerships with civil society and governments and so on. Having thus prepared themselves, it is in those CEO'S interests to advocate societal and governmental changes in the right direction to speed up the trends. Thus smart CEOs not only are going to orient their companies toward sustainability, but also are going to try to orient society toward sustainability".

So the question of accountability comes down to two points. Firstly, it isn't that companies have no legitimate interest in societal outcomes - they do, even on a 'business of business is business' level. But accountability comes into the equation in terms of disclosure by the company on what issues it has lobbied and to what intended ends. If ExxonMobil seek to influence public policy one way, and BP / Shell another - I can take that into account when rating those companies as corporate citizens and in deciding where to place my own business.

If that were the end of the story - companies lobbying as equals and either winning or losing arguments on their merits - it would all be rather easy. However, the factor that makes it more problematic is simply the one of money, and the potential influence it can buy quite removed from the merit of arguments.

That is why, for some companies, the issue of payments is such a difficult one. There is no democratic principle under which influence should be bought. For others, they simply see insurmountable difficulties in doing business in some parts of the world unless payments are made - often 'facilitating payments' to government officials in developing countries, but also with lobbying purposes in mind.

It would be difficult for the CSR movement to insist that the global consistently correct position is that companies should never make any kinds of payments whatsoever. So we are left with the position, as advocated recently by George Soros and a wide collection of NGOs, who say that companies should be required to declare what payments have been made, and for what outcome - "say what you pay".

It is one of the most sensitive areas of the whole agenda. A moderately risk-averse company does not want to upset the many people who - inevitably - will disagree with its position. Likewise, such a company will want to take what steps it can to manage its commercial environment to its own best advantage. It is clear how abuse can quickly become part of the system.

That is why whenever these arguments emerge about how different national standards apply, the one universal constant that should be brought to bear is full and open disclosure. Society must be able to know the face of all the players in the formation of public policy - and how to make their own opinions count.

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In the news from the latest issue

Nepal: Relatives of killed workers sue US firm KBR for trafficking

US: Proposed Alaskan mine survives people's vote

Merck accused of dressing marketing up as science

Australia: Business lobby group warns over carbon trading

India: Tata Motors threatens pull-out from West Bengal

US: Climate change resolutions making impact on companies

Japan: Details of carbon labeling confirmed

Canada: Wal-Mart has union contract imposed

India: Rising protests against factory building

US: Fraud will cost firms $994bn this year

US: American Airlines accused of safety breaches

Ghana: Call for companies to help clear up electronic waste

US: Disneyland demonstration over hotel worker benefits

Uzbekistan: Major retailers call for end of child labour in cotton

... more news stories

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Business Respect - most recent edition added on 17th August 2008