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Business Respect - CSR Dispatches No 70 - 1 Feb 2004
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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 review the social responsibility of media companies in the light of the recent Hutton Report's damning of the conduct of the BBC.
In the news:
1. Engineering and construction companies join together to fight corruption2. South Africa: Macmed fraud trial begins
3. Worldcom, Parmalat cases inflict damage on auditors
4. Unocal wins Myanmar human rights ruling
5. Australia: Sino Gold pulls out from Tibet
6. Japan: Toyota to boost hybrid car production
7. Egypt: 17 firms to join Global Compact
8. UK: Most FTSE companies produce CSR reports
9. $7bn award marks latest stage in Exxon Valdez suit
10. Sweatshop accusations on IT equipment manufacturers
11. US: Slavery reparations suit thrown out
12. Monsanto pleads not guilty to ill intent on wheat patent
13. Microsoft partners UN to boost computer literacy in developing world
14. UK: Coca-Cola halts school advertising
Feature articles on the internet:
1. A pressing need for corporate governance - 1 Feb 2004 FROM The Star Online (Malaysia)2. The Two Faces of Wal-Mart - 28 Jan 2004 FROM Business Week
3. Tough Love for the Obesity Lobby - 23 Jan 2004 FROM AlterNet
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Topics:
WelcomeCSR News 1 Feb 2004
CSR FEATURES from the internet
The Media and Social Responsibility
Want to read a hyperlinked version of this issue? You can find one on the website at http://www.mallenbaker.net/csr/nl/70.html.
Copyright 2004 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 Hutton Report has pushed the UK's biggest broadcaster into a state of collective denial. However, what it has certainly raised is the question about the social responsibility of the media companies. This is a key question - and one which we scratch the surface of this issue! There is much mroe to be said - and perhaps the recent work by a number of media companies to produce a social responsibility framework for themselves will provide the future prompt for this.
In the mean time, Mallen has been busy for Business in the Community this week taking on the CORE bill (seeking to legislate for CSR reporting and directors responsibility), and the rather poor Christian Aid 'report' on 'Behind the Mask of CSR', which seeks to discredit the movement by making populist accusations against three companies.
You can see the Guardian's reporting of the debate at:
http://www.guardian.co.uk/business/story/0,3604,1131160,00.html
In the event, the government 'talked out' the CORE bill. This was always inevitable since - even for those who might have supported the essence of what the bill was seeking to achieve - it was so poorly framed it could never have made good law. The CSR movement could really do without the 'something must be done - this is something - therefore this must be done' approach.
However, perhaps you have a different perspective to offer. Feel free to send your views, which we will include here.
The latest vote on 'offshoring' has attracted a brisk turnover. The current position stands as follows:
Companies that seek to move jobs from the US / Europe to developing countries with lower costs
Can in no way be called socially responsible 55 (25%)
Are right to stay profitable, but should pay attention to how they make the change 152 (70%)
Should aim for maximum profitability, and not be hampered by unwarranted sentimentality 11 (5%)
218 people have voted so far. Still time to make your own voice heard, of course!
Mallen Baker
Vanessa Wood
editors@mallenbaker.net
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CSR News 1 Feb 2004
Engineering and construction companies join together to fight corruption
19 engineering and construction companies have signed an agreement with Transparency International and the Basel Institute on governance to work towards eliminating corruption.
The agreement, signed at the World Economic Forum in Davos, will see the companies adopting a 'zero tolerance' policy on bribery. The companies will develop the management systems needed to ensure the policy is implemented at all levels.
The 19 firms that signed the compact had combined annual revenues of more than $70 billion.
These include Murray & Roberts (M&R) and Aveng from South Africa, ABB (Switzerland), Fluor (US) and Skanska (Sweden).
"We believe the time is right for issuance of these E&C business principles and that their widespread adoption will raise standards across the industry, contributing to the goals of good governance and economic development," said Alan Boeckmann, Fluor Chairman and Chief Executive Officer, who chairs the multinational Engineering and Construction Task Force.">
South Africa: Macmed fraud trial begins
The fraud case against fomer directors of healthcare group Macmed, which suffered South Africa's largest corporate collapse in 1999, has begun in Pretoria.
The case has been brought by the company's liquidators for personal liability for fraud and reckless trading under the Companies Act. Following 11 cases, including that against Don McArthur, the former CEO and chairman, being settled out of court, there are now just four directors plus one other employee in the dock.
The plaintiffs allege that they lent to Macmed as a result of fraudulent financial statements that covered up the extent of the company's problems.
The case is expected to last ten weeks - an unprecedented period for such a case in South Africa.
Worldcom, Parmalat cases inflict damage on auditors
According to a new report, WorldCom could sue KPMG for bad tax advice and defunct Arthur Andersen for negligent auditing. In addition, industry commentators have said that Grant Thornton has similarly been damaged by the Parmalat scandal.
WorldCom, recently renamed as MCI, was brought down by the revelation of major accounting irregularities in 2002. The report, produced by bankruptcy court examiner Richard Thornburgh, suggests that the company's tax minimisation programme, allegedly based on advice from KPMG, could be challenged by states seeking to recover back taxes. This could lead to a claim from WorldCom that KPMG was negligent in the carrying out of its duties.
KPMG siad that the reports conclusions were wrong. "Our corporate tax work for WorldCom was performed appropriately, in accordance with professional standards and all rules and regulations, and we firmly stand behind it", the company said.
MCI said that it currently has no plans to take action against KPMG, although it is "reviewing and considering" options.
Meanwhile, Grant Thornton has been described as damaged by its associations with the Parmalat scandal by Allan Koltin, the president of PDI Global. "Grant has been billing themselves as the quality alternative to the big four," he said. "Now when Grant's name comes up, people will think Parmalat."
Grant Thornton has said it will vigorously defend itself against charges arising from Parmalat. The company recently expelled its Italian member firm, which had been responsible for the audit of around 20 Parmalat companies.
Unocal wins Myanmar human rights ruling
A US Superior Court judge has found that Unocal to be blameless for human rights abuses attributed to the Myanmar military during the construction of a pipeline in the country.
Judge Victoria Gerrard Chaney said that it was the company's subsidiaries that had been responsible for building the pipeline, not the parent company, and that these subsidiaries were not - as the plaintiffs argued - the 'alter ego' of the parent company set up merely to limit Unocal's liability.
Judge Cheney added that the company had acted in good faith, setting up legitimate subsidiaries to undertake the project.
The company's lawyers celebrated the ruling as a complete vindication of the company's position, and added that the lawsuit had been prosecuted for political reasons.
A statute of limitations now prevents a refiling of the case against the subsidiaries.
Australia: Sino Gold pulls out from Tibet
Australian gold mining company Sino Gold has announced the cancellation of plans to start mining operations in Tibet, a move that has been welcomed by human rights groups.
The company said its decision was based on the low quality of gold ore at the site in Jinkang in Sichuan province, although the Australia Tibet Council (ATC) said that it believed that international concerns on human rights had also played a part.
Sino Gold Chief executive Jake Klein said that the company's investment was beneficial to local communities, and foreign companies will often bring in higher standards in labour and environmental practices.
"We're pleased that Sino Gold has chosen to do the right thing," said ATC's Executive Officer Paul Bourke. "Tibet's gold and other resources rightfully belong to the Tibetan people. We believe it is irresponsible to extract non renewable resources while Tibetans are unable to exercise their internationally recognised human rights, including deciding how their resources should be used."
The announcement brings to a close a chapter in the company's history that saw it the target of a "Sino Gold: Hands off Tibet!" campaign.
Japan: Toyota to boost hybrid car production
Toyota has said that it is to increase production of its Prius hybrid car following strong growth in demand around the world leading to sales targets being reset to 130,000 from the original 76,000.
The car runs a combination of petrol and electric power, providing better environmental performance through reduced petrol consumption and lower overall emissions.
Sales were initially constrained by high prices, but growing demand has led to reduced prices, and the latest model has been able to deliver improved performance on the road.
Egypt: 17 firms to join Global Compact
The Global Compact has announced that 17 companies in Egypt have signed up to the UN initiative in advance of its formal launch on February 9th. The number is expected to increase quickly.
Currently, the country with the most supporters is Spain, with 123 companies having declared their support. Algeria is at the bottom, with only 2 companies, although the US remains the most important laggard given its role and importance.
Around 1,000 companies overall have declared their support to the Compact, which seeks to put into corporate commitments the principles of the universal declarations of the UN, covering human rights, labour standards and environmental protection.
Egyptian companies include Orascom, TEA Computers, Arabian Oils, Nile Clothing Company and Grains and Chemical Complex.
UK: Most FTSE companies produce CSR reports
According to the Association of British Insurers (ABI) 80 percent of the top 100 UK listed companies report to some extent on their CSR performance.
Mary Francis, Director General of the ABI (Association of British Insurers) said there is growing awareness among large companies of the importance of managing corporate responsibility risks. The evidence suggests that companies that do this well are more competitive and provide a better return for shareholders.
Dealing with the question of legislation, she said: “We won’t get anywhere if we approach it with a bossy-boots mindset that is determined to tell companies to behave in ways that we personally have decided is good for them. We are not qualified to set absolute standards, for emissions for example, or to define how many cigarettes it is ethical for supermarkets to sell.
“I want to make it clear that we have nothing against sensible legislation that serves a real social purpose, but the danger with legislation on corporate responsibility is twofold. First it takes away the right of companies to differentiate themselves by competing to be more responsible. Indeed the very nature of the word responsibility suggests that there needs to be an element of free-will. Otherwise we would be talking about corporate compliance.”
The statement called into question the premise of the CORE bill, put before the UK parliament during the same week by backbencher Andy King, proposing the introduction of compulsory reporting due to a 'failure in the voluntary approach'. The proposal fell through lack of parliamentary time.
$7bn award marks latest stage in Exxon Valdez suit
US District Judge Russel Holland has ordered Exxon Mobil to pay $4.5bn in punitive damages for the Exxon Valdez incident, plus interest that brings the figure close to $7bn. It is the latest step in a series of legal moves that have pushed figures through the courts with little sign of achieving a final settlement.
The action has been kept in the air since 1994, when the company first appealed a $5bn verdict, sending the case to the 9th US Circuit Court of Appeals, which has overturned the various figures put forward since saying that they were excessive.
Many commentators remarked that Judge Holland had ignored higher court directives, and some have suggested that the Court of Appeals should now decide the amount itself.
Sweatshop accusations on IT equipment manufacturers
A report by the Catholic Agency for Overseas Development (CAFOD) has claimed that companies such as IBM, Dell and Hewlett-Packard are purchasing components from firms subjecting employees to 'atrocious conditions'.
The report covers sites in Mexico, China and Thailand, and says that CAFOD has discovered a range of breaches, including unsafe working conditions, compulsory overtime, illegally low pay and deprivation of basic entitlements.
CAFOD said that the companies named all had codes of conduct for labour standards that fell below UN standards. IBM, for instance, was highlighted as failing to include provisions covering the use of forced or child labour.
IBM said in a statement: "We are taking steps to reinforce this with the suppliers, including updating our supplier agreement to include new language that specifically prohibits them from discriminating against employees and applicants for employment because of race, colour, religion, sex, age, national origin or any other legally protected status".
US: Slavery reparations suit thrown out
A US federal judge has struck out a lawsuit brought by descendents of slaves against companies alleged to have benefited from slave labour.
Judge Charles Norgle said that the suit had failed to make a direct connection between the companies, including RJ Reynolds, JP Morgan Chase and Lloyds of London, and the slavery.
There was no evidence that the plaintiffs had suffered any identifiable injury as a result of any illegal conduct, he said in his written judgement.
The lawyer responsible for the suit said that his clients would bring back an amended complaint.
Monsanto pleads not guilty to ill intent on wheat patent
Monsanto has said that it has no intention to exploit a patent for the wheat used for making chapati which it has just been granted.
Anti GM campaigners had attacked the patent for the wheat strain Nap Hal being granted, and suggested that this would potentially lead to the US multinational making monopoly profits from a staple food for millions of people. They argued that the wheat's qualities were the result of generations of farmers in India, not by any intervention by the company.
Monsanto has pointed out that it inherited the patent application through its purchase of the cereals division of Unilever in 1998. It said it was pulling out of cereals in key markets, so the patent would not be exploited.
For many of the campaigners, however, the potential for exploitation is the issue, not the intent of any specific company.
Microsoft partners UN to boost computer literacy in developing world
Microsoft chairman Bill Gates has announced that the company is to partner with the United Nations Development Programme in seeking to boost computer literacy in developing countries.
The programme will begin with pilot projects in Egypt, Mozambique and Morocco, and Gates promised that the computer centres that will be the vehicle for the scheme will not be restricted to use only Microsoft products.
Mark Malloch Brown, administrator of the UN program, said that the project could potentially provide 'shortcuts' to bypass corrupt governments, and he hoped that technology companies would come to see the developing world as a real market to be targeted.
UK: Coca-Cola halts school advertising
Coca-Cola has stated that it is to end the practice of product advertising on vending machines in schools in the UK. The move follows a similar statement covering Scotland, and is seen as a response to the growing mood against product promotions aimed at children during a period of growing childhood obesity.
The company said it was taking the step in recognition of the status of classrooms as 'commercial-free' areas. It is also placing a greater emphasis on healthier drinks, including bottled water.
Pictures of Coca-Cola will be replaced by pictures of children actively playing.
Ian Deste, head of corporate affairs at Coca-Cola Enterprises (GB), said: "We hope this move will be seen as us being responsive to the sensitivities in this area".
CSR FEATURES from the Internet
A pressing need for corporate governance - 1 Feb 2004 FROM The Star Online (Malaysia)
There is a need for corporations in Malaysia to heed the Prime Minister’s advice on corporate governance to project a good image of the country as we enter the competitive world of globalisation, said Datuk Anusha Santhirasthipam, a Malaysian pioneer in investor relations.
Last week, Anusha, who is also managing director of Financial Network (M) Sdn Bhd, drove this message home to about 40 heads of listed companies at an Investor Relations Corporate Reputation seminar organised by the Ratings Agency Malaysia Berhad (RAM).
The Two Faces of Wal-Mart - 28 Jan 2004 FROM Business Week
Persuading Americans to use dollar coins has never been easy. So, to get the Sacagawea dollar into circulation in 2000, the U.S. Mint came up with an unconventional plan. It chose not just banks and post offices to distribute the coins but also Wal-Mart (WMT ), where the gold-tinted coin went into customers' change.
That says a lot about Wal-Mart's "credibility in our culture," says Barbara Bund, a senior lecturer in customer relationships at the Massachusetts Institute of Technology. The Mint chose the Bentonville (Ark.) chain not only for its ubiquity as the world's largest retailer but also for its status as a trusted, all-American company.
Tough Love for the Obesity Lobby - 23 Jan 2004 FROM AlterNet
The Bush Administration has a problem with personal responsibility. They make a big deal about it for nearly everyone – except themselves and the corporate big shots who finance their campaigns.
A case in point is the recent World Health Organization's proposal to combat the spread of obesity, diabetes and related illnesses throughout the world. The WHO proposal – called officially the Global Strategy on Diet, Physical Activity and Health – would encourage governments to adopt a number of common-sense steps, from better food labeling and limits on junk food advertising to the promotion of healthful diets with more fruits and vegetables, and less sugar. It also urges governments to make sure that schools promote such diets, not junk food and soda pop.
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The Media and Social Responsibility
Article by Mallen Baker
The Hutton Report has placed the harshest possible spotlight on the social responsibility of media companies - a light that in the first instance has not been greatly flattering to the BBC. But what here is the real challenge of corporate social responsibility for media companies?
Recently I attended a meeting of the UK's All Party Parliamentary Group on Corporate Social Responsibility - a session specifically focusing on the role of the media. Sadly, it was nothing of the sort. Rather, it became a lengthy discussion on how the media dealt with companies and social responsibility issues affecting them. Hardly surprising, I suppose. The MPs and Lords present were much more interesting in the relationship between their own work and the media that so often interpret it for the general public.
Mind you, there is a real debate here. Companies take a defensive approach to media relations precisely because there are so many examples of journalists with an actively antagonistic viewpoint - editorial comment masquerading as impartial reporting. But then that's part of the point.
Equally, the single industry sector that was most resistant to Business in the Community's Corporate Responsibility Index was that of the media companies. The Index, which sought to measure responses to core marketplace issues, workplace, environmental and community issues, missed the essential positive impact on society created by the media, they argued. The delivering of news from around the world, without fear, without favour, had an immeasurable positive impact. Reporting environmental emissions of a service-intensive industry rather paled in comparison. And, because these companies were the vehicle for reporting the impact of the index, the opposition of these companies became part of the story. And that's part of the point as well.
The UK media is one of the most diverse in the world, and it is full of contradictions. On the one hand, you have the BBC, which generally has upheld pretty high standards of impartiality throughout its history, and is imbued with a public service ethos that has influenced many other followers across the world. It is deeply ironic that it is this institution that has been so unrelentingly savaged by the report of Lord Hutton.
On the other, you have the real shark pool. The tabloid newspapers that will quite cheerfully destroy anyone that gets in their way, and apparently likes nothing better than to chalk up the scalp of a government minister or celebrity following some vitriolic campaign. These are the companies that employ the paparazzi who hound celebrities without mercy. One UK newspaper recently took to publishing front page photographs of 'upskirt' shots of female celebrities - that's about as low as it gets.
The recent events with the BBC have thrown the issues into stark relief. On the one hand, Lord Hutton said that it was unacceptable that the BBC had carried inaccurate stories about the UK government 'sexing up' a dossier used as a basis for going to war against Iraq. Given the intense interest in the event - and the belief in some quarters that an unfavourable verdict by Hutton could have brought the Prime Minister down - there's not much doubt of the stakes. And, whether one likes the Hutton report or not, it is evidently the case that the BBC made mistakes. In particular, its leaders were quick to defend a flawed story. In that case, it was inevitable that they would have to carry the can.
Interestingly, most of the British public would still trust the BBC more than they would the government. The fact is that, whatever failings the BBC evinced in its handling of this story, nobody believes that the Corporation had an agenda that was mischievous in intent. Many believe that the Government, on the other hand, had gone to war over a position that had proven to be mistaken, and had to defend itself against potentially fatal criticism. The real tragedy is that - mistakes notwithstanding - the crisis has robbed the BBC of leaders of real calibre and elsewhere in the world, where the trust in the brand was more fragile, there has been real damage.
But the question remains - how does one approach the issue of social responsibility with the media? Here we have an industry sector that is hugely powerful - exactly why tyrants and despots have always tried to control it. In the UK, politicians have been shy of facing the fact that this is the one powerful industry that remains largely unregulated, mostly because whenever they look as though they might be about to try, the big guns come out and whichever hapless politician it is gets blown out of the water. David Mellor, for instance, famously said that the media were drinking in the 'last chance saloon'. But it was he, not they, that met an untimely end following tabloid disclosures of his affair with an actress.
On the other hand, there is no doubt that the media companies are right. When they are at their best, they can have a hugely positive impact on society. The benefits of a free press - the value of the world broadcasts of the BBC - are there for all to see. Tyrants ultimately fail to control information and it can shape revolutions and change worlds. It is hugely positive. Done well.
But where is the pressure to do well? The BBC has done better than most, because it is under constant pressure both to justify its publicly-paid licence fee and also to show that it is independent of the government of the day. Many other media outlets are so nakedly the tool of their proprietor as to beggar belief. They get away with it only because nobody dares to take them on.
Most companies have to perform well to survive. Competitive pressure means that they produce higher quality products for cheaper prices. But there is no evidence that journalistic integrity is a key competitive feature. People choose their news source on the basis of the interesting scoops. And currently, the papers that feature the barely bikini-clad photos of celebrities in the jungle outsell those that analyse with seriousness the implications of, for instance, the current issue with the BBC. So where is the business case here for social responsibility?
What is the social responsibility of a media company? Surely, to tell the truth. To accord people a general expectation of privacy and dignity. To expose wrongs, but equally to allow that no-one is perfect. To entertain, for sure, but also to inform. And also to avoid conflicts of interest.
We promote to companies generally the value of measuring and reporting performance - so it should be here. Solid measurement would include number of complaints, and prosecutions, as well as standard measures such as environmental performance (yes, still relevant here!), employee satisfaction and impact on local communities. Oh, and some information about how the organisation has dealt with conflicts of interest.
The BBC has been relentless in its frank reporting of its own troubles. How often could that be said of some of the privately owned outlets? So often, the interests of the proprietor have led to biased reporting - or an absence of reporting where appropriate.
Regulation is for minimum standards. CSR is about best practice. There are many who feel that - whilst the BBC is being punished for having fallen temporarily short of the latter - many are getting away with flagrant disregard for the former. If politicians cannot say this, because the industry assumes that they are angling to cover up their own misdemeanors - then who can?
Most companies have to establish clear values, show leadership in embedding those values, and establish policies and processes for ensuring they don't fall short of them. The media industry currently believes it is so noble by inherent virtue of its calling that it needs to do few of these things. They are wrong.
The question is whether Hutton is enough to make this case. After all, the reputational fall of the BBC should be enough to persuade that no-one is immune.
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