Business Respect - CSR Dispatches No 64 - 19 Oct 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 ask whether a company can practice corporate social responsibility AND relocate jobs to developing countries.

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/64.html.

Copyright 2003 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

Mallen recently spoke at the United Nations Conference on Trade and Development (UNCTAD) event in Geneva on CSR reporting. Apart from being a great opportunity to raise awareness of some of the work UK companies have been doing in this area, it was a fascinating insight into how some of the institutions are either embracing or rejecting CSR - generally on the basis of how well it fulfils objectives (in this case development) that go somewhat beyond what most practitioners would actually claim for it.

That's not to say CSR can never relate to the development objectives of a country. Mallen's next article for Ethical Corporation (which will also appear on this website in a week or so) gives a case study of how the TBIRD initiative in Thailand has achieved just this (those with good memories will recall this story from Mechai Viravaidya was a highlight of the Asian Forum on CSR conference). But many of the unrealistic expectations of what companies can do through CSR are frankly fueled by the fact that the responsible agencies, government and the public sector, as well as international agencies, have failed to play their part. Companies that are not elected by anybody cannot be the prime agents for development.

The context-dependent definition of CSR seems to be something of a theme, with the article this time focusing on the UK unions' assertion that HSBC's relocation of 4,000 jobs counts in itself as corporate irresponsibility.

In the mean time, we asked you for your opinion on a similar such question - what should be the position of responsible companies towards doing business in challenging countries. So far, the results look like this:

In countries like Burma or Sudan where there are huge human rights challenges, companies should:

Withdraw - no company with a conscience should do business there
- 41 (24%)
Do business there - but use its influence to try to make things better - 121 (70%)
Do business there - and keep out of interfering in politics
- 11 (6%).

Thanks to the 173 people that have voted so far. There's still time to make your own views known!

Mallen Baker
Vanessa Wood
editors@mallenbaker.net

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CSR News 19 Oct 2003

Pakistan: Call for sexual harassment at work to be made an offence

The National Commission on the Status of Women (NCSW) has called on the Pakistan government to add sexual harassment in the workplace to the Pakistan Penal Code as a punishable offence.

The organisation has also called for the establishment of an inquiry committee to address the issue.

The NCSW's proposed code would make it an offence to verbally or physically harass of woman, or to ignore such behaviour having received a complaint if in a position of management authority. Contravention would be punishable by up to 6 months in prison.

The NCSW was set up by the Pakistan government in 2000.

GlaxoSmithKline rejects SA Competition Commission findings

GlaxoSmithKline has said it rejects the charge that its prices for anti-retroviral drugs are excessive, saying that its prices are the lowest in the world.

South Africa's Competition Commission fond that GSK and Boehringer Ingelheim had contravened the Competition Act by charging high prices for the drugs. The findings also said that the companies had refused to issue a license to manufactures of generic medicines.

The commission has suggested a penalty of 10 percent of the annual turnover of the respondents' antiretrovirals in South Africa for each year they are found to have violated the Competition Act.

The move came soon after GSK had announced a further reduction in the price of its drugs "to help the world¹s poorest countries meet the unique challenges of HIV/AIDS." The company operates what it describes as not-for-profit prices for its HIV/AIDS drugs in qualifying countries. In a rebuttal of the Commission's charge re. generics, the company said that it had extended the voluntary licence it had already granted to Aspen Pharmacare, sub-Saharan Africa¹s largest generics company, for the manufacture and sale of antiretrovirals.

It said that the further price reductions had been made possible by further improvements in the manufacturing process as well as the economies of scale.

Asbestos liability plan may fall to filibuster

US insurers and companies with outstanding asbestos liabilities have come to an agreement over a $114bn fund to compensate victims of asbestos poisoning - but the plan faces being scuppered by a Democratic filibuster in the US Senate unless the companies agree to pay more towards the deal.

The agreement, which was reached after extensive arguments over the amount different sectors would contribute, concluded that the insurers would pay $46bn, with the condition that they could not be sued further even once the fund had become exhausted.

The fund, which was created by the Fairness in Asbestos Compensation Act, was set up to avert a looming crisis over asbestos liabilities, that potentially threatened to bring major global corporations, such as ABB, to financial ruin. The thousands of law suits that have so far taken place have bankrupted 67 US companies.

But the deal has left US Democratic politicians unimpressed. Senate Minority Leader Thomas A. Daschle said that an alternative bill, that would provide more in contingency financing would be better, and that the companies should be prepared to pay more to be let off the hook.

China: Toy industry body to inspect factories

The International Council of Toy Industries is to begin inspecting factories, mostly amongst the 10,000 factories in China, to ensure they meet health, labour and safety codes.

The Council, whose members account for 95 percent of the world's annual toy sales, said that voluntary inspections will begin in the next month against its code of conduct providing a set of standards on wages and safety.

Announcing the initiative, the Council's spokesman predicted that many manufacturers would be unlikely to meet the standards at first, but they would provide the impetus for improvement in the future.

Although inspections will begin in China, the initiative is expected to spread to other key countries in due course - particularly Mexico, Brazil, Romania and Thailand.

South Africa: Top companies pay lip service to ethics

According to a recent study, many top listed companies in South Africa pay only lip service to the management of business ethics - and are potentially at higher risk as a result.

The Business Ethics SA (Besa) 2002 survey was conducted by the Ethics Institute of South Africa and reviewed 53 of the Johannesburg Securities Exchange (JSE) top companies. It said that it found "worrying ethical lapses" in many of them.

EthicSA's chief executive, Professor Willem Landman, said that corporate South Africa still had some hard work to do in the area of ethics management, drawing attention as he did to some of the catastrophic impacts of poor behaviour on company's fortunes abroad.

He said that the main risks for companies came from poor communication from senior management on ethics management, theft, and employee disbelief or cynicism about the company's stated values.

The survey comes as the JSE has announced its intention to create an ethical index to benchmark listed companies - the first in the world to be run by a stock exchange.

Anglo American extends AIDS support to local communities

Anglo American has announced a further initiative in its programme to combat AIDS in South Africa. Having focused previously on its employees and their families, the company is now to take action within the communities where it does business.

The project, the first of its kind amongst companies in South Africa, will see Anglo providing around R30m over three years to an HIV-prevention programme for youth as well as time and expertise to help build capacity in health-care clinics.

Tony Trahar, chief executive, said that a new community partnership project would see Anglo fund prevention and treatment of the disease in six provinces where the mining group has business units.

EU: "American firms lie over GM crops"

Margot Wallstrom, the EU commissioner for the environment, has said that US biotech companies have tried to lie about the benefits of genetically modified crops to get them into European markets.

According to The Independent, she said that the companies had been motivated by the need to prevent starvation amongst their shareholders rather than for any concerns about the fate of people in developing countries.

The European Parliament has recently agreed that GM foods will be able to be sold in Europe in five years' time, providing they are clearly labelled. However, the US government is disputing the moratorium, seeing it as an illegal barrier to trade.

Rio Tinto chairman: UK governance reforms are stifling

Sir Robert Wilson, the chairman of Rio Tinto, has said that governance reforms in the UK are now starting to stifle boardrooms, and will potentially drive new board candidates away when fresh talent is desperately needed.

He criticised the growing emphasis on non-executive directors, particularly arising from the recent report of Derek Higgs stating that boards should have an executive / non-executive balance.

The job of non-executive director has, he said, become less interesting due to the major shift in focus from the business issues to purely governance-related matters.

Corporate Conscience Award winners announced

SA International has announced the winners of its fifth Corporate Conscience Awards - giving profile for the first year to a fully international list of excellent companies.

The companies were: Novadelta (Postive Community Impact Award), Southwest Airlines (Positive Community Impact Award), Carrefour (Innovative Partnership Award), Chiquita Brands International (Innovative Partnership Award), Westpac Banking Corp (Innovative Partnership Award), Maina Panettoni (SA8000 Responsible Workplace).

A special citation went to Del Monte Kenya for what SAI described as "the extraordinary work of a group of Kenyan unions and NGOs bringing about tremendous change at the Thika plantation of Del Monte Kenya Ltd."

IBM target of cancer lawsuit

Former IBM employees have begun legal action against the company claiming that they contracted cancer from exposure to dangerous chemicals through their work making microchips and other electronic parts.

The action, filed in the US state of California, is the first by former employees of electronics companies - but could potentially open the floodgates for hundreds of similar claims if it turns out to be successful.

The focus of the case is on the protection for workers in so-called 'clean rooms' - a dust-free environment that the plaintiffs argue is designed to protect the electronic components but not the workers, who they allege are exposed to a range of poisonous chemicals.

IBM disputes the suit, and says that it is not true that workers in these environments contract cancer more than others because of their working conditions.

Coca-Cola settles whistle-blower lawsuit

Coca-Cola has agreed to pay $540,000 to a whistle-blower who had accused the company of punishing him for drawing attention to financial fraud and rigged marketing tests.

The suit was brought by Matthew Whitley, a former finance manager with the company, who said the company had fired him one month after contacting his superiors about the alleged frauds.

The company had previously dismissed the accusations, saying that they came from a "disgruntled employee" who had failed to win promotion. He had been laid off along with 1,000 others during restructuring.

The accusations are the subject of an investigation by the US Department of Justice and the Securities and Exchange Commission.

Coke has admitted that some aspects of the claims are true, although it denies others. For isntance, a rigged marketing test with Burger King, where Coke paid an intermediary to take hundreds of children to Burger King to buy frozen Coke, boosting sales and convincing the restaurant to invest considerably in the product.

US: Colin Powell recognises US Steel's corporate citizenship

US Secretary of State Colin Powell has presented the Secretary of State's 2003 Award for Corporate Excellence to United States Steel Corporation for its 'exemplary corporate citizenship, innovation and business practices in the Slovak Republic and for exhibiting the qualities of conscience, character and integrity'.

Since 1999, the awards have been given annually to multinational enterprises by the Secretary of State to emphasize the important role US businesses can play abroad to advance ethical practices and democratic values and to recognize those companies' exemplary conduct in overseas operations. Companies are selected through a Department-wide review of nominations from U.S. ambassadors.

In accepting the award, Usher thanked Ambassador Weiser and the Embassy staff in Bratislava for nominating U. S. Steel in recognition of the company's activities in the Slovak Republic through its U. S. Steel Kosice (USSK) subsidiary. He also thanked the Slovak Republic government, which "works with us in a real spirit of business-government cooperation."

Chairman and Chief Executive Officer Thomas Usher said: "We entered Slovakia with our minds open to learning from our new Slovak partners, and with a strong determination to carry our best traditions, know-how, and professional practices with us.

"While many of our accomplishments occurred inside the mill gates, some of our greatest satisfaction has come from participating in Slovak community life, mindful that we are always ambassadors of the American business community."

US Steel has long prided itself in having been a trailblazer in good corporate governance. According to the company, it was the first corporation to: publish an annual report (in 1903); hold an annual meeting for its shareholders (1902); create and apply a code of business conduct (circa 1909); introduce benefit programs, medical and pension plans (1902-1908); adopt the eight-hour workday (1923); recognize the steelworkers' union (1937); and establish an employee stock program (circa 1903).

CSR FEATURES from the Internet

Do Errant Executives Deserve a Second Chance? - 19 Oct 2003 FROM New York Times

At some point in our lives, as imperfect human beings, we find ourselves in need of forgiveness," says Barry Minkow. In 1989, at age 23, Mr. Minkow was sentenced to 25 years in prison for defrauding investors in ZZZZ Best, a carpet-cleaning company he started when he was 16. All told, he fabricated more than 20,000 documents related to the business, which grew into a public company worth more than $200 million.

Read full story

Let's debate the criteria for JSE's social index - 17 Oct 2003 FROM Business Report

The JSE Securities Exchange has set in motion the process to introduce, early next year, a corporate responsibility index, which embraces the environmental, social and economic criteria enshrined in King 2. Being the first of its kind in the developing world, there's nothing with which it might be directly compared.

So the JSE is breaking new ground. With all the regulatory sticks for enforcement of good corporate governance, integral to sustainability, here is a carrot. Listed companies, able to showcase their compliance for assessment, should command a share price premium to the extent that the index finds investor acceptance.

Read full story

The pinstripes are getting streetwise - 16 Oct 2003 FROM London Evening Standard

SO, TRAVIS, tell them your experience of Marks & Spencer. 'I had a great time, I was in the store, in the warehouse, I really got to know the meaning of customer service.' Sitting next to him, M&S chairman Luc Vandevelde wears a satisfied smile.

Travis continues: 'The best thing, though, was I even got to drive one of their bosses round in a Merc.' And, asks the woman facilitator, 'What are your plans now?' Travis thinks for a bit, then answers. 'First off, I want to get a driving licence.' Vandevelde's grin instantly vanishes, to be replaced by a worried frown.

Read full story

Don¹t Sweat It - Sweatshop Protests May Hurt, Not Help, Poor Workers - 10 Oct 2003 FROM ABC News

Last month there were big protests when the World Trade Organization met in Cancun, Mexico. There are always protests when this meeting is held. OFTEN the protests are supported by American students who say workers are being mistreated

The students object to what they call sweatshops. They say companies are exploiting poor people, by setting up factories in developing countries and paying workers a fraction of American workers' wages.

Read full story

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The inherent value of jobs

Article by Mallen Baker

In the last few days, HSBC has announced that it is to move 4,000 jobs from the UK to a more competitive location - ie. in the developing world. The move has caused outrage amongst the trade unions, who have been quoted as saying that the company's claims to corporate social responsibility could effectively now be discarded. Is that right?

I suppose that if we were to say that the inherent value of a human life was the same in the developing countries as in the industrialised countries, few would argue with that. Notwithstanding the cash value of someone's expected earning power, the value placed on their life should be the same.

Is there something similar here about the inherent - as opposed to the cash - value of a job? Does the creation of 4,000 jobs in a developing country equate to the creation of 4,000 jobs in an industrialised country? And if not, what would be the factors that would be relevant in making a distinction?

On the one hand, one could argue that the social value of jobs is higher if they are created where the need is greatest. Good jobs in areas where potentially skilled and loyal workers would otherwise have no access to such jobs are surely a good thing. And although one shouldn't be too black and white about this, such a criteria would tend to favour the value being highest for jobs in developing countries.

The company will also plead the need to be profitable. This, of course, is the argument that creates the most disgust from the opponents of such moves, but the inability of a long-term unprofitable company to preserve jobs and livelihoods is rather well documented. If your biggest potential positive impact on society comes from the goods and services you provide, and the jobs you create, then going bust is the most socially irresponsible thing you can do.

Often companies are responding to pressure from new entrants to their respective marketplace who don't carry the same sort of overheads that they carry. So, in banking for instance, the UK marketplace has been transformed by the entrance of the dotcom banks - who have no branch network to bear the cost of. Those who have existing infrastructures to support have been losing customers hand over fist to the newcomers. Nobody hammers the newcomers for the impact they have had, however.

When BT recently announced a similar move, the outcome was slightly different. The company came to an amicable agreement with the unions. This was partly based on the company's commitment that the UK job reductions would not be achieved through compulsory redundancy - not a great hardship in the call centre industry, where turnover is extremely high anyway. But it also agreed measures to show that it would manage responsibly the conditions of the Indian workers it proposed to take on. This was a first - and an encouraging sign of how unions can act as a progressive force, working co-operatively with companies that have shown their intent to do the right thing.

Of course, 4,000 is a lot of people. And HSBC has said that - although it will achieve as many of these as possible from natural wastage - it expects that there will also be compulsory redundancies. The unions in this case have not really seemed interested in what may happen with the new workers - it is a case of defending British jobs for British workers. And that's that. No interest in how the company will undertake the exercise - what sort of severance packages, how much support provided, etc.

I don't mind the union taking this position - there is a logic for them as representatives of said British workers. I do mind their equation of corporate social responsibility with their line, however. I can't identify the CSR principle that says you should retain activities in unprofitable places, regardless of the consequences. The danger must surely be that the CSR label becomes co-opted by every interest group to mean just what their special interest decides they would most like it to mean.

That being said, there is no doubting the seriousness of the situation for the 4,000 that will be affected. If you lose your job, it is a painful experience, and you won't be much inclined to be understanding or supportive towards the company that has cast you aside.

I do wonder if companies always think through the consequences of such actions as well as they might. I am mindful of the fact that companies that resist to the end the pressures to let people go often turn out to be highly successful. Take Southwest Airlines, for instance. The only US airline to not lay people off in the wake of September 11th. The only US airline to remain profitable during same period. Coincidence?

It may well not be a case of corporate irresponsibility to decide to relocate key staff in the face of economic hard times - but given the impact such moves have on the morale and loyalty of the thousands of staff that remain behind, it is just possible that the real impossible-to-measure costs of the move come close to outweighing the short term benefits.

It's hard to persuade your people that they are your greatest assets - the oft repeated claim - if at the same time you are telling them that they are dispensable at short notice. Whilst not condemning those who make that tough choice, the CSR movement should celebrate the companies who show that putting the mantra of 'our people first' into practice in difficult times can pay off in terms of successful business practice. This is an area where the development of best practice in terms of corporate social responsibility is only just emerging.

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In the news from the latest issue

Pakistan: Call for sexual harassment at work to be made an offence

GlaxoSmithKline rejects SA Competition Commission findings

Asbestos liability plan may fall to filibuster

China: Toy industry body to inspect factories

South Africa: Top companies pay lip service to ethics

Anglo American extends AIDS support to local communities

EU: "American firms lie over GM crops"

Rio Tinto chairman: UK governance reforms are stifling

Corporate Conscience Award winners announced

IBM target of cancer lawsuit

Coca-Cola settles whistle-blower lawsuit

US: Colin Powell recognises US Steel's corporate citizenship

UK: JJB Sports withdraw goods from Myanmar

Antitrust suit to proceed against Monsanto

... more news stories

To make any comments / suggestions re. this site, please contact mallen@mallenbaker.net
Business Respect - most recent edition added on 28th September 2003